Rishi Sunak has announced the government will extend furlough until the end of March as the second coronavirus wave and renewed lockdown measures threaten to drive up unemployment.
In a major climbdown for the government after multiple changes to its economic support packages in recent weeks, the chancellor said the Treasury would continue to pay 80% of workers’ wages.
Sunak said it was increasingly clear that the economic effects of the pandemic would be much longer lasting for businesses than just the duration of second lockdown and this warranted the multibillion pound increase in wage support.
“Extending furlough and increasing our support for the self-employed will protect millions of jobs and give people and businesses the certainty they need over what will be a difficult winter,” Sunak said.
The move follows mounting pressure from business groups, unions and politicians from across the political divide in the UK’s nations and regions, who had called for additional economic support during the second Covid wave.
It also comes after the Bank of England announced a fresh £150bn stimulus package earlier on Thursday, in a coordinated push between No 11 and Threadneedle Street to safeguard jobs and growth through a difficult winter ahead.
The chancellor said the extension in furlough would cover 80% of usual wages and that employers will only need to pay the cost of pension and national insurance contributions.
Sunak said the job retention bonus – a £1,000 payment to firms for retaining furloughed staff until the end of January, expected to cost up to £9bn – would be scrapped because of the new extension in furlough.