UK small businesses raise concern over £2bn Kickstart jobs scheme

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The UK government’s £2bn Kickstart jobs scheme has been criticised for disadvantaging smaller businesses because companies taking on fewer than 30 new young workers are prevented from applying directly for funds.

The scheme, modelled on a programme that ran after the 2008 recession, is one of the central elements of chancellor Rishi Sunak’s “Plan for Jobs” set out at the start of July to mitigate the economic fallout from the coronavirus pandemic.

The initiative pays employers’ costs to create six-month work placements for 16 to 24-year-olds, who are likely to be the hardest hit by job losses threatened across industries such as hospitality and retail. 

The chancellor said that hundreds of thousands of jobs could be created with the allocated money; he called on “every employer, big and small, national or local” to hire as many Kickstarters as possible.

But small businesses are alarmed by rules that restrict applications to a minimum of 30 places, which means that companies taking on fewer will need to either find other businesses to apply alongside or use a local intermediary such as a chamber of commerce.

Business leaders warned that this extra layer of bureaucracy would create a barrier that would stop many from applying, with companies often not having the sort of existing relationship with their local business groups to access the funds.

The Federation of Small Businesses, which represents the interests of small businesses in the UK, said the scheme had not been designed with small businesses in mind and appeared “more aligned to the needs of larger businesses”. 

Mike Cherry, national chair of the FSB, said that “without further work, the scheme will leave many without any employment support after waiting for it for so long”.

“The time it will take to hire these 30 employees across several small firms could take months and result in increased costs for small firms at a time when they need our support the most,” he said.

One business representative said that they had been surprised by the constraints of the scheme, launched on Wednesday, which had been worked on with the involvement of business groups.

“It’s a real barrier,” he said. “How do you find 30 similar-minded businesses with new jobs in your local community?”

Problems accessing the scheme could hit demand, with just a third of businesses indicating that they were quite or very likely to get involved, according to a survey from the Institute of Directors of more than 700 company directors.

However, only one in five small companies — with up to 10 employees — said they intended to use the scheme. The survey was carried out in August before the details of the initiative were released.

The IoD on Wednesday urged the government to ensure the system was as simple as possible, and accessible for businesses of all sizes.

Joe Fitzsimons, head of education and skills policy at the IoD, said the 30-placement requirement “could prove a challenge”. 

“With so much on their plate, many small firms will be put off by any unnecessary hurdles,” he said. “Making the system inaccessible to all but the biggest businesses would be to miss a trick.”

A government spokesperson said it had designed the scheme specifically to meet the needs of SMEs. “We will continue to work closely with them and their representative organisations to make sure that every business that wants to employ a Kickstarter is able to.”

The FSB said that there was also no clear guidance on how to become an intermediary. A government panel will vet those requesting to become a representative for a group of employers, with up to a month before applications are processed and funding only becoming available when the criteria are met. 

However, the federation welcomed the Treasury’s promise to hold talks on how to make the scheme work for small businesses. “We are in discussions with them on how to address small business concerns and make sure it does,” it said.

The new jobs must not replace existing or planned vacancies, or cause existing employees to lose their jobs. They must be for a minimum of 25 hours a week for six months and paid at least the minimum wage. Each application needs to include how the company will help the participants develop their skills and experience.

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