Struggling sectors may get further furlough extensions

*This news item has been superseded by a more recent announcement. Read the latest update here* 

HM Treasury has suggested that employees in sectors hit hardest by the coronavirus crisis may be given furlough extensions as the nation prepares to embark on phase two of the pandemic.

Prime Minister Boris Johnson confirmed on 30th April that the UK had passed the peak of the coronavirus outbreak, but was adamant there was more hard work ahead to avoid a second peak later this year.

The Treasury has been subsequently modelling a “wide range of scenarios” for easing the restrictions of the current lockdown.

A key factor in limiting the long-term damage to the UK economy has been finding ways to ease the Coronavirus Job Retention Scheme, which sees taxpayers cover 80% of the wages of furloughed workers, up to £2,500 a month.

The Office for Budget Responsibility (OBR) anticipates the scheme costing upwards of £42 billion, protecting the incomes of four million workers in the process.

Chancellor Rishi Sunak hinted to the House of Commons that he would be looking “at the right interventions for every sector” when it comes to easing wage contributions by the state.

A sector-by-sector approach would ensure the Coronavirus Job Retention Scheme could continue to underpin the industries most affected by the lockdown. The scheme has already been extended until the end of June but looks likely to be extended to those sectors unable to reopen their doors during the start of the next phase.

There are growing calls for the Treasury to also consider allowing firms to bring furloughed employees back to work on a part-time basis.

Aidan Shilson-Thomas, researcher at public services reform think-tank, Reform, said: “As it stands, the policy may not be flexible enough to meet the demands of employers as the economy slowly begins to restart.

“Ministers must allow short-time working so employers have the flexibility to bring staff back to work in a gradual fashion while still receiving some support, once the lockdown begins to be lifted.”

Either way, the government’s bailout measures are expected to see government borrowing exceed £300 billion in 2020, with the public purse at its most exposed since the early 1960s.

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Date published 1 May 2020 | Last updated 13 May 2020