UPDATED: Rishi Sunak has extended the 80 per cent furlough scheme until the end of March 2021, capped at £2,500 per worker.

The extended furlough scheme will operate across the UK, not just England as originally announced, and employers need only cover National Insurance and pension contributions.

To be eligible for the scheme, employees do not need to have been placed on furlough previously but must have been on an employer’s RTI payroll submission on or before October 30 2020.

An employer may rehire an employee to place them on furlough if they were made redundant after September 23.

Further guidance is due to be released on November 10.

However, it is unlikely that many businesses, having gone through the process and cost of the redundancy, will have a change of heart and rehire employeees – leaving the chancellor open to criticism that he should have been bolder and extended the furlough earlier.

The Bank of England said it expects 5.5 million people to be on the furlough scheme this month, which the Resolution Foundation said would cost £6.2bn. The cost in future months will be lower if the economy reopens. At the height of the pandemic in April and May, 8.9 million people were on furlough.

The announcement came as the Bank of England announced another £150 billion of quantitative easing — printing money — to prop up the economy.

The surprise move has been received both warmly by businesses that can now plan ahead into the spring – instead of the stop-start support on offer before – and with alarm by those who see the chancellor sending a message that businesses will not reopen until April 2021, a full year after lockdown was first announced.

Musab Hemsi, partner at LexLeyton, said: “It will give business leaders the financial assurance and time they need to plan and weigh up their options as they look beyond this lockdown with a view to reopening, in some capacity, for the festive period.”

However, Philip Richardson, a partner and head of employment law at Stephensons Solicitors, said that his firm had seen a quadrupling of enquiries from businesses seeking advice before starting on redundancy consultations.

Richardson said: “For them, the stark reality of today’s trading conditions and national lockdowns have simply pushed them to breaking point. Only time will tell if these latest measures are enough to stem the flow of redundancies over the next few months.”

However, the chancellor has faced criticism for reintroducing the furlough scheme when Scotland, Wales, Northern Ireland and parts of northern England had harsher restrictions and didn’t receive such generous funding.

The Welsh government was unhappy when its pleas for more funding during their “firebreak” lockdown last month. It had to rely on its own coffers to fund a £300m grant scheme.

Further reading

Government extends business furlough scheme until December at 80%