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Highlights
- Worker unions, firms want UK furlough scheme to be extended as it enters its final month.
- Some of the sectors which will be severely hit with the withdrawal are Aviation, Hospitality, Retail, Leisure, and Manufacturing.
- The Boris Johnson government does not want to extend the furlough scheme again due to rise in public debts.
The unions and firms in the UK want the Furlough scheme, introduced by the Boris Johnson government, to continue to protect workers in industries that were badly affected by the Covid-19 pandemic, as the job subsidy scheme that supported over 11 million employees enters its final weeks.
The Aviation sector is one of the worst affected sectors, so its staff and workers should be allowed to remain on the furlough scheme until next year when the sector returns to pre-pandemic highs and travel restrictions are lifted completely.
Many employers are still struggling to cope up with the turbulence of the Covid-19 and new Delta variant, prepare to take back staff on the job retention scheme. The request came as unions and the industry lobby group wanted time to prepare for the increase in redundancies.
In the beginning of the August, over 1.7 million workers were under the scheme and if the Furlough scheme comes to an end, employers will be forced to pay all their wages as a result many jobs are expected to be at risk.
With the end of the furlough scheme, in economic outlook which is going to publish next week, the British Chambers of Commerce will forecast a sharp rise in the unemployment rate above 5%, which is expected to be higher than usual redundancies linked.
Recently, the Bank of England said it has anticipated the record number of vacancies to allow a large rise in job losses and the unemployment rate would remain at 4.7%.
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How the Furlough scheme is changing
The Furlough scheme was introduced in Spring 2020 in response to the economic damage caused by the pandemic and to stop workers laid off by the employers. Initially, the UK government paid around 80% of workers usual monthly wage, up to £2,500 a month and since then it is same, so workers have not seen their income affected.
In July 2021, employers were expected to pay 10% of salaries and the government was contributing 70% of salaries. However in August and September, the UK government contribution decreased further to 60% and employers were expected to pay 20%. In addition, employers were also paying pension and National Insurance contributions.
According to the Institute for Fiscal Studies, the expense for employers to keep a staff on furlough was £155 in June, £322 in July and £489 in August and September.
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Will the Furlough scheme continue?
Earlier in March, the scheme was extended to 30 September to give businesses certainty and to reduce the rise in unemployment rate.
However, Chancellor Rishi Sunak is concerned about the rise in public debts of which was around £70 million was spent on the furlough scheme until June as part of around £100 million of spending on the job protection programmes, so the UK government does not want to extend furlough again.
Also, from April 2020 to April 2021, the UK government has borrowed £299 billion, the highest figure since 1946.
If the new delta variant cases rise in the UK, the government had to impose restrictions again. In that case, the Boris Johnson government will come under a lot of pressure to continue or reintroduce a form of furlough scheme.
Sectors that would be affected by Furlough scheme withdrawal
The years 2020 and 2021 have been the worst years for the UK economy as the pandemic badly affected various sectors with several restrictions. It is also an economy reliant consumer spending on things such as clothes, restaurants, hotels, leisure activities, travel and footwears. Sectors that have seen largest the numbers of job cuts during COVID-19 pandemic are Retail, Aviation, Hospitality, Wider Economy, Manufacturing, and Energy.
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Conclusion
Many people across the world lost their jobs or seen salary cut, which led to increase in unemployment rates across the major economies. Countries across the world imposed strict restrictions to prevent the spread of Covid-19, which affected various industries. Experts feel the scheme should be extended for the aviation sector as in its absence can damage the recovery of the sector. But Sunak has repeatedly turned down the idea of extending the furlough scheme citing that an extension to any government subsidy could pile on more public debts.
