A deserted high street in Leicester: the Treasury has estimated that about 3m people, or 10 per cent of the private sector workforce, would be laid off temporarily © Joe Giddens/PA

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About half of UK companies are planning to furlough many of their staff because of coronavirus, according to surveys that threaten a much higher cost to the Treasury than expected.

The prospect of a higher than expected take-up of the furloughed workers programme comes as the government seeks to improve the terms of the loan scheme to help banks lend to more companies.

Alok Sharma, the business secretary, said on Wednesday that it was “completely unacceptable” if banks were unfairly “refusing funds to good businesses in financial difficulties”.

He added that the taxpayer had bailed out the banking sector in the 2008 financial crash, and it was time for banks to “repay that favour”.

The Treasury has estimated that about 3m people, or 10 per cent of the private sector workforce, would be laid off temporarily and thus their employers would be able to take advantage of the government job retention scheme, which covers four-fifths of wages up to £2,500 a month.

However, in a survey by the British Chambers of Commerce, about 44 per cent of companies said that at least half their staff would be paid through the scheme, and one-third said that they were planning to furlough more than 75 per cent of their workforce over the next week. A fifth of businesses had closed operations temporarily, it found.

A separate survey by the CIPD, the body for HR professionals, and People Management magazine found that more than half of employers expected to furlough staff using the government’s scheme. A quarter said they expected to cut jobs permanently, with one in 10 expecting to lose between 11 and 49 per cent of employees.

The cost of the job retention scheme is estimated at a little over £10bn for every 3m people using it for three months but if the surveys reflect the intended take-up of the government scheme then the Treasury faces much higher costs.

Ministers have already directed the Debt Management Office to sell £45bn of government debt in April alone, three times the amount expected after the March 11 Budget as a start to what the DMO said was an “exceptional” period of government borrowing ahead. 

According to the CIPD survey, which was answered by 301 companies, many other businesses were taking measures that would hit take-home pay, with a quarter cutting hours and a quarter freezing or deferring pay rises.

A fifth of those answering the survey were still asking some or most of their employees to work on-site even though they were not classed as essential workers, with many saying that government guidance on which businesses activities counted as essential had been unclear. 

The British Chambers of Commerce survey was conducted from March 25-27 across more than 600 businesses; most were smaller companies, meaning they have fewer than 250 employees.

Most businesses have at most three months of cash left, according to the report, while one-fifth of companies said that they would only have enough money to last a month.

So far almost none had been able to take advantage of government schemes designed to bail out struggling businesses. The survey conducted last week — several days after its start — showed that only 1 per cent had received help from the government-backed loan scheme for smaller businesses. This offers interest and fee-free loans of up to £5m for up to a year.

Bank executives have said that their systems have struggled to meet the high levels of demand for the package, which has caused delays.

Mr Sharma said the Treasury was looking at ways to ensure businesses had the support they needed, and that the chancellor would give details in the coming days.

Measures are expected to include expanding the scheme so that all viable businesses with revenues under the £45m can apply. Currently the scheme requires lenders to offer normal commercial terms first before using the government-backed loans.

The scheme has been criticised by small business owners after banks asked for personal guarantees to obtain loans — although many lenders have now waived that for amounts under £250,000 — as well as the risk of high interest charges at the end of the 12 months. 

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Borrowers also complain that they are being told to use banks’ standard loan packages; the government’s terms mean that banks first need to ensure that the borrower could not use normal financing products, but also only lend to businesses viable before the start of the pandemic. 

“Our findings highlight the urgent need for that support to reach businesses on the ground as soon as possible,” said BCC director-general Adam Marshall. “The majority of firms cannot wait weeks or months for help to arrive.”

This article was amended to clarify that the CIPD survey was conducted jointly with People Management magazine

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