CHANCELLOR Rishi Sunak is under pressure to extend the Government’s furlough scheme – or see millions lose their jobs within weeks.
Industry and manufacturing think tanks have warned of “cliff edge” unemployment levels not seen since the Great Depression if the Government fails to give employers further support.
The furlough scheme, which is set to end in June, sees the Government pay 80 per cent of the wages of employees unable to work because of the coronavirus crisis – up to the value of £2,500.
So far, 140,000 businesses have taken advantage of the offer – an estimated 9million staff members costing taxpayers around £42billion for the first three months.
The scheme is designed to stop firms that are unable to operate under lockdown from laying off staff, keeping Brits in jobs.
But the Royal Society for Encouragement of Arts, Manufacturing and Commerce warned that without further support, unemployment could skyrocket to levels not seen since the 1930s.
The head of the RSA future Work Centre, Alan Lockey, said: “There is an estimated 27 per cent of the entire workforce on furlough, with more than 80 per cent of workers in the hospitality sector affected.
“If those people were made redundant the level of unemployment would rocket to levels not seen since the Great Depression.”
He added: “The Government’s response so far has been robust but it must avoid going back to ‘business as usual’ – including Universal Credit, sanctions and means-testing – if it’s to avoid the devastating impact of prolonged unemployment on whole swathes of the population.”
Business association the Chartered Institute of Personnel and Development said the Chancellor should extend furlough until September.
It said: “This will provide more certainty for employers and ensure that there is no ‘cliff edge’ exit from furlough straight to redundancy for hundreds of thousands of workers at the end of June.”
The Manufacturers’ Organisation, Make UK, has also called on the Government to extend furloughing within its sector, where four fifths of companies have seen a fall in orders.
Make UK’s chief executive, Stephen Phipson, said: “All the indications at the moment indicate that, even if a gradual easing of lockdowns begins soon, the impact of this shock will continue to hit companies and livelihoods for some time to come.
“As such, Government may need to be flexible with its future support schemes in the same way that industry is going to have to be flexible with its recovery plans.”
The chief economist at the Institute of Directors, Tej Parikh, told the Observer the Government should act to avoid a cliff-edge.
He said: “Getting the economy running again won’t be like flicking a switch.
“Even if lockdown measures were completely lifted, many firms wouldn’t expect demand to lift to normal levels immediately.
“A sharp removal of the furlough scheme at the end of June could cause significant problems for some businesses, so the Government should explore how it could taper off the system in a flexible way.”
Treasury sources have said that the issue of extending the furlough scheme beyond June was under review.
It is said to be in talks with business groups to allow companies to claim support for staff returning to work part-time.
Major companies signing up to the scheme include BA, which has furloughed 22,260 staff members, and easyJet.
Ministers will outline plans for easing lockdown measures this week and getting people back to work is set to be a priority.
Rishi Sunak said at the start of this week he was willing to consider extending the scheme to July.
He said: “I am determined to make sure as many people as possible return to work after this crisis.
“I want to make sure that as we emerge from this crisis, we can bounce back to the lives we once knew.”
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