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No more furlough: Rishi Sunak ‘set to close scheme to new applications’

Rishi Sunak will stop companies furloughing more staff
Rishi Sunak will discuss phase two of the furlough scheme this week (Picture: EMPICS/ Downing Street)

Companies could soon be banned from putting any more employees on furlough, with Rishi Sunak expected to make an announcement later this week.

At present, the Coronavirus Job Retention Scheme has granted 8,000,000 people absence from work, with the government paying 80% of their wages, up to £2,500 a month. However, the programme is expected to change in the coming months, with companies contributing a percentage of staff pay.

This could mean employers begin paying workers 20% of their salary, with government contributions falling to 60%. The Chancellor will lay out plans for the scheme this week.

He is also reported to be planning a cut-off date for when employees can be put on the programme, in a bid to prevent companies from furloughing current full-time workers and then bringing them back part-time in August.

Chancellor Rishi Sunak arrives in Downing Street, London, after the introduction of measures to bring the country out of lockdown. PA Photo. Picture date: Tuesday May 19, 2020. See PA story HEALTH Coronavirus. Photo credit should read: Jonathan Brady/PA Wire
The Chancellor has been talking to businesses this week (Picture: PA)

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There are also growing concerns about the cost of the government scheme, which the Office for Budget Responsibility currently estimates to be around £84.000,000,000.

Sunak has spoken with business owners who have used the furlough scheme this week, writing on social media that ‘phase two’ will be launched imminently. He said the next stage would involve ‘flexible furloughing which I hope will help get us back up and running’.

Craig Beaumont of the Federation of Small Businesses warned that companies will a heads up in advance of any changes put in place by the government.

He told the Financial Times: ‘The vast majority of employers registering for the scheme are small and medium-sized Enterprises (SMEs). These struggle with changes, so any ending should be announced in advance so they have time to plan, including those who are entering the scheme now as their business enters difficulty.

File photo dated 04/05/20 of British Airways planes grounded due to the coronavirus outbreak parked at Gatwick Airport in Sussex. British Airways and Aer Lingus owner International Consolidated Airlines Group (IAG) bosses have tentatively said flights could resume at 50% capacity by July but added the group was burning through cash and does not expect to return to full capacity until 2023. PA Photo. Issue date: Thursday May 7, 2020. See PA story CITY IAG. Photo credit should read: Gareth Fuller/PA Wire
British Airways are among thousands of companies to rely on the scheme during the pandemic (Picture: PA)
Britons Adjust To Eased Coronavirus Lockdown, Now In Ninth Week
Most shops have not yet reopened to the public (Picture: Getty Images)

‘The chancellor shouldn’t announce and pull up the rope ladder at the same time; announcing now for August 1 would be best.’ 

Tej Parikh, chief economist at the Institute of Directors, also said there may be companies who have been trying to ‘hold off’ using the scheme that ‘now need to’ just as the government brings applications to a close.

He said: ‘[For them], this will be a bitter pill to swallow. As the scheme winds down, other measures to cushion costs will be necessary to support businesses as they try to return to work.’

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Source: Metro News UK

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