Fast-recovering British companies have returned more than £1bn of furlough cash as investors pile pressure on managements to repay taxpayer funds taken in the pandemic before paying big bonuses.
According to data obtained by the Financial Times through a freedom of information (FOI) request, companies have repaid £709m of money to HM Revenue & Customs that had been claimed under the government’s coronavirus job retention scheme. A further £319m was accounted for by companies that had taken the money in error by over claiming.
The amount is still dwarfed by the £64bn spent by the Treasury under the furlough scheme in total up to May 14, which has helped pay the wages of 11.5m people during the pandemic.
The windfall for the Treasury comes after shareholders have sought to hold boards to account if they tried to pay large bonuses after using the government schemes set up to support struggling businesses during the crisis.
Many companies have bounced back from the economic lockdown in unexpectedly strong financial health, with buoyant consumer demand fuelling sales for retailers and other areas of the economy.
A wide range of companies have paid back furlough cash in recent months, including retailers such as Primark, Games Workshop, Asos, Ikea, Watches of Switzerland and Halfords after many recorded stronger than expected sales since the beginning of the year. Hotel Chocolat recently returned £3.1m in furlough money after sales soared since stores were allowed to reopen in the spring.
Most big housebuilders have also paid back the money. Redrow said it would refund the government given better than expected cash flow. Chair John Tutte said it was “hard to justify taking government money”.
Last week, Auto Trader Group and Watches of Switzerland became the latest to confirm the return of cash. Auto Trader said it had returned all funds received under the furlough scheme “as soon as we had confidence that we would return to profitability”.
But there has been a public backlash against those companies that have kept the cash despite strong financial performances or management payouts.
More than 39 per cent of investors opposed estate agent Foxtons’ remuneration report at its annual meeting in April after its chief executive was awarded £1.6m in pay and bonuses.
Foxtons took almost £7m in furlough money and business rates relief but decided not to repay the cash despite a boom in trade. Rival agents such as Knight Frank have repaid the money.
Foxtons’ board said it was “clear that a significant proportion of shareholders did not agree with the decision to pay bonuses to executives . . . on the basis that the company had benefited from government support”.
BDO, the accountants, also decided to repay £4.1m of furlough money after criticism over payouts to its partners.
Peter Cowgill, executive chair of sports and fashion retailer JD Group, was this week forced to defend taking a bonus during the pandemic despite the retailer claiming more than £60m in furlough cash.
HMRC said it welcomed moves by employers to return grants made under the job retention scheme “because they no longer need the grant, or have realised they’ve made errors and followed our guidance on putting things right”.
The furlough scheme was extended from an original deadline of April 30 after the lockdown continued into the summer, but will taper down from next month despite a further four-week delay to full reopening plans.
Business groups have called on the Treasury to delay the tapering given many companies will be forced to remain closed for another month at least.
The government is also seeking to claw back money from other companies that have claimed in error or fraudulently. It committed £100m for a new HMRC Covid fraud task force to investigate claims.
In the FOI, the HMRC said it would not disclose how much of the job retention scheme had been misused or stolen through fraud. It said it had an assessment of this but it would be included in its 2020-21 annual report, due later this year.