Furlough replacement scheme: the winners and losers

Rishi Sunak has responded to growing pressure over the level of government support for parts of the country facing tough new coronavirus restrictions with a last-minute expansion of the new furlough scheme.

Winners

• Workers. Cutting employer contributions for the job support scheme is expected to make retaining more employees easier for companies. While many workers will still lose their jobs over the coming months, analysts at the consultancy Pantheon Macroeconomics revised their estimate for UK unemployment to 6.5% by the end of the year, down from 7.5%. Unemployment before Covid-19 struck was 3.9%.

• Hospitality and leisure. Business grants worth up to £2,100 a month will help companies struggling in areas subject to high restrictions. The Treasury estimates that 150,000 businesses in England, including hotels, restaurants, and B&Bs, will benefit.

• Companies already in high-alert level areas. Allowing the backdating of business grants to the start of August is a victory for firms and parts of the country that had been under severe pressure. However, there will be criticisms that the changes have come too late to save many companies and workers.

• Eligible self-employed workers. As much as £3.1bn is being made available to self-employed workers, increasing the value of the grants they can access to cover lost income from 20% to 40% of average monthly profits, meaning the maximum grant will rise from £1,875 to £3,750. Many are however not eligible for the support.

Losers

• Furloughed workers. Almost one in 10 of the UK workforce – more than 2 million people – are estimated to still be furloughed. The original furlough scheme paid 80% of normal wages. The new schemes will only cover two-thirds. While some firms will top up pay, many won’t.

• Closed businesses and their workers, where the government has not forced them to shut. Companies that have closed due to a drop in demand, but are not legally required to shut by the government, will struggle to retain staff. They will be ineligible for the “job support scheme: closed”, which pays two-thirds of wages at closed companies. They will also struggle to keep staff on to meet the minimum 20% of hours required to use the “job support scheme: open”.

• Arts and culture. The Institute of Employment Studies estimates that at least half a million jobs were furloughed in hospitality and the arts in tier 2 and 3 areas of the country. It said many of these employers would struggle to bring staff back for the minimum one day a week required, meaning firms would have no choice but to make redundancies.

• Self-employed workers who miss out on government support. Almost 3 million people are estimated to have fallen through the cracks of furlough and self-employed income support schemes. No new steps for these people were taken. Those excluded include people self-employed for less than a year, sole company directors and those with annual profits of more than £50,000.

• The unemployed. Redundancies were rising at the fastest rate on record before the chancellor’s changes, with hundreds of thousands losing their jobs in recent months. But there are no new measures for unemployed people, and a boost to universal credit benefits is scheduled to end next year.