Coronavirus: UK cuts furlough aid for firms but extends self-employed lifeline

Tom Belger
Finance and policy reporter
Chancellor Rishi Sunak announced an extension to the self-employment income scheme and shakeup of the coronavirus furlough scheme. (AP Photo/Matt Dunham)

The UK chancellor has extended a financial lifeline for millions of self-employed workers, but ordered firms to start paying more of furloughed workers’ wages.

Rishi Sunak used the government’s daily coronavirus briefing on Friday to announce a shakeup of two coronavirus crisis schemes currently supporting millions of self-employed and employed workers.

Millions of freelance workers whose incomes have been hit by the pandemic and lockdown will be able to claim a second payment of up to £6,570 ($8,083) from HMRC. A previous grant has been claimed by 2.3 million people but was only due to last until the end of May, sparking heavy pressure for an extension.

A Treasury press release said the grant will be based on 70% of workers’ average monthly profits in recent years, and is intended to cover another three months’ earnings. The previous payment was worth 80% of incomes, capped at £2,500 a month. Sunak made clear there would not be another grant.

READ MORE: Firms warn of closures and job cuts if furlough aid slashed

The chancellor also unveiled a shakeup of the furlough scheme, a parallel scheme currently subsidising 8.4 million workers’ wages to protect jobs at struggling firms. He stressed it would close in October, warning it “cannot continue indefinitely.”

Firms will be able to bring furloughed workers back part-time for whatever hours they wish from 1 July. They will have to pay workers’ wages for hours they are in work, according to the Treasury.

Millions of furloughed employees will continue to receive 80% of their average wages up to a £2,500 cap, but firms will have to cover more of the costs.

“I have decided to ask employers to pay only a modest contribution,” said Sunak at the briefing. He announced employers will have to pay national insurance and pension contributions from August, 10% of wages from September and 20% of wages from October

He also promised “new measures” in future to support recovery, but gave no further details.

READ MORE: UK government warned self-employed face ‘total income cliff-edge’

Business and union leaders broadly welcomed the changes. Carolyn Fairbairn, director-general of the Confederation of British Industry (CBI), said allowing part-time furloughing “will help employees to return to work gradually and safely.”

Fairbairn said firms accepted they needed to contribute, but warned firms unable to open until later, as in hospitality, leisure and creative industries, may need more assistance.

“Our five million-strong self-employed community will be greatly relieved to know that the income cliff-edge they were facing in two days’ time has now been removed,” added Mike Cherry, national chair of the Federation of Small Businesses (FSB).

But he called for grants for firms to help them make workplaces safe, and support to be extended to the newly self-employed and many company directors who are currently excluded.