The extension of the furlough scheme will swoop in to save sectors and jobs across the UK, but analysts have urged the government to go further.
Rishi Sunak will announce the move in today’s Budget, meaning the government will pay millions of people’s wages beyond the end of Covid restrictions.
The chancellor said last night that it was “only right” to support businesses and top up wages, as the UK looks to lift all pandemic restrictions over the next four months.
Small businesses rally for last-ditch support
Oliver Prill, CEO of financial service company Tide, has urged the government to put SMEs at the heart of the country’s rebuild.
“While our research says most small businesses are optimistic about a return to normality this year, one in five expect to make redundancies once the furlough scheme ends,” Prill said.
“Accounting for around half of the economy, SMEs can make a substantial contribution from levelling up to NetZero and job creation.”
The furlough scheme currently sees the government pay 80 per cent of employees’ wages for up to £2,500 a month.
It has supported around 11.2 million jobs since the start of the pandemic.
Sunak’s extension will prolong the terms until the end of June, with employers then asked to pay 10 per cent of wages in July and 20 per cent in August and September.
Night time boost
The extension is a positive move in safeguarding the UK’s night time sectors, according to the Night Time Industries Association (NTIA).
Michael Kill, CEO of NTIA, believes the decision will allow more flexibility through the phases of reopening the country’s night time economy.
“We hope that the initial announcements from the government on the budget will set the tone for further positive news in support of businesses, which without support will be unable to deliver the furlough scheme which has protected millions of jobs during the pandemic,” Kill said.
Chancellor ‘should carry over VAT cut’
Michael Hewson, chief market analyst at CMC Markets UK, welcomed the furlough extension but urged Sunak to carry over the cut in VAT to 5 per cent, which is due to expire at the end of March.
“A return of VAT to 20 per cent, and the reintroduction of business rates would not only tip a lot of struggling businesses over the edge, but it would also exert upward pressure on inflation at a time when the UK economy will still have various lockdown measures still in place,” he said.
The prime minister’s lockdown roadmap sees non-essential retail and outside hospitality open no earlier than 12 April, with indoor hospitality following suit from 17 May.
The government hopes to lift all restrictions on 21 June.