Replacement for furlough scheme announced by UK chancellor

A new Job Support Scheme will replace the UK government’s furlough scheme, Chancellor of the Exchequer Rishi Sunak has announced.
Chancellor of the Exchequer Rishi Sunak

UK Chancellor of the Exchequer Rishi Sunak set out on Thursday a replacement for the government’s furlough scheme, which is to be phased out at the end of October.

From 1 November and running for six months, the government’s new Job Support Scheme will support “viable jobs” where employees are working at least one-third of their normal working hours.

In his announcement to MPs in the UK Parliament’s House of Commons, Sunak said: “The furlough was the right policy at the time we introduced it. It provided immediate, short-term protection for millions of jobs through a period of acute crisis.”

But he said it was “fundamentally wrong” to hold people in jobs that only exist inside the furlough.

Details of the Job Support Scheme set out in the Winter Economy Plan include:

  • Employers will continue to pay employee wages for the hours worked; for the hours not worked, the employer and government will each pay one-third.
  • “The level of grant will be calculated based on an employee’s usual salary [and] capped at £697.92 per month,” the government said.
  • The scheme is open to companies across the UK — even if they haven’t used the existing furlough scheme.
  • All small- and medium-size businesses are eligible, but larger businesses are only able to apply if their turnover has fallen through the crisis.
  • Businesses can take advantage of both the Job Support Scheme and the existing Job Retention Bonus, announced in July.

Andrew Harding, FCMA, CGMA, chief executive–Management Accounting at the Association of International Certified Professional Accountants, said in a news release that the chancellor’s statement is to be welcomed on many fronts but does not look far enough ahead.

Harding said the chancellor’s statement missed an immediate opportunity to tackle the long-term challenges faced by the UK economy (such as faltering productivity, a widening skills gap, and failing social mobility) that the crisis has exacerbated.

“This will likely prove detrimental for businesses, people, and the economy as we seek to recover from the COVID shock,” Harding said. “Over the coming weeks, we look forward to the government putting a greater focus on key areas such as providing new training opportunities to reskill the workforce and for those who have lost their jobs, to enhance recovery and improve productivity.”

He added: “It is essential that the government provides businesses with greater certainty in areas under its control such as taxation, regulation, and trade to help them make better investment decisions for the future.”

Support for self-employed workers

In his statement Sunak also said that the Self-Employment Income Support Scheme would be extended so that those who are currently eligible for the scheme and “are continuing to actively trade but face reduced demand due to coronavirus” will receive a taxable grant.

  • The initial lump sum will cover three months’ worth of profits for the period from November to the end of January. It is worth 20% of average monthly profits, up to a total of £1,875.
  • An additional second grant, which may be adjusted to respond to changing circumstances, will be available for self-employed individuals to cover the period from February 2021 to the end of April 2021.

Loan repayments

The chancellor announced a series of measures to give businesses more time to pay back government loans.

Government Bounce Back Loans can be repaid in ten years, up from six years. The government’s guarantee on Coronavirus Business Interruption Loans is also extended to up to ten years. Further, the deadline for all government coronavirus-related loan schemes is extended to the end of the year, and work is starting on a successor loan programme “set to begin in January”, Sunak said.

Temporary VAT cut extension

The temporary decrease in the level of VAT from 20% to 5% for the tourism and hospitality sectors will be extended until the end of March. The cut was originally put in place until 12 January.

A new VAT payment scheme will allow the businesses that deferred their VAT payments the option to pay back in smaller instalments. “Rather than paying a lump sum in full at the end March next year, they will be able to make 11 smaller interest-free payments during the 2021–22 financial year,” the government said.

In addition, around 11 million self-assessment taxpayers will be able to benefit from a 12-month extension from UK tax authority HMRC on the “Time to Pay” self-service facility. This means payments deferred from July 2020, and those due in January 2021, will now not need to be paid until January 2022.

Corporate Insolvency and Governance Act deadlines

The government also announced Thursday that temporary measures introduced by the Corporate Insolvency and Governance Act 2020 will be extended beyond their 30 September deadline. The measures include:

  • Companies and qualifying bodies with obligations to hold annual general meetings will continue to have the flexibility to hold these meetings virtually until 30 December 2020.
  • Statutory demands and winding-up petitions will continue to be restricted until 31 December 2020.
  • Termination clauses are still prohibited, stopping suppliers from ceasing their supply or asking for additional payments while a company is going through a rescue process. Small suppliers remain exempted from this until 30 March 2021.
  • The modifications to the new moratorium procedure, which relax the entry requirements to it, will also be extended until 30 March 2021.

Oliver Rowe ( is an FM magazine senior editor.

Video: Britain offers new jobs support as virus surges

Britain’s government launched scaled-back job support on Thursday for workers hit by the resurgent COVID-19 pandemic.

Editor’s note: The following is a transcript of the accompanying video. ©2020 Thomson Reuters.

“I cannot save every business. I cannot save every job.” Not the most encouraging words from the UK finance minister. But Rishi Sunak was in Parliament on Thursday [24 September] to offer fresh solutions to keep Britain's pandemic-ravaged economy going. With the country borrowing record amounts to pump money through an economy that’s on track for its biggest annual contraction in at least 100 years, business owners and investors were all ears.

Sunak’s plans include a new jobs support scheme to help keep people employed on shorter hours. He will also extend support loan repayments for businesses. And delay ending a tax cut for the hospitality sector, which has been severely hit.

“These are radical interventions in the UK labour market. Policies we have never tried in this country before. But right now, businesses need every extra pound to protect jobs rather than repaying loans and tax deferrals.”

At the heart of the new measures is a replacement for the Coronavirus Job Retention Scheme. It supported nearly 9 million private-sector jobs at its peak in May and ends next month. Help will now only be available to workers whose employers keep them on at least a third of their normal hours. For unworked hours, the government and the employer will each pay staff a third of their normal rate.

At almost 42,000, Britain has the worst coronavirus death toll in Europe. The UK’s opposition Labour Party said the new support had come too late. The plunge in demand for flights, clothes, and nights out has already led to tens of thousands of workers losing their jobs. British Airways, Rolls-Royce, Marks & Spencer, and Whitbread are among just some of the major firms to shed staff.