This week’s commercial awareness post will take a different format. We will be talking through two terms that have recently been on the news a lot recently in light of the coronavirus pandemic.
This term has been widely used on news outlets during the coronavirus pandemic. It simply means to “temporarily suspend work”.
In March, the UK government issued new rules that employees will be furloughed by companies, instead of sacking them. Through this scheme, the government will pay up to 80 per cent of people’s wages, up to a maximum of £2,500 per month. Anyone working in a full-time job (or on a PAYE basis) on March 19 can be furloughed. This includes people on zero-hours contracts or those working flexibly.
What does this mean?
As you might guess, this is slightly better than redundancies as is the case in the US, where 6.65 million Americans have filed for unemployment. Furloughing means that when the pandemic is over, most people that were furloughed will be returning to their jobs at the same companies.
Impact on Law firms
Most big City law firms have furloughed staff. Though this may be good for employees, this holds the risk of reputational damage amongst the most elite firms, which may not translate too well to their client base. This is added to the fact that if these furloughed staff are still working from home, clients may be more on edge, as the legal industry is one that has been targeted by cybercriminals, assumingly due to its confidential nature.
Reduction in Interest rates
This has been a common occurrence during the pandemic amongst central banks. The interest rate in the UK is currently at a historic low at 0.1%.
The interest rate is the percentage charged on the amount you borrow or save.
What does this mean?
Low-interest rates will mean that consumers (you and I) can borrow more as the loan becomes cheaper to pay back. Paying mortgages will also be cheaper as well.
However, savers and investors will receive fewer returns on their savings/investments.
Normally, amongst consumers, this would tend to be positive. However, in the light of the current pandemic, it is not that straight forward. Due to furloughing and increasing unemployment, people cannot afford to borrow, as they may not have the capital to pay back (hence why interest rates are so low – to encourage more spending and borrowing).
News to watch out for
The European Central Bank prepares to issue another stimulus in addition to its initial 750 billion euros it issued in March.
Check out our article here to find out more about that: https://bamenation.co.uk/2020/03/20/banks-to-the-rescue-the-high-street-saga/