Friday 17 April 2020 3:48 pm

UK government extends coronavirus job retention scheme until end of June

The Treasury has announced it will extend the UK’s coronavirus job retention scheme by one month until the end of June in a sign that an economic recovery may be some way off.

Chancellor Rishi Sunak said it was “the right decision” after the government extended the coronavirus lockdown for another three weeks yesterday.

Read more: CBI says firms need clarity on job retention scheme timeline

The job retention scheme allows firms to “furlough” employees – keep them on the staff without them working – with the government paying cash grants of 80 per cent of their wages up to a maximum of £2,500.

It was originally open for three months and backdated from the 1 March to the end of May, when the Treasury had hoped the economic picture might brighten. But it will now run until at least the end of June.

The move followed calls from business groups such as the CBI to give businesses more clarity about when the scheme might end.

CBI chief Dame Carolyn Fairbairn today told the BBC that because employers had to engage in a 45-day redundancy process, firms might have to start laying off workers next week.

Sunak said: “With the extension of the coronavirus lockdown measures yesterday, it is the right decision to extend the furlough scheme for a month to the end of June to provide clarity.”

UK braces for recession

The move is also a sign that the government is bracing for a long and deep recession that will mean providing further support to businesses and workers.

At the start of the coronavirus outbreak, figures such as Bank of England governor Mark Carney said the UK should expect to rebound relatively quickly.

But the consensus is now that the UK economy is set to crash in 2020. The UK’s budget watchdog said GDP could fall 13 per cent this year.

However, the Treasury’s unprecedented actions have won praise from institutions such as the International Monetary Fund (IMF), which said the UK’s economic response to coronavirus has done “all the right things”.

The British Chambers of Commerce (BCC) has said that roughly 50 per cent of UK firms are expected to use the job retention scheme. Around 9m workers are expected to be furloughed.

Read more: Lending through UK coronavirus scheme hits £1.1bn after three weeks

Although unemployment will rise markedly, the scheme means the UK can expect to avoid the harrowing level of job losses seen in the US. More than 22m Americans have filed jobless claims in the last month.

Sunak said the job retention scheme will remain under review. “It is vital for people’s livelihoods that the UK economy gets up and running again when it is safe to do so, and I will continue to review the scheme so it is supporting our recovery,” he said.

Businesses welcome job retention scheme extension

Business groups welcomed the extension of the furlough scheme beyond the end of May.

Dame Carolyn Fairbairn, CBI director-general, said it would “help protect the economy and prevent unnecessary job losses through this new lockdown phase”.

“This extension means that firms will no longer be forced to issue redundancy notices over the next few to days to comply with 45-day consultation requirements,” she added. “Instead [they can] return to focusing on protecting jobs and their businesses’.

Read more: Rishi Sunak expands coronavirus loan scheme to include all UK businesses

“No firm wants the scheme to last for longer than it needs to, but it’s absolutely clear that these vital support systems must stay in place until it’s safe for people to return to work and we can begin to restart and revive our economy.”

ADS chief executive Paul Everitt added: “Extending this important scheme allows employers to continue furloughing arrangements without having to confront difficult decisions on future staffing levels until after the next review of lockdown measures.

“This is a welcome announcement that protects jobs, limiting the impact of the crisis on workers and supporting the recovery that will be needed once the Government is able to begin to release restrictions on movement.”