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UK furlough set to wind down despite 'freedom day' delay

·Senior City Correspondent, Yahoo Finance UK
·4-min read
Chancellor of the exchequer Rishi Sunak. Photo: PA
Chancellor of the exchequer Rishi Sunak. Photo: PA

The UK's furlough scheme will continue on its current schedule despite a looming delay to the final stage of unlocking, according to a report.

The Daily Mail reported that chancellor Rishi Sunak was resisting calls for an extension to the furlough scheme and other business support measures, such as rates holidays and a moratorium on evictions and debt collection. The Institute of Directors warned on Monday that businesses were facing a "cliff edge" as restrictions are extended for another month.

The furlough scheme — officially known as the coronavirus job retention scheme — is due to run until 30 September but will begin the process of winding down next month. From 1 July, government payments will reduce to 70% of wages and employers will be on the hook for another 10%. Currently, the government pays 80% of furloughed employees' wages and employers contribute nothing.

Read more: FTSE opens higher despite lockdown easing set to be delayed by one month

At the end of April, 3.4 million people were on furlough, which amounts to roughly 10% of the UK workforce. While numbers have been reducing, some sectors remain hugely reliant on the support programme. 70% of staff in pubs and bars were on furlough at the end of April and 65% of hotel and accommodation staff were using the scheme.

The scheme has been hugely successful in keeping staff attached to jobs but the achievement has come at a mammoth cost to the Treasury. The government has so far spent almost £65bn (£46bn) paying furloughed staffs' wages.

Watch: Boris Johnson faces Tory backlash as lockdown lifting put on hold

It has widely been reported that UK prime minister Boris Johnson is set to delay the final stage of reopening by a month. The current schedule would see all remaining pandemic laws — such as social distancing and masks — scrapped on 21 June. However, the prime minister looks set to delay that stage until July to try and curb surging cases of the Delta variant. Downing Street has scheduled a press conference for 6pm on Monday where an announcement is expected.

Read more: 'Last in, first out' fears holding back UK workers from changing jobs as vacancies soar

The delay would mean restaurants and bars must continue to limit the numbers of customers they serve to comply with regulations. It would also make the prospect of a summer holiday season seem even more distant. 

"Clearly this is a blow for many businesses, particularly those in the retail and hospitality sectors," said Roger Barker, the Institute of Directors' director of policy.

“We are now approaching a cliff edge, with government support for business ending or beginning to taper off. It is vital that this support is pushed out commensurately with the lockdown extension. Economic support and public health measures must be aligned.”

Kate Nicholls, head of UKHospitality, on Monday called for an extension to the support. She told the BBC that a one month delay to "freedom day" could cost the industry £3bn.

Read more: Airline stocks dive as UK businesses demand fresh emergency support

Downing Street argues the reopening delay is necessary to help the vaccination campaign and will prevent the reimposition of restrictions in future. Business leaders say more support is needed to help them survive the final stretch of the pandemic. The Night Time Industries Association said on Monday that a quarter of its members could go bust in just one month without additional government support.

A spokesperson for the Treasury said: "We are committed to helping businesses and individuals through the pandemic and deliberately went long with our support to provide certainty over the summer.

“The furlough scheme and support for the self-employed is in place until September and eligible businesses will continue to benefit from business rates relief, VAT reduction and the Recovery Loan Scheme.”

Edward Argar, a British junior health minister, hinted that more support measures could be announced alongside the delay.

"I know that when he addresses his decision, sets out what he intends to do around the easing on the 21st, he will address those points as well," Argar told Sky News on Monday.

“I think he is very mindful of the need for businesses and others to get the support they need if they continue to be locked down or unable to open."

Watch: What is the job support scheme and how has it changed?

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