Sunak extends furlough scheme into Spring 2021

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Date: 5 November 2020

Big Ben and the parliament buildings

Workers on furlough will now get 80% of their income paid by the government until the end of March 2021; support for the self-employed has also been increased.

Chancellor of the exchequer Rishi Sunak has announced a five-month extension of the furlough scheme into Spring 2021. The Coronavirus Job Retention Scheme (CJRS) will now run until the end of March 2021, with employees receiving 80% of their current salary for hours not worked.

The Self-Employment Income Support Scheme (SEISS) will also be increased, with the third grant for self-employed workers covering November to January calculated at 80% of average trading profits, up to a maximum of £7,500. The Federation of Small Businesses (FSB) has described the move as "bold and much-needed".

Chancellor Rishi Sunak said: "It's clear the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our 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."

Under the extended furlough scheme employers will only have to cover National Insurance and employer pension contributions for hours not worked. For an average claim, this accounts for 5% of total employment costs or £70 per employee per month.

However, it also means the end for the Job Retention Bonus - a £1,000 one-off payment promised to firms that kept on previously-furloughed staff until the end of January 2021. The chancellor said it will be replaced with a new "retention incentive" to be announced at an "appropriate time".

The government also announced:

  • Cash grants of up to £3,000 per month for businesses which are closed;
  • £1.1 billion for local authorities, for one-off payments to enable them to support local businesses;
  • Plans to extend existing government-backed loan schemes and the Future Fund to the end of January, and an ability to top-up Bounce Back Loans
  • An extension to the mortgage payment holiday for homeowners.

The Institute of Directors (IoD) has described the chancellor's announcement as "the right call". Jonathan Geldart, IoD director general, said: "This will give directors much greater confidence about their ability to keep staff on board through the Winter … To support as many jobs as possible through the crisis, consistency and clarity is vital. Businesses need the ability to plan ahead, with cashflow being critical through the first quarter of 2021 particularly in light of potential Brexit impacts."

Adam Marshall, director general of the British Chambers of Commerce (BCC), said "A further extension of the furlough scheme and more generous grants for the self-employed are important steps in protecting jobs and providing certainty for our business communities beyond the immediate shock of a four-week lockdown.

However, Marshall urged the government to look further ahead. "Government must set out longer-term measures over the next 12 months to give firms greater certainty and confidence to plan proactively, rather than to react to changes in support from week to week."

Mike Cherry, FSB national chairman said: "This latest intervention from the chancellor is bold and much-needed. The ability to furlough staff on these terms until March will give employers an acutely-needed injection of confidence as they head into the festive period beset by disruption."

The FSB has, once again, raised the issue of the many business owners that are not eligible for government support. Cherry said: "Too many new business owners, sole traders, company directors and entrepreneurs without business premises are still largely excluded from support measures. That urgently needs to change, and local authorities must use discretionary funds to help these groups wherever possible."

Written by Rachel Miller.

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