Furlough scheme extension could save two million jobs, says think tank

Experts warn ‘years of experience and dedication’ could be lost without extra support when the job retention scheme ends in October

Up to two million at-risk jobs could be saved by extending the furlough scheme past October, a think tank has said.

In its new report, Rescue and recovery: Covid-19, jobs and income security, the Institute for Public Policy Research (IPPR) warned that up to three million jobs will “still be on life support” when the coronavirus job retention scheme ends in October, but said that extending the scheme and offering more support to businesses could make two-thirds of these jobs sustainable in the long term.

The IPPR suggested the government replace the current coronavirus job retention scheme with a new coronavirus work sharing scheme (CWSS) that would encourage firms to keep employees in work rather than putting them on furlough. 

It argued that the proposed CWSS, which would pick up where the current furlough scheme ends and run until March 2021, would help avoid mass redundancies and unemployment as businesses are hit by local lockdowns or a second wave of Covid-19, and could save up to two million jobs that would otherwise have been lost or deemed unviable.

Clare McNeil, associate director for work and the welfare state at the IPPR, said ending the furlough scheme too early without a plan to protect jobs affected by local lockdowns or a second wave would result in many employers having to cut staff as they are unable to operate under continued lockdown restrictions.

She said these jobs would not be lost “because business owners are not working hard or smart enough, but because of continuing social distancing measures.

“In many cases, years of experience and dedication may be lost with those jobs, and we know that the disabled, those who are shielding and those with caring responsibilities – particularly women – are most at risk," McNeil said, adding that the government must do more to restart the UK's economic recovery by investing support in the creation of new jobs and helping many workers who are looking to switch sectors.

The IPPR proposed that the CWSS should be made available only to firms in the hardest hit sectors, and estimates it would cost approximately £7.9bn over the five months. However, in the event of local lockdowns or a second wave, the scheme would be open to any business that needed support. 

Ben Willmott, head of public policy at the CIPD, also called for the government to consider additional support after the furlough scheme closes at the end of October in the form of a short-time working scheme for key sectors hardest hit by the crisis. He said this would enable more employers to reduce employees' working hours instead of making them redundant.

"The job retention bonus won't be sufficient to protect jobs, so we believe there needs to be additional support," Willmott said. "It makes sense to develop a more targeted support system to enable firms to retain workers through reduced hours, like through some form of short-time working scheme.

“This would support workforce flexibility, particularly for key sectors that are likely to have to make significant redundancies if the furlough scheme ends and there's nothing to replace it."

According to government figures, the furlough scheme has so far supported 9.6 million jobs since it was launched. However, a recent study by the Resolution Foundation suggested that half the workers who had been on the scheme could be back at work already, with the actual number of people on furlough as of the beginning of August potentially as low as three million. 

As of this month, employers have been required to start making national insurance contributions for furloughed workers as part of the tapering of the scheme, which is set to finish at the end of October.

In September, the government will drop its contribution to 70 per cent of wages, with employers expected to contribute the other 10 per cent, on top of national insurance and pension contributions. In October, the last month of the scheme, the government’s contribution will drop again to 60 per cent and employers will need to contribute 20 per cent of wages.

Recent research by the CIPD and Adecco Group found one in three (33 per cent) employers planned to make job cuts by the end of September as the government winds down the furlough scheme. This marks a 50 per cent increase in the same number of companies expecting to make redundancies in the third quarter of this year, compared to the previous quarter.

Private sector firms were twice as likely as public sector organisations to be planning redundancies. Nearly two in five (38 per cent) private sector employers said they were expecting to reduce headcount, compared to less than one in five (16 per cent) in the public sector.