[UK] Four-Month Extension To Furlough Scheme

12 MAY 2020

Chancellor Rishi Sunak has announced that the UK furlough scheme - which covers the wages of workers on leave from work as a result of the coronavirus pandemic - will be extended to October, BBC News reports.

The Chancellor confirmed that employees will continue receiving 80 per cent of their monthly wages, up to a maximum of £2,500. But he added that from August the government will ask companies to "start sharing" the cost of the scheme.

Around 7.5 million people - a quarter of the UK workforce - are now covered by the furlough scheme at a cost of £14 billion a month.

Mr Sunak said that the scheme would continue to cover all sectors and regions of the country but from August that cover would incorporate greater flexibility to support the transition back to work. Employers currently using the scheme will have the opportunity to bring furloughed employees back part-time from then.

The Chancellor said, "I'm extending the scheme because I won't give up on the people who rely on it.

"Our message today is simple: we stood behind Britain's workers and businesses as we came into this crisis, and we will stand behind them as we come through the other side."

Last week Mr Sunak said the furlough scheme could not continue in its current form, in the wake of growing concern about its cost. He was reportedly under additional pressure to announce changes soon to forestall a "cliff-edge", the point at which employers begin mass redundancies.

Any company intending to terminate more than 100 jobs are obliged to run a 45-day consultation. Under the previous terms, May 18 was the last date employers could begin this process before the furlough scheme ended in June.

The Chancellor disputed the idea that some people could become "addicted" to furlough if it was extended.

"Nobody who is on the furlough scheme wants to be on this scheme," Mr Sunak said. "People up and down this country believe in the dignity of their work, going to work, providing for their families, it's not their fault their business has been asked to close or asked to stay at home.

Shadow chancellor Anneliese Dodds said she had only learned about these changes "in the last few seconds" and intended to examine them "very, very carefully".

But Ms Dodds emphasised that it was "critically important" that workers who had to continue on furlough "are not penalised for that choice".

The business response to the extension was largely positive. The British Chambers of Commerce said extending the scheme would bring "significant relief" to employers and workers,

Stephen Phipson - chief executive of manufacturing group Make UK - said the extension would avoid "a looming cliff-edge triggering significant redundancies for many companies and recognises the need for greater flexibility as the economy fires up."

Mr Phipson did, however, warn that there was no "silver bullet" cautioning that both government and industry would have to be flexible.

The TUC also offered support Frances O'Grady - TUC general secretary - said the extension "will be a big relief for millions". She qualified this by saying, "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."

It is believed that approximately 935,000 businesses in total signed up for the furlough scheme. Paul Johnson - Director of the Institute of Fiscal Studies economic think tank - estimates the scheme will have cost close to £100bn by October.