The Chancellor’s move to extend the furlough scheme has been cheered as a “huge relief” for workers and businesses, but the hardest-hit sectors raised concerns about plans for employers to contribute.
Business groups widely welcomed the announcement that the scheme will continue until October, with the Government continuing to fund 80% of furloughed employees’ salaries until the end of July.
There had been mounting fears of a June cliff-edge hit to firms if the scheme ended without extension, with retailers and those in hospitality set to suffer the biggest impact.
Instead, the Government has been praised for keeping the scheme unchanged until July, with a gradual phasing-out from August as employees are able to return to work part-time and still receive 80% of their salary.
The British Chambers of Commerce (BCC) said the decision to extend is a “huge help and a huge relief for businesses across the UK”.
The Trades Union Congress said it is a “win for the pay packets of working families”.
But as employers will be asked to pay some of the 80% salary for those who return part-time from August, there are fears over the impact on some severely-affected sectors such as hospitality.
BREAKING: The govt has listened to unions and extended the job retention scheme till autumn.
Govt will still cover 80% of wages and has changed the rules to support short-time working, which is key to a gradual, safe return to work.
A big relief to millions of working families.
— TradesUnionCongress (@The_TUC) May 12, 2020
UK Hospitality chief executive Kate Nicholls warned that the Government may need to extend the full 80% for some firms in the sector.
She said: “The full 80% may need to be extended past July for some businesses in sectors like hospitality that will still operate at much reduced levels of trade, or not yet be able to open.
“Our businesses will need as much warning as possible if they are to be expected to plan ahead for eventual venue reopenings.”
Business groups across the board are also urging the Government to set out more detail on how the second phase will work.
The CBI business group said that, while the plans provide much-needed breathing space for firms, the scheme will need to be kept under review.
Dame Carolyn Fairbairn, director-general of the CBI, said: “The Government must continue to keep a watchful eye on those industries and employees that remain at risk.
“That’s essential as the UK economy revives step by step, while supporting livelihoods.”
Adam Marshall, from the BCC, said: “Further support may yet be needed for companies who are unable to operate for an extended period, or those who face reduced capacity or demand due to ongoing restrictions.”
There are also concerns that the Treasury’s decision not to change the scheme until July means many small firms and self-employed workers will miss out on support.
Tory MP Mel Stride, chairman of the Commons Treasury Committee, said: “This will be worrying for those who continue to fall through the gaps of the Government’s support measures, such as the lack of furlough support to help cover dividend income generated through self-employment.”