The UK government will be announcing that businesses from August will have to pay 20% of wages of employees who remain on the furlough scheme.
In a bid to reduce the mounting costs of the furlough scheme and record borrowing for the month of April, the government is asking businesses to pay part of the wages for their employees as they seek to wind down support.
There are currently a reported 8 million workers enrolled in the scheme where they are eligible to receive 80% of their normal salary – one of the most generous in the world. However the costs of supporting employees across the UK has led to record borrowing of more than £15 billion to continue financing those affected by the pandemic.
While there is widespread support for the scheme, it is set to end in October as the government looks to shore up the finances with multiple strains on the economy and skyrocketing demand for universal credit.
Unemployment is set to rise to 10% by the end of the year before job hiring starts to recover with many businesses unable to resume normal operations. The new 20% commitment may prove difficult for small and medium sized businesses still unable to operate normally, however the scheme’s generous support has managed to prevent several million job losses while cushioning the economic blow.
Despite the difficulty facing businesses, there is optimism of a V-shaped recovery and that the UK could see a sharp rebound in the 3rd and 4th quarter.
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