Local furlough scheme announced amid further business closures

Chancellor Rishi Sunak has announced an expansion of the Job Support Scheme, which will offer grants to businesses that are legally required to shut as part of local or national lockdowns. Under the local furlough scheme, employees will be paid two-thirds of their salary up to a maximum of £2,100 a month.

The scheme will begin on 1 November and will be available for six months, with a review point in January. The government has also increased the cash grants available to businesses in England that are shut due to local lockdowns to £3,000 per month to £1,500 per month.

“Throughout the crisis the driving force of our economic policy has not changed. I have always said that we will do whatever is necessary to protect jobs and livelihoods as the situation evolves,” Sunak said. “The expansion of the Job Support Scheme will provide a safety net for businesses across the UK who are required to temporarily close their doors, giving them the right support at the right time.”

In England, pubs and restaurants in the north are expected to be closed next week in response to a rise in Covid infection rates, while in Scotland new restrictions are set to come into force today. Previous closures in the hospitality and foodservice industries had far-reaching impacts on the food and drink sector.

The Food and Drink Federation’s chief executive Ian Wright welcomed the news, but stressed that the support does not address the difficulties faced by suppliers to businesses which are forced to close. “These - including many food manufacturers which provide meals, drinks and other products - are equally vulnerable to the impacts of Government measures. Through no fault of their own, they face being shut with no income.  Without additional support for the supply chain throughout lockdown, many of these ‘squeezed middle’ suppliers will simply not survive.”

“While many manufacturers are managing to adapt and find new routes to market, that just doesn’t work for others. When the Government is ordering businesses to close it is the duty of the Treasury to intervene at scale and with speed. Otherwise thousands of jobs, companies and livelihoods will be lost for ever,” Wright said.

The current furlough scheme is due to end on the 31st October, and according to official figures nearly three million workers, or 12% of the UK’s workforce, are on partial or full furlough leave.

Greater Manchester mayor Andy Burnham tweeted today that: “Without an extension to the main furlough scheme, the damage to the economy of the North will be deep and lasting.”

The chancellor’s announcement comes as figures by the Office for National Statistics show that the UK economy grew by 2.1% in August, which was below expectations, despite support from the Eat Out to Help Out scheme.

Although August saw the fourth consecutive month of growth, it was the slowest rate of expansion since April 2020, the ONS said. GDP is still 9.2% below pre-pandemic levels.

“GDP also likely will struggle to improve on September’s level over the next three months, as the second wave of Covid-19 instils more consumer caution and compels the government to shut hospitality businesses in Covid-19 hotspots once again,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics told the BBC.