Rishi Sunak urged to extend furlough scheme as report reveals two million have not worked for six months

Two million people have not worked for at least six months, according to a new report calling for Rishi Sunak to extend the furlough scheme.

The Resolution Foundation, a think tank, said the economy ran the risk of suffering from “long Covid” if the Job Retention Scheme was not extended to wean the workforce off state support.

With an estimated 4.5m workers on the coronavirus job retention scheme, Resolution’s research suggests that almost 2m workers have been unemployed or furloughed for at least six months of the pandemic, increasing the risk of long-term economic damage.

The think tank's latest study comes less than two weeks before Mr Sunak is set to outline the next stage of his ‘Plan for Jobs’ in next month’s Budget.

The foundation’s call for the full furlough to be extended until the end of June would cost at least £10bn extra, based on the £4.7bn outlay on the scheme in December.

The body is also pressing for a more targeted furlough to carry on into the second half of 2021 for as long as restrictions remain in place for the hardest-hit sectors like bars and restaurants.

The extension would heap more pressure on strained public finances as Mr Sunak already faces a deficit of at least £400bn in the current financial year and a likely £200bn in 2021/22.

But Nye Cominetti, senior economist at the foundation, said the furlough should be “phased out gradually and in a way that acknowledges where the risks of rising unemployment are highest – in sectors like hospitality”.

“This would keep a lid on rising unemployment and encourage firms to bring back existing workers, while tax breaks on hiring could help more people to move jobs too,” she added.

Its survey found 8 per cent of currently employed workers either expect to lose their jobs or be informed of redundancy in the next three months, rising to 21 per cent among those furloughed for at least six months.

The report said the Government’s Kickstart scheme offering six month placements for young people should be extended beyond the end of this year because of delays due to the third lockdown.

Resolution’s findings came as the British Chamber of Commerce’s latest survey found that a quarter of companies would slash jobs if support measures such as business rates relief ended in March and the furlough was halted in April.

The BCC wants to see furlough extended to July.

The Labour Party is calling for a “smarter” extension to the furlough scheme that includes new provisions for training and tough new conditions to prevent abuse.

A Treasury spokeswoman would not comment on whether furlough would be extended again but said: “We’ve already extended our furlough scheme through to April so that people have certainty that help is in place."

“We will continue to invest in protecting and creating jobs through the remainder of the pandemic and through the recovery, and we will set out further details via the next stage of our Plan for Jobs at the upcoming Budget.”