Although the furlough scheme is set to end in September, new research has found that 660,000 furloughed jobs are still likely to need the initiative.
Analysis from the NEF has discovered that thousands of positions could be at risk of becoming redundant or seeing a fall in pay and hours once the furlough scheme ends.
The data from the NEF also shows that the additional 20 percent employer contribution towards furloughed wages from the start of August will not be cost-effective for around one-third of furloughed jobs (around 250,000).
This comes alongside new research from the British Chamber of Commerce, finding one in five firms plan to let staff go in response to the furlough policy change.
As such, a recommendation has been made to make the furlough scheme a permanent fixture, so employers have the freedom to furlough employees in response to future uncertainty, such as climate disruption, trade realignment, and future public health emergencies.
Although most pandemic restrictions were removed on 19 July, it is unlikely that the economy will return to pre-pandemic levels of activity for a considerable amount of time.
The NEC has made several recommendations in order to avoid a surge in unemployment driven by the end of the furlough scheme:
- Extend the furlough scheme and roll back increased employer contributions until voluntary social distancing will realistically end
- Build the resilience of the UK economy by establishing a permanent furlough scheme to respond to future economic shocks
- Make furloughed workers more attractive for employers, increase productivity and the government’s tax return by allowing them to use subsidised non-working hours on training.
Alex Chapman, senior researcher at the New Economics Foundation, commented:
The furlough scheme has been a necessary lifeline for millions of workers, and we strongly urge the Chancellor to retain it beyond September.
Over time, similar to some of our European neighbours, a more permanent furlough scheme should be introduced that can help the British workforce build resiliency against future economic shocks such as climate disruption, trade realignment and other public health emergencies
Rishi Sunak has rejected calls for a furlough extension, with sources suggesting that he believes sufficient support is already in place.
A spokesperson for the Treasury commented:
The furlough scheme is in place until September – we deliberately went long with our support to provide certainty to people and businesses over the summer.
The number of people on the furlough scheme has already fallen to the lowest level this year, with more than 1 million coming off the scheme in March and April – showing our plan for jobs is working.
Businesses can also continue to access other support including business rates cuts, VAT cuts and our recovery loan scheme.