The Government has promised to continue paying 80 per cent towards wages until the end of April 2021.
The scheme was originally due to expire at the end of March but the announcement suggests the Treasury believes the economy will still be struggling to cope with the impact of coronavirus further into the year.
It comes just a few weeks after the Chancellor’s spending review in which he painted a bleak picture of the UK’s finances because of the devastation wreaked by the pandemic.
The Chancellor said the extension will give businesses and employees across the UK certainty into the New Year.
Mr Sunak said: “Our package of support for businesses and workers continues to be one of the most generous and effective in the world – helping our economy to recover and protecting livelihoods across the country.
“We know the premium businesses place on certainty, so it is right that we enable businesses to plan ahead regardless of the path the virus takes, which is why we’re providing certainty and clarity by extending this support, as well as implementing our Plan for Jobs.”
We are extending furlough until the end of April 2021.
We will continue to pay 80% towards wages of unworked hours - giving businesses and employees across the UK certainty into the New Year.
Read more: https://t.co/tQzuqeAzzH #PlanForJobs pic.twitter.com/WRH5ih27d2
— Rishi Sunak (@RishiSunak) December 17, 2020
The Chancellor confirmed that the Budget will be on March 3 when he will set out the next phase of his plan to “tackle the virus and protect jobs”.
The Treasury also confirmed that struggling businesses will have until the end of March to access the government-guaranteed Covid-19 business loan schemes. These had been due to close at the end of January.
Business Secretary Alok Sharma added: “Extending government-backed loan schemes will give companies right across the UK the finance they need to support, protect and create jobs as we build back better from the pandemic.”
The Government said its Coronavirus Job Retention Scheme [CJRS] scheme has protected 9.6 million jobs across the UK with more than one million businesses accessing loans to help them through the crisis.
The furlough scheme
The government will continue to pay 80 per cent of the salary of employees for hours not worked until the end of April.
Employers will only be required to pay wages, National Insurance Contributions (NICS) and pensions for hours worked; and NICS and pensions for hours not worked.
The eligibility criteria for the UK-wide scheme will remain unchanged and these changes will continue to apply to all Devolved Administrations.
In his spending review last month, Mr Sunak warned that Britain is facing an “economic emergency” as he announced a pay freeze for most public sector workers and cuts to foreign aid.
In his vision for post-Covid Britain there was a £4 billion "levelling-up" fund — but warnings that unemployment could first hit 2.6 million and borrowing more than £760 billion over four years.