Furlough scheme extended by one month to end of April 2021

17 December 2020, 14:34 | Updated: 17 December 2020, 16:25

By Nick Hardinges

@NHardinges

The furlough scheme has been extended for a month until the end of April 2021, Chancellor Rishi Sunak has announced.

Furlough was set to expire at the end of March next year after already being extended from the end of October 2020.

However, the new date suggests the chancellor believes the economy will continue to be hit hard by the coronavirus pandemic well into 2021.

He also extended the government's business loan schemes, which were set to conclude at the end of January, until 31 March in a bit to support firms up to the spring.

They include the Bounce Back Loan Scheme, Coronavirus Business Interruption Loan Scheme, and the Coronavirus Large Business Interruption Loan Scheme.

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Mr Sunak said: "Our package of support for businesses and workers continues to be one of the most generous and effective in the world - helping our economy to recover and protecting livelihoods across the country.

"We know the premium businesses place on certainty, so it is right that we enable them to plan ahead regardless of the path the virus takes, which is why we're providing certainty and clarity by extending this support, as well as implementing our plan for jobs."

The chancellor also announced that the next Budget will take place on 3 March of next year.

A statement from the Treasury said: "The Budget will set out the next phase of the plan to tackle the virus and protect jobs and will be published alongside the latest forecasts from the Office for Budget Responsibility."

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Under the furlough scheme, the government will continue to pay 80 per cent of the salary of employees for hours not worked until the end of April.

Employers will only be required to pay wages, National Insurance Contributions (NICS) and pensions for hours worked; and NICS and pensions for hours not worked.

Mr Sunak said on Twitter: "We will continue to pay 80% towards wages of unworked hours - giving businesses and employees across the UK certainty into the New Year. "

Business Secretary, Alok Sharma, said: “While our loan schemes have provided a vital lifeline to millions of firms across the country, we know that business owners need additional certainty as we head into the New Year.

“Extending government-backed loan schemes will give companies right across the UK the finance they need to support, protect and create jobs as we build back better from the pandemic.”

The eligibility criteria for the UK-wide scheme will remain unchanged and the date change will continue to apply to all devolved administrations.

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The schemes have helped keep the economy on life support but have added to the cost of the pandemic to the public purse.

Official figures showed that £46.4 billion of furlough payments under the Coronavirus Job Retention Scheme had been claimed for 9.9 million jobs in 1.2 million firms since it was set launched in April.

So far £43.5 billion of bounce back loans have been provided to businesses.

Around £19.6 billion has been made available under the CBILS and almost £5 billion in CLBILS, which is for larger companies.

But shadow chancellor Anneliese Dodds accused Rishi Sunak of "last-minute decision-making" following his announcement extending the furlough scheme.

She said: "Once again the Chancellor has waited until the last possible minute to act, leaving businesses in the dark with less than 24 hours before they have to issue redundancy notices.

"Rishi Sunak's irresponsible, last-minute decision-making has left the UK with the worst recession of any major economy."

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The Confederation of British Industry (CBI) said the extension of the furlough scheme would bring "some much-needed certainty and respite" for businesses.

Rain Newton-Smith, the organisation's chief economist, said: "Stable employer contributions and an extension to the Job Retention Scheme until the end of April will mean the scheme continues to protect people's livelihoods.

"And with cashflow difficulties still at the forefront of the minds of many business owners, continued access to Government-backed loans through to spring will bring great comfort.

"In early 2021, businesses will likely need clarity about the level of support beyond the spring to build a bridge to economic recovery.

"Working with firms to evolve the furlough scheme, support cashflow and avoid cliff-edges in other schemes like tax deferrals, grants and business rates holidays, will be essential early in the new year."

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