Furlough Scheme March 2021 EXTENSION – and Bank of England update
- Julia Docker
- Nov 5, 2020
- 2 min read
Chancellor Rishi Sunak has announced an EXTENSION to the Coronavirus Job Retention Scheme (‘Furlough’) until the end of March 2021.
At the same time, Sunak updated the Self Employment Income Support Scheme to cover 80% of profits during the next grant period.
Big news too from the Bank of England today, extending their bond-buying programme of quantitative easing by a further £150bn and keeping interest rates on hold – no negative interest rates, yet!
Here’s what it all means for the economy and for your money.
The Chancellor announced the additional fiscal stimulus in response to growing economic uncertainty.
He had already extended the Coronavirus Job Retention Scheme until the English lockdown is scheduled to end on 2nd December, but the economic forecasts are negative and suggest the impact will be long-lasting.
The government remains committed, for now, to reopen the economy at the start of December. But it recognises that it needs to go further to address a slowing economic recovery and downside risks.
The furlough scheme is therefore extended until the end of March 2021, with the government paying employers for furloughed employees, up to 80% of their wages with a cap of £2,500 a month.
Employers will have to cover their National Insurance contribution and pension costs.
Sunak will review the policy in January, at which point we expect (assuming progress with the pandemic) employers will be asked to contribute towards the cost of furlough.
The Chancellor also effectively scrapped the promised £1,000 Job Retention Bonus, due to be paid to employers at the end of January 2021, in respect of each employee returned from furlough.
He promised to redeploy this bonus, at the appropriate time.
For the self-employed, an extension to the furlough scheme means their next grant payment will be set at 80% of net profits, with a cap of £7,500 for the three month period.
Both schemes (furlough and the Self Employment Income Support Scheme) cover the whole of the UK.
In addition, Sunak increased guaranteed funding for the devolved administrations, from £8bn to £14bn.
Earlier today, the Bank of England published its latest Monetary Policy Committee minutes.
They unanimously voted to keep interest rates on hold at 0.1%, but voted to increase the size of their asset purchase programme of quantitative easing by £150bn to reach £895bn in total.
The resurgence of Covid-19 means the Bank now expects to see a slower, bumpier economic recovery.
They forecast GDP decline of 11% for 2020, with forecast growth next year slower than previously expected.
Unemployment is forecast to peak in the middle of next year at 7.75%; the highest since 2013.