Furlough Scheme to be extended to September in today’s Spring Budget

Business Leader Voices: the Spring Budget edition

At 12.30pm today, Chancellor Rishi Sunak is expected to extend the furlough scheme until the end of September 2021.

The scheme was due to finish at the start of April.

Speaking ahead of the Budget, Sunak said: “Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK. There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”

Sunak said the scheme would help millions of employees and businesses across the UK through the spring and summer months, although many Labour MPs have said that the announcement has come very late.

The scheme pays 80% of employees’ wages for the hours they cannot work because of the COVID-19 crisis.

The Coronavirus Job Retention Scheme has, so far, helped protect more than 11.5 million jobs since the pandemic hit in March last year.

In today’s announcement, Sunak is expected to outline that employers will be expected to pay 10% towards the hours their staff do not work in July. This will then increase to 20% in August and September.

Industry reaction

Rain Newton-Smith, CBI Chief Economist said: “Quite simply, extending the scheme will keep millions more in work and give businesses the chance to catch their breath as we carefully exit lockdown. The furlough scheme has been a stand-out success throughout the crisis. It’s common-sense to keep the scheme going while business resilience remains fragile for some months yet. As we make progress into the summer, it’s right that businesses start contributing a little more as revenues start to recover. Meanwhile it’s great to see more support for the newly self-employed, who have missed out over the last year.”

Michelle Ovens CBE, Founder, Small Business Britain, said: “Further measures to reduce costs for small businesses, like an extension to furlough and the business rates holiday, cuts to VAT rates and other help to pay bills through the Bounce Back Loan scheme, will all be welcome. There is also a need for a strategy to address and leverage the sweeping structural changes to the U.K. economy that the pandemic has wrought, such as changes to the high street and the mass adoption of digital and remote-working that has changed the face of business.”

Kate Palmer, HR Advice and Consultancy Director at Peninsula said: “As the government plans to relax lockdown restrictions, hopefully for the last time, it has remained clear that the pandemic’s ongoing impact on businesses is far from over. To this end, eyes will have all turned to the Chancellor today to announce how he intends to support companies across the UK as we, hopefully, head back to normality.

“A significant aspect of today’s Budget is the extension of the furlough scheme, something that has provided a lifeline to businesses across the country since it was originally put in place in March 2020. The news that it is going on until the end of September will undoubtedly be extremely welcome to many employers, especially those that are still not expecting to open until at least June, such as nightclubs. If all goes to plan, this means that the furlough scheme will remain an option for employers for a few months after restrictions are expected to be lifted entirely on 21 June, which will hopefully help them to slowly bounce back from the major disruption they may have seen.

“An interesting development is that, once again, employers will be asked to start contributing to the scheme from July, something that we previously saw introduced last year as the government aimed to wind the scheme down before it was extended. Whilst this may at first glance be concerning for employers, they should remember that by July, the government is aiming for life to be, essentially, much more normal, and likely anticipate the need to use the scheme will be much diminished. However, whether this means they will start to clamp down on who can actually use it following 21 June does remain to be seen.”

James Mcleod, VP EMEA at Faethm AI said: “The extension of the furlough scheme into the summer poses as many questions as it answers. Yes, it will continue to provide critical stimulus for the economy, but it remains a short-term lifeline for businesses. Questions around the long-term impact of the pandemic on unemployment remain unanswered. How will the government ensure jobs remain for those who have been furloughed? How do we ensure returning workers have the skills required to fulfil these roles? Or to generally remain employable?

“The Chancellor has emphasised that the government is ‘throwing absolutely everything’ at the problem of unemployment, but tackling the source of the problem – skills – rather than working around it, is the solution. That means supporting and incentivising businesses to reduce redundancies, and invest in new skills, to keep individuals in employment. Digital displacement is a potential risk for many furloughed employees, with many businesses having invested in intelligent technologies such as AI and automation during the pandemic to reduce costs. Employers must be encouraged to protect their staff’s employment status and enhance their long-term employability to prevent current levels of unemployment from persisting or growing in the long-term.

“Every employee has transferable skills, and the government is missing an opportunity. It must consider further targeted investments that encourage businesses to retain furloughed staff, retrain them in essential digital skills and competencies, and redeploy them in more in-demand roles where they can offer longer-term benefits and growth opportunities. That way business can add capacity and increase productivity while still making financially beneficial and morally responsible decisions, and creating a digitally adept workforce for the future. All of which will help the government deliver positive economic growth, one of its key goals.”