Coronavirus: Experts believe Britain's furlough scheme merely delaying redundancies

7.5 million workers and around million businesses availing of job retention scheme

As ministries in Britain work to ease the lockdown and urge people to return to work, there is speculation that the proportion of the furlough scheme could come down to 50 per cent from August. Various companies are concerned they will not be able to contribute enough to keep the workers on furlough starting August. Mass job losses will happen when employers are asked to share 50 per cent of the cost of their employees' wages.

Chancellor Rishi Sunak has announced that the multi-billion pound furlough scheme due to end next month will stay in place for the next four months. The scheme, whose cost is roughly equivalent to the NHS budget, has been extended till October. It will cost more than £14 billion ($15 billion) a month.

Experts believe that the treasury contributing to 80 per cent of wages is merely delaying redundancies. Currently, self-employed people earning a profit of £50,000 ($54,000) are excluded from the scheme. However, there are rumors that those earning profits just above £30,000 ($32,500) will also be excluded in the scheme after July. Some 7.5 million workers and over a million businesses are protected under the job retention scheme.

Employers using the scheme will be able to bring their furloughed employees back to part-time. Sunak said: "We will ask employers to start sharing with the government the cost of paying people's salaries." Richard Lim, chief executive of Retail Economics, said retailers would likely shift to online selling and will try to hold on to store staff if possible. But this could mean fewer hours or job sharing among the workers.

Furlough scheme still not a permanent solution

Ministries hope the economy to get back to normal from August and businesses could share some burden. If £14 billion ($15 billion) a month continues to flow in till October, then the total bill could be around £112 billion ($122 billion). Trade Union Congress General Secretary Frances O'Grady said gradual and safe return to work can best be pulled by enabling change in rules to allow part-time work. "As the economic consequences of Covid-19 become clear, unions will keep pushing for a job guarantee scheme to make sure everyone has a decent job," she added.

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The parent company of British airways, International Consolidated Airlines group, in a statement to the Daily Mail said, extension of furlough funding cannot recover the loss of revenue in the long term. However, it buys a few extra days that the business is required to survive during the crisis. Still it is not seen as an indefinite financial solution.

Institute of Economic Affairs' professor Len Shackleton said businesses will be unable to stand back and adjust to the economy if they are dependent on the furlough scheme for longer. The need to look for other jobs is clearly going to be delayed by individuals.

The furlough scheme was first announced in March for three months but later extended till June- end. Now, it has again been extended for four more months with greater flexibility from August so furlough workers could return to work part-time.