UK Lockdown Diaries: Extension of Furloughing Scheme

The Furloughing scheme that was announced by the UK government last month whereby the government has promised to bear about 80 per cent of the cost of the retained employees of businesses who are currently facing slowdown challenges has now been extended till June of this year. The scheme when it was announced was set to culminate in May, but with the constantly rising number of infections in the country, it soon became clear that the lockdown would have to be extended, necessitating the exchequers’ action. While commenting on the decision, Chancellor Sunak said that the government had taken an unprecedented step to support employment and businesses in the country who are currently going through this period of uncertainty, as part of the country-wide job retention scheme. The decision to extend the furlough scheme for a month to the end of June is most appropriate one and would provide clarity, in the wake of the extension of the pandemic lockdown measures which had been announced on 16 March. He further stated that It is very important that the livelihoods of the citizens are protected and that the British economy rises up and starts running again when conditions in the country improve. He further added that he would continue to review the scheme, as the situation evolves and keep supporting the economy untill it recovers. The pandemic till now has infected more than 108,000 people in the United Kingdom out of whom about 14,500 have been reported dead, and the ensuing lockdown conditions have led to a widespread economic slowdown in the country, leading to massive business and employment losses.

A day before, the British government had officially announced that the lockdown currently in effect in the country would be extended by another three weeks. While making the announcement, British Foreign Secretary Dominic Raab had said that the extension of the lockdown measures was necessary to build on the gains made so far in the fight against this virus that has been achieved due to the lockdown in place till now. He further stated, that given the stage the pandemic is right now, any change made to the existing social distancing in place now would risk a resurgence in the spread of the virus and that the efforts and toils that has been made by the country and its citizens so far will all be go in vain. Adding further to that he said, that removing the lockdown measures now would undo the progress that has been achieved so far in containing the spread pf the virus and should a resurgence take place it would require an even longer period of lockdown then what is in place right now, and more restrictive social distancing measures would be required to contain the virus and bring the pandemic in control. It seems the gesture in the decision announced by the foreign secretary to protect the lives of the countrymen has been echoed by the chancellor of the exchequer’s decision, to protect the livelihoods.

The government is most worried about the increase in the unemployment rate in the country that has seen a sharp upward trend since the outbreak. The furloughing scheme was announced by the government in March when it was felt that small and medium business would be the worst impacted because of the pandemic as the masses were asked to avoid venturing out of their houses fearing an infection of the deadly virus. The scheme entailed that businesses who were suffering revenue losses could avail of the scheme where the government will be bearing 80 per cent of the salary costs of their retained employees amounting to a maximum of £2,500 per employee till the end of May. Initially, when the scheme was announced, it was estimated that about 10 per cent of the business in the country would avail of this scheme, costing the exchequer about £ 10 billion pounds, but as time progressed and the scope and severity of the pandemic became more prominent, it soon became evident that the scope of the scheme would have to be widened. Now it seems a larger number of companies will be applying for the benefits under the scheme, and with the time extension, the programme is going to cost the exchequer in excess of £50 billion.

Barring only a few sectors like healthcare and online retailing, which have been showing good business activity most other industries have been seeing their revenue numbers plummeting, forcing them to seek government protection. The IMF in a report published last week has predicted that the British economy will shrink by 6.5 per cent in 2020, while the Office of the Budget Responsibility in the United kingdom estimates that the economy will shrink by 13 per cent during the year overall while it will shrink by nearly 35 per cent during the April-June quarter which is going to be the most affected period of the outbreak. While terming the crisis as a far deeper one than the 2008 financial crisis, OBR also stated that the economic downturn and the ensuing unemployment situation would be one of the worst-hit economic crisis that has been faced by the country since the culmination of world war two. The Budget watchdog also estimated that the lockdown conditions could increase unemployment in the country by close to 2 million, which is roughly 10 per cent of the current workforce. The Office of the National Statistics also came out with a report last week detailing the impact of the lockdown in the economy, it reported that as many as 25 per cent of the businesses in the country have either closed their businesses temporarily of having halted trading till better times come to prevail and as much as a third of the employees in the country could be Furloughed because of this.

The government’s decision to extend the support it is giving to businesses of the country, as well as weaker sections of the worker class is essential to keep the economy from collapsing. This help being extended now will go a long way in ensuring the speedy recovery of the economy when the dust settles on the pandemic.

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