The government will not extend its flagship furlough payments even as it delays plans to lift the final lockdown restrictions in England.
The scheme, which has paid the wages of millions throughout the coronavirus crisis, will start to be phased out from the end of this month and is due to end entirely on September 30.
Boris Johnson is facing calls to announce extra support for workers and businesses after he confirmed that the so-called ‘freedom day’ on 21 June has now been postponed until July.
But ministers are understood to believe there is no need to extend the furlough scheme after changes in the Budget mean the aid lasts into the autumn.
Dr Roger Barker, director of policy at the Institute of Directors (IoD), said the delay was a “blow” for many businesses, particularly those in the retail and hospitality sectors.
He warned: “We are now approaching a cliff edge, with Government support for business ending or beginning to taper off. It is vital that this support is pushed out commensurately with the lockdown extension. Economic support and public health measures must be aligned.”
As well as furlough a number of other support measures are due to change at the end of this month.
A ban on commercial rent evictions is due to come to a halt on June 30, while business rates relief will also taper off.
Michael Kill, chief executive of the Night Time Industries Association (NTIA), warned the delay would make many businesses “highly reliant” on government help. He said: “Many of these businesses and individuals have adapted, overcome and survived for an exceptional length of time with the bare bones of support, and have arrived at this opportunity to find that it could be ripped away from them.”
Nigel Morris, employment tax director at MHA MacIntyre Hudson, called for changes to the phasing of the furlough scheme.
“Keeping Government contributions at 80 per cent throughout July – instead of going ahead with the proposed reduction to 70 per cent support for businesses with a mandatory 10 per cent employer contribution – would be an enormous help given the delay to ‘Freedom Day’.”
Health minister Edward Argar has said that Mr Johnson is “very sensitive” to the challenges businesses continue to face.
However, there is some good news for wedding venues. Ministers have made an exception to lift the numerical limits on wedding guests. This will now be decided by the size of the venue and its ability to support social distancing. But it could prove a shot in the arm for an industry which has suffered disastrously during the crisis. Under the changes events such as weddings and wakes will no longer be limited to a total of just 30 guests.
A series of pilots organised by the government will also go ahead, in a bid to allow large scale events to go ahead.
Under the Coronavirus Job Retention Scheme, otherwise known as furlough, the government currently pays 80 per cent of wages up to £2,500 a month.
From July, however, that contribution will fall to 70 per cent, with employers either having to make up the extra 10 per cent themselves or let an employee go.
In August and September the government will further cut its support to 60 per cent, and employers will be asked to raise their contributions to 20 per cent. After September the scheme will come to an end altogether.