The UK Chancellor of the Exchequer Rishi Sunak announced Tuesday that the government scheme to support coronavirus crisis-affected businesses in paying their employees’ salaries will be extended until the end of October.
Under the Coronavirus Job Retention Scheme, which came into operation on 20 April, workers would continue to receive 80% of their current salary up to a £2,500 monthly cap.
There will be no changes to the scheme until the end of July, but flexibility will be introduced from the beginning of August “to avoid a cliff edge and get people back to work in a measured way”, Sunak said.
In a series of tweets, Sunak said: “Employers currently using the scheme will be able to bring back furloughed employees part time. We will ask employers to start sharing, with the government, the costs of paying people’s salaries.”
Details about the changes to the scheme will be announced by the UK government at the end of May.
Dame Carolyn Fairbairn, director-general of the Confederation of British Industry, which represents 190,000 UK businesses, said in a press statement that extending the furlough scheme would avoid the end-of-June cliff edge and the flexibility would “prepare the ground for firms that are reawakening”.
Adam Marshall, director-general of the British Chambers of Commerce, said its research “shows that the scheme has become a key part of wider government support for businesses, with more than 70% of firms surveyed furloughing a portion of their staff”.
On Monday, UK Prime Minister Boris Johnson, speaking at the government’s daily coronavirus briefing, clarified his easing-of-lockdown message that encouraged workers to return to work.
Employers would need to provide “COVID-secure” safety standards for employees, he said.
Johnson added that the UK Health and Safety Executive would be carrying out “random spot inspections to check that companies are doing the right thing”.
Meanwhile, the Bank of England’s latest Monetary Policy Report, published in early May, said it is likely “that the Government’s Coronavirus Job Retention Scheme has materially reduced the number of redundancies. Early data suggest that applications for furlough have been received from 800,000 companies covering over six million jobs.”
The central bank’s most recent survey in April of CFOs across UK business found that companies expect their second-quarter sales to be 44% lower than they would have been without the impact of the coronavirus, employment to be 18% lower, and investment to be down 50%.
For more news and reporting on the coronavirus and how management accountants can handle challenges related to the pandemic, visit FM’s coronavirus resources page.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.