Huge relief as furlough scheme is extended to October

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Date: 12 May 2020

A man stood cross armed in a warehouse wearing protective goggles

Chancellor of the exchequer Rishi Sunak has announced that the Job Retention Scheme will be extended by four months.

The announcement means that furloughed workers across the UK will continue to receive 80% of their current salary, up to £2,500 a month, until the end of October. By then, the scheme will have been in place for eight months.

The scheme will continue in exactly the same way until the end of July; however from August, businesses will be encouraged to bring furloughed staff back into the workplace on a part-time basis, 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.

Specific details of how the Job Retention Scheme will operate in this second phase won't be revealed until the end of May. Questions are already being asked about how much employers will be expected to contribute to the scheme and how different sectors will be affected. Even so, business groups have exressed their delight that the scheme is not coming to an abrupt halt anytime soon.

Chancellor Rishi Sunak said: "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."

Adam Marshall, director general of the British Chambers of Commerce (BCC), said the news would come as a "huge help and a huge relief" for UK businesses. "The changes planned will help businesses bring their people back to work through the introduction of a part-time furlough scheme," he said. "We will engage with the Treasury and HMRC on the detail to ensure that this gives companies the flexibility they need to reopen safely."

Mike Cherry, national chairman of the Federation of Small Businesses (FSB), said: "The Job Retention Scheme is a lifeline which has been hugely beneficial in helping small employers keep their staff in work and its 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."

Carolyn Fairbairn, CBI director-general, said that the extension of the furlough scheme would protect millions of jobs and she welcomed the flexibility allowing staff to return part-time from August. "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."

The latest government statistics show that the job retention scheme has protected 7.5 million workers and almost one million businesses. Businesses have also 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.

Written by Rachel Miller.

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