The move comes a day ahead of Saturday’s deadline for employers to issue redundancy notices for staff being laid off at the end of next month, and staves off the prospect of a mass round of job losses.
The £10bn-a-month scheme announced by the chancellor last month was initially intended to run to the end of May, allowing employers to hold on to workers who might otherwise be let go because of the collapse in economic activity caused by the lockdown.
Today’s extension comes after foreign secretary Dominic Raab announced on Thursday that lockdown restrictions will remain in place for at least three weeks to 7 May and possibly as late as June.
The scheme, which allows firms to furlough employees with the government paying cash grants of 80 per cent of their wages up to a maximum of £2,500, was originally open for three months and backdated from 1 March to the end of May.
Mr Sunak has said there is no limit to the number of workers who can be placed on the scheme, which experts have estimated could cost the Treasury £10bn a month.
Announcing the extension, Mr Sunak said: “We’ve taken unprecedented action to support jobs and businesses through this period of uncertainty, including the UK-wide job retention scheme. With the extension of the coronavirus lockdown measures yesterday, it is the right decision to extend the furlough scheme for a month to the end of June to provide clarity.
“It is vital for people’s livelihoods that the UK economy gets up and running again when it is safe to do so, and I will continue to review the scheme so it is supporting our recovery.”
The Treasury said future decisions on the scheme will take into account further developments on the measures to reduce the spread of coronavirus as well as the responsible management of public finances.
Dame Carolyn Fairbairn, director-general of the Confederation of British Industry, welcomed the move, which she said would “help protect the economy and prevent unnecessary job losses through this new lockdown phase”.
“Once again, the government deserves credit for showing agility in the face of unprecedented challenges,” said Dame Carolyn.
“This extension means that firms will no longer be forced to issue redundancy notices over the next few days to comply with 45-day consultation requirements, and can instead return to focusing on protecting jobs and their businesses.
“No firm wants the scheme to last for longer than it needs to, but it’s absolutely clear that these vital support systems must stay in place until it’s safe for people to return to work and we can begin to restart and revive our economy.”
Frances O’Grady, general secretary of the Trades Union Congress, said: “This is very welcome news for workers and their families.
“If the scheme had not been extended, the deadline for redundancy consultation notices would have been tomorrow. So it was vital that this announcement came quickly after the lockdown extension.
“Employers must continue to make full use of the scheme to furlough workers and protect jobs. There is no reason to make any staff redundant.”
Mike Clancy, general secretary of the Prospect union, said: “There are still too many employers refusing to take advantage of the scheme, even though their industries have completely shut down, leaving employees relying on an overstretched and much less generous benefits system through no fault of their own.
"The government needs to remove the remaining uncertainty around the scheme by clarifying that HM Revenue and Customs will only refuse genuinely fraudulent claims. Employers who need to and can furlough staff should do so, even if this means re-hiring staff after short-term contracts have expired.”
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