The government’s Coronavirus Job Retention Scheme will remain open until the end of October, the Chancellor announced today.
- Coronavirus Job Retention Scheme will continue until end of October
- furloughed workers across UK will continue to receive 80% of their current salary, up to £2,500
- new flexibility will be introduced from August to get employees back to work and boost economy
In a boost to millions of jobs and businesses, Rishi Sunak said the furlough scheme would be extended by a further four months with workers continuing to receive 80% of their current salary.
As we reopen the economy (at least in England – Ed.), we need to support people to get back to work. From the start of August, furloughed workers will be able to return to work part-time with employers being asked to pay a percentage towards the salaries of their furloughed staff.
The employer payments will substitute the contribution the government is currently making, ensuring that staff continue to receive 80% of their salary, up to £2,500 a month.
Chancellor Rishi Sunak said: “Our Coronavirus Job Retention Scheme has protected millions of jobs and businesses across the UK during the outbreak – and I’ve been clear that I want to avoid a cliff edge and get people back to work in a measured way.
“This extension and the changes we are making to the scheme will give flexibility to businesses while protecting the livelihoods of the British people and our future economic prospects.”
New statistics published today revealed the job retention scheme has protected 7.5 million workers and almost 1 million businesses.
The scheme will continue in its current form until the end of July and the changes to allow more flexibility will come in from the start of August. More specific details and information around its implementation will be made available by the end of this month.
The government will explore ways through which furloughed workers who wish to do additional training or learn new skills are supported during this period. It will also continue to work closely with the Devolved Administrations to ensure the scheme supports people across the Union.
The Chancellor’s decision to extend the scheme, which will continue to apply across all regions and sectors in the UK economy, comes after the government outlined its plan for the next phase of its response to the coronavirus outbreak.
The scheme is just one part of the government’s world-leading economic response to coronavirus, including an unprecedented package for the self-employed, loans and guarantees that have so far provided billions of pounds in support, tax deferrals and grants for small businesses.
Today the UK government is also publishing new statistics that show businesses have benefitted from over £14 billion in loans and guarantees to support their cashflow during the crisis.
This includes 268,000 Bounce Back Loans worth £8.3 billion, 36,000 loans worth over £6 billion through the Coronavirus Business Interruption Loan Scheme, and £359 million through the Coronavirus Large Business Interruption Loan Scheme.
Mike Cherry, National Chairman of the Federation of Small Businesses, said: “The Job Retention Scheme is a lifeline which has been hugely beneficial in helping small employers keep their staff in work, and it’s extension is welcome.
“Small employers have told us that part-time furloughing will help them recover from this crisis and it is welcome that new flexibility is announced today.
BCC Director General Adam Marshall said: “The extension of the Job Retention Scheme will come as a huge help and a huge relief for businesses across the UK.
“The Chancellor is once again listening to what we’ve been saying, and the changes planned will help businesses bring their people back to work through the introduction of a part-time furlough scheme. We will engage with the Treasury and HMRC on the detail to ensure that this gives companies the flexibility they need to reopen safely.
“Over the coming months, the government should continue to listen to business and evolve the scheme in line with what’s happening on the ground. Further support may yet be needed for companies who are unable to operate for an extended period, or those who face reduced capacity or demand due to ongoing restrictions.”
Dame Carolyn Fairbairn, CBI Director-General, said: “The Chancellor is confronting a challenging balancing act deftly. As economic activity slowly speeds up, it’s essential that support schemes adapt in parallel.
“Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs.
“Introducing much needed flexibility is extremely welcome. It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation. That’s essential as the UK economy revives step-by-step, while supporting livelihoods.
“Firms will, of course, want more detail on how they will contribute to the scheme in the future and will work with government to get this right.
“Above all, the path of the virus is unpredictable, and much change still lies ahead. The government must continue to keep a watchful eye on those industries and employees that remain at risk. All schemes will need to be kept under review to help minimise impacts on people’s livelihoods and keep businesses thriving.
“The greater the number of good businesses saved now, the easier it will be for the economy to recover.”
Commenting on the extension of the government’s job extension scheme today, TUC General Secretary Frances O’Grady said: “We are pleased ministers have listened to unions and extended the job retention scheme to the autumn. This will be a big relief for millions.
“Changing the rules to allow part-time working is key to enabling a gradual and safe return to work. And maintaining the rate at 80% is a win for the pay packets of working families.
“As the economic consequences of Covid-19 become clear, unions will keep pushing for a job guarantee scheme to make sure everyone has a decent job.”
Anneliese Dodds MP, Labour’s Shadow Chancellor, said: “The furlough scheme is a lifeline for millions. The Government was right not to pull it away.
“It is welcome that the Chancellor has heeded the call by Labour, trade unions, and businesses for more flexibility in the scheme, to support employees to go back to work part-time.
“The government must clarify today when employers will be required to start making contributions, and how much they’ll be asked to pay. If every business is suddenly required to make a substantial contribution from the 1st August onwards, there is a very real risk that we will see mass redundancies.”
Extension to Furlough Scheme could cost the Government £70 billion
The Chancellor has extended the current Furlough scheme until the end of October but he now has a huge challenge to get this right, say leading tax and advisory firm Blick Rothenberg.
Heather Self a partner at the firm said: “He needs to achieve a “Goldilocks” effect – not too hot, and not too cold. If he provides too much it will be very expensive and may discourage firms from reopening. If he provides too little thousands of people could lose their jobs.
She added: “It is going to be a turbulent time for the labour market in the Autumn. Some sectors, such as the hospitality and tourism sector, are likely to see significant redundancies, while others such as construction and financial services will be relieved to see a gradual winding-down of support.
From the announcement today, we now know that:
– Support will be continued to the end of July in full, with employers required to contribute after that date.
– Part time working will be permitted, but only for some employees
– The same level of overall support – 80% of wages up to a maximum of £2500 a month – will be maintained
Heather said: ” As the furlough scheme is reduced the Government needs to incentivise business and come up with creative ideas about how business can keep going and retain staff.
“The Chancellor could not go on paying out billions of pounds indefinitely, and everyone understands that, but there needs to be much more joined up thinking between Government and business.”
So far, some 7.5m employees have been furloughed, at a cost approaching £10bn.
The expected costs to the end of July are likely to be around £50bn, with the extension at a reduced level to the end of October perhaps costing a further £20bn. These are very significant sums, amounting to around 10% of total Government receipts.
As Britain seeks to get back to work, the pressures on different sectors will be very uneven.
While some sectors, such as construction and financial services, are getting back to work, others such as leisure and hospitality will be much slower to recover.
And the position in the tourism and heritage sectors is likely to become critical if they lose the whole of the Summer season.
Heather Self said: “Enabling part time work is welcome, as it will permit a gradual return to work. But the Chancellor said this would only be available to businesses “currently using” the scheme – it is not clear what the cut-off date will be for businesses still considering whether they need to furlough employees.
“The Chancellor needs to pay attention to the needs of different sectors, difficult though this may be. Leisure and hospitality businesses are unlikely to be able to cope with reopening fully by the end of July, and may need to contemplate redundancies.
“Additional support beyond the furlough scheme will be needed for a long time – whether loans such as the CBILS scheme, or grants, or incentives such as an increase in the Employment Allowance to encourage employers to maintain their staff levels, or even take on new employees.”
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