Employers will carry more costs of furlough as govt tapers off program

Business leaders in the United Kingdom are warning of a threat to jobs and economic growth after the government began to taper off its job support program on Thursday.

More than 1.5 million workers are still on furlough, say estimates from the Office for National Statistics, while many businesses remain closed or are operating at limited capacity under lockdown rules.

Furloughed staff will continue to receive 80 percent of their full wages, but employers will now pay part of that for the first time, and will pay incrementally more until the program ends in late September.

The measures were originally due to be scaled back on June 21, the date set for the country to fully reopen after lockdown, but Prime Minister Boris Johnson pushed this date back to July 19 in a bid to vaccinate more of the population against the Delta variant of COVID-19.

According to data from the national tax authority, HM Revenue and Customs, the furlough program has so far been used to support 11.5 million workers, and 1.3 million employers, at a total cost of 64 billion pounds ($88 billion) by mid-May.

The program has been credited with saving the UK from a sudden increase in unemployment that business leaders had predicted at the start of the pandemic.

Business tax rates relief for leisure, hospitality and retail enterprises is also being scaled back, and the stamp duty tax holiday to boost the housing market is also being withdrawn.

In Parliament on Wednesday, the Scottish National Party led calls for furlough to be extended, in recognition that some business sectors would struggle after months of closures, Sky News reported.

But the prime minister ruled out extending the job support program beyond September, saying the UK now had the "highest and strongest" immunity against the Delta strain of COVID-19.

Business groups have warned jobs could be threatened in areas such as hospitality and aviation.

The Institute for Fiscal Studies, a policy think-tank, warned of the shock that could face some workers, in comments published online.

Tom Waters, a senior research economist at the IFS, said: "The unwinding of the furlough scheme represents a step toward 'normality' in the labor market, but it also will mean big income losses for many of those who end up unemployed unless they are swiftly able to find alternative employment."

Writing in The Guardian, Jagjit Chadha, the director of the National Institute of Economic and Social Research, said risks remained.

Chadha said: "As an economy sensitive to the fluctuations in world trade, the UK is acutely subject to the maxim that this won't end for anyone until it ends for everyone. This means that for as long as the crisis casts its shadow, the denuded prospects for tourism, international trade and labor mobility may act as a drag on UK activity."

Frances O'Grady, the general secretary of the Trades Union Congress, warned that easing these measures would have economic consequences.

In a TUC news release, O'Grady said: "Ministers must not pull the plug on our recovery by cutting off support too soon."