UK chancellor extends furlough scheme until end of October

Updated: Jun 2, 2020

UK chancellor Rishi Sunak has extended the government’s coronavirus furlough scheme for workers until the end of October

Mr Sunak confirmed that employees will continue to receive 80% of their monthly wages up to £2,500 despite its dwindling cost, as he attempts to prevent a wave of job losses in the summer due to the ongoing lockdown.

Businesses largely welcomed the extension, with business group the British Chambers of Commerce saying the move would bring "significant relief" to employers and workers.

Sunak said the government will ask companies to "start sharing" the cost of the scheme from August. However, the scheme will continue for all sectors and regions with greater flexibility to allow firms to bring staff back to work as the lockdown eases and the economy reopens.

With 7.5 million workers having their wages paid by the taxpayer, the Institute for Fiscal Studies has said the cost would have been £60bn by the end of July – but it will now be significantly higher.

Mr Sunak will attempt slowly to reduce the cost to the taxpayer of the subsidy scheme, but full details are still to be worked out.

In an interview with the BBC on Tuesday, Mr Sunak said the number of job losses "breaks his heart", adding: "That's why I'm working night and day to limit the amount of job losses."

“There are already businesses that are shutting. There are already people who have lost their jobs. And as I said, that’s heartbreaking to me and that’s why I’m working night and day to limit the amount of job losses,”Sunak said. The Department for Work and Pensions has said there have been 1.8m claims for universal credit since mid-March.

Sunak’s announcement of an extension to the furlough scheme came just ahead of a key deadline this weekend for firms to avoid starting redundancy consultations for job losses at the end of June.

The government could still face a rapid rise in unemployment if companies balk at the prospect of contributing large sums, given the length of time it could take to fully reopen the British economy. Paul Johnson, director of the Institute of Fiscal Studies economic think tank, estimates the scheme will have cost nearly £100bn by October. It is thought that about 935,000 businesses signed up for the scheme in total.

Mr Sunak told the Commons 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."

How does the UK's furlough scheme work? Under new rules, the scheme, which began on March, 1 and will now run until October, has allowed companies to furlough employees rather than fire or retrench them. Through this scheme, the government will pay up to 80 per cent of people’s wages, up to a maximum of £2,500 per month.

Since March, 19, anyone who was working in a full time job (or on a PAYE basis) could be furloughed. This included people on zero hours contracts or those working flexibly. It, however, has not applied to people who might have switched jobs between the end of February and when the scheme was announced.

How can you apply? Any UK employer can apply to the scheme to temporarily cover people’s salaries, including businesses, charities, agencies and public authorities. Employees have to agree to be put on furlough – and an individual can’t apply by themselves.

Employers are still required to pay national insurance and pension contributions payments for furloughed employees. The statutory minimum for these can also be claimed back.

Employees who are furloughed are still entitled to the same employment rights and benefits such as sick pay and bonuses. If any employee is on unpaid leave, shielding for health reasons or have caring responsibilities, they are also eligible. Staff on maternity, paternity, adoption or shared parental leave will still receive statutory pay from the government. Employers do not have to top up salaries that no longer reach the minimum wage.

Which companies are furloughing workers? The coronavirus crisis has meant that pubs, restaurants, cafes, travel firms and estate agents have had to close.

British Airways has furloughed more than 30,000 staff, while TUI has furloughed 11,000 and EasyJet has furloughed about half of its workforce.

Clothing chains Oasis and Warehouse have furloughed staff after going into administration, while Topshop owner Arcadia has also used the scheme.