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Furlough extension: Should Rishi Sunak extend support? UK vs Germany comparison | Personal Finance | Finance


Rishi Sunak launched the furlough scheme and other support measures between March and April in direct response to the economic impact of coronavirus. The Chancellor of the Exchequer and the wider government went on to extend these support measures a number of times, but Mr Sunak has been adamant that they cannot continue as we move into 2021.

There have been numerous calls to extend the furlough scheme beyond its current October deadline and these calls have jumped in recent days.

This has occurred due to reports of Germany extending its own furlough scheme, pushing their support into next year.

Comparisons between the UK and Germany are to be expected, given that the two countries have among the biggest economies in Europe.

However, while many have used Germany’s ruling to strengthen their position that the furlough scheme in the UK should also be extended, others have stressed that Rishi Sunak is right to hold firm.

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“The latest statistics from the middle of August show the UK scheme preserved approximately 9.6 million jobs from around 1.2 million employers and paid out £35.4billion.

“By October the scheme will end up costing close to £50billion.

“In contrast the German scheme has only cost €12billion so far, a smaller figure especially in the context of its larger economy.”

Nigel went on to examine how sectoral extensions could work out for troubled industries.

This could in theory work on a small scale, but it in turn would create difficult questions which Nigel explored: “There have been some calls for the furlough scheme to be limited to certain sectors in particular need of help, such as hospitality and arts and entertainment.

“Figures from the end of July show the furlough scheme was supporting around 110,000 jobs in hospitality at a cost of £4.8billion, and 30,000 in the arts and entertainment at a cost of £1.3billion. “Extending the scheme to November for these sectors may cost around £1.5bn but help maintain a workforce temporarily buoyed up by Eat Out to Help Out into the Christmas season.

“Based on the numbers, extending the scheme for specific sectors seems viable but this would raise questions of fairness; why should jobs be preserved for longer in some areas but not others?

“Overall, although there’s no doubt the Coronavirus Job Retention Scheme has been vital, it can’t save every job or be sustained in its current form.

“Employees and employers now need to focus on managing what seem to be more inevitable job losses and making medium and long term plans for recovery.”

As it stands, claims for the Coronavirus Job Retention Scheme can be made up until October 21 but the government will provide less support come the autumn months.

From October, the government will reduce their support to 60 percent of wages and employers will need to cover the additional costs.

This has led some to worry that there may be a wave of redundancies in the coming months, as employers may struggle to afford to keep staff on.



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