“Even before lockdown, coronavirus was threatening to take the shine off the UK’s sterling jobs record, and initial estimates for April don’t make for easy reading. It’s clear that without the Government’s furlough scheme, the picture would have rapidly deteriorated even further.
“While furloughing is holding off some job losses for now, it’s not yet clear how firms will react as the scheme changes in August and as social distancing continues. Many companies will still be in the middle of a cashflow crisis, and will struggle with any cost increases. Government faces an onerous task in winding down the scheme without causing too much pain.
“The UK’s dire productivity record is one thing that can’t be put down to the pandemic. In fact, many businesses have been innovating more than ever in response to the lockdown. As firms get up and running again, money will be tight, and widespread debt will hold back new projects. The Government should seek to spur investment through tax incentives, otherwise companies will be slower to adapt to the new normal, and our productivity performance will remain in the doldrums.”