The Government will extend the furlough scheme until the end of March, Chancellor Rishi Sunak has confirmed.
He told MPs said the scheme will pay up to 80 per cent of a monthly wage and confirmed that the government will review the policy in January.
The move follows days of wrangling over the scope and duration of the furlough scheme. It was due to end on October 31, but has already been extended to cover the current four-week lockdown in England.
About £40bn has been spent on the furlough scheme since it was introduced in March.
Jonathan Geldart, Director General of the Institute of Directors, welcomed the news describing furlough as “a known quantity”.
It’s clear that the Government needs to now reinstate and extend insolvency protections to prevent company collapses
He added: “To support as many jobs as possible through the crisis, consistency and clarity is vital. Businesses need the ability to plan ahead, with cashflow being critical through the first quarter of 2021 particularly in light of potential Brexit impacts. The more information government can provide on support for the rest of year, the better position organisations will be in.”
He also welcomed other measures such as the increase in self-employment support, adding. However, while the Government has extended some measures, it is still failing to fix major gaps in the support. Many self-employed, including small company directors, continue to be left out in the cold. Grant funding through local authorities could help address this issue, otherwise those missing out will face a harsh Winter.
“It’s clear that the Government needs to now reinstate and extend insolvency protections to prevent company collapses. The Treasury should also work with banks to ensure that loans reach the front line. Finally, the Chancellor should look to marry defensive measures like the furlough with policies to get firms on the front foot, encouraging job creation and investment through the tax system.
“The response to the pandemic has highlighted some tensions in our devolution set-up. It’s paramount that businesses aren’t caught in the crossfire of political negotiations over coronavirus support. The onus is on all sides to work constructively moving forward.”
Rob Marshall, managing director of WorkLife, said: “The Chancellor’s announcement will be hugely welcome for smaller firms who’ve been fearing they might not survive this second lockdown. Extending the furlough scheme offers them a vital lifeline, but we cannot ignore the fact that their troubles won’t be anywhere near over come March, at which point they will have been facing a year’s worth of business disruption.
I’d question whether the scheme should be universal as I’d much rather see the support given to the sectors forced to shut down such as hospitality
“Moreover, 38 per cent of firms surveyed as part of our Small Business Monitor said that employees were worried about the impact of the first lockdown on their finances, and we’re only likely to see this figure increasing with furloughed workers facing continued salary cuts.
“For those firms who can’t afford to provide full pay, it is vital they are being smart in the use of their employee benefits provision and looking at any changes that could make a difference to their employees right now – be it through swapping in free financial advice or features like mental wellbeing support.”
Phil Mills, Head of Food & Drink at business advisers Old Mill said: “For me, I think the furlough is a bit of a blunt instrument. The announcement provides much needed certainty and so I welcome the new time horizon given but I’d question whether the scheme should be universal as I’d much rather see the support given to the sectors forced to shut down such as hospitality.
“The gamble is that we keep enough people employed so that they can return on the other side, and the company is still around to employ more people, pay tax and contribute to GDP. An alternative might be targeted assistance for the sectors most in need, coupled with massive infrastructure investment to keep those let go employed in other, value adding areas of the economy.”
Seb Maley, CEO of tax specialists Qdos CEO, said: “This is good news for employees, but the reality is the furlough scheme simply doesn’t work for most one person companies, whose owners have received very little or no support whatsoever throughout the pandemic. These individuals aren’t eligible for the self-employment scheme either, meaning they continue to fall between the cracks.
“Time is running out for the Chancellor to provide the support that millions of freelancers, contractors and small business owners clearly need. The fact that the furlough scheme will run for a year shows just how serious the situation is, which begs the question, why has the Government cast aside limited company directors for so long?
“The longer this virus continues to affect the UK, the more urgent it becomes that the support packages actually work for freelancers and contractors.”