The chancellor, Rishi Sunak, has been urged to extend the coronavirus wage subsidy scheme until September to avoid spiralling job losses across Britain this summer.
Against a backdrop of mounting pressure on the government to provide continued support as lockdown measures are gradually removed, the Resolution Foundation said the extension would cost the exchequer as much as £48bn but would prevent a fresh surge in unemployment.
After Boris Johnson announced on Sunday his blueprint for the gradual lifting of restrictions, industry groups warned it was incomplete without urgent details about the job retention scheme.
Lex Butler, the chair of the Hotel Booking Agents Association, said: “We immediately need to know that the furlough scheme will be extended beyond the end of June and on what terms. We need clarity now to prevent closures and large scale loss of jobs.”
Employees in the hospitalities sector are expected to return to work last, possibly from July.
Adam Marshall, the director general of the British Chambers of Commerce, said: “Firms will need to know that government support schemes, which have helped save millions of jobs in recent weeks, will continue for as long as they are needed so that they can plan ahead with confidence.”
Johnson told parliament on Monday that Sunak would announce details on the future of the furlough scheme on Tuesday. The chancellor is widely expected to announce the gradual wind-down of the scheme amid rising concern over its cost, which is roughly £14bn a month.
Under the scheme, workers receive 80% of their pay up to £2,500 a month. More than 6 million were protected at 800,000 firms in the first two weeks of the scheme’s operation.
Options the Treasury is understood to be considering include cutting the level of support to 60% while allowing staff to work some of their hours.
The Resolution Foundation urged the government to allow for “partial furloughing” from as early as June, but said the 80% support should also be kept in place across the economy until at least August. It could then gradually be scaled back.
However, the thinktank recommends 80% support continuing until at least September for businesses in sectors where the return to work will take longer, including hospitality.
Sunak is under pressure from business leaders to provide an update this week because employers have to allow for at least 45 days to consult on redundancies of more than 100 staff. Companies face a deadline of 18 May to begin the redundancy consultation process if the furlough is no longer available in July.
Torsten Bell, the chief executive of the Resolution Foundation, said: “Moving too quickly could spark a huge second surge in job losses at a time when unemployment already looks set to be at the highest level for a quarter of a century.
“The scheme cannot last forever however. It should be phased out gradually, with a longer timeframe for the hardest-hit sectors.”
On Sunday Johnson said it was time for sectors in which home-working was not possible – including manufacturing and construction – to get back to work.
But the Confederation of British Metalforming (CBM), which represents about 200 manufacturing companies across Britain, said it would take longer for the economy to recover and that further financial support would be required while production levels remain below normal.
The CBM said up to 30% of jobs (12,000) among its members could be cut if assistance was taken away at the end of June.
The finance lobby group TheCityUK said it expected UK firms would face unsustainable debts of up to £105bn that would need to be managed before March next year.
Alongside continued support from the government, the major high street banks have been ordered by the Bank of England to make more loans to firms to help keep them running.
A spokesman for the Treasury said the job retention scheme had already protected millions of jobs.
“Future decisions around the scheme will take into account the wider context of the measures in place, as well as the public health response,” they said. “We have been clear there will be no cliff edge and people will be eased back into work in a measured way.”