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Lockdown 2: Can my business still use furlough?

Updated 02 November 2020

3min read

Nick Green
Financial Journalist

The announcement of a second national lockdown until 2 December to slow the rise in Covid cases means that the furlough scheme will continue, alongside more help for the self-employed. Here you can find out if you’re eligible, and how to claim. Article by Nick Green.

Lockdown and furlough

The UK’s new nationwide restrictions – popularly known as the ‘second lockdown’ or ‘lockdown 2’ – mean that the furlough scheme that was due to end from the start of November will now be extended. The current plan is to continue it until at least until 2 December, though it may extend further if the lockdown itself is also extended.

The furlough scheme – officially named the Coronavirus Job Retention Scheme – enables businesses to claim 80% wages from the government for any employees who cannot work as a result of the Covid restrictions (e.g. because the business cannot operate), or whom the business cannot continue to employ due to financial difficulties resulting from the lockdown.

Who can still use furlough?

To all intents and purposes the furlough scheme will continue in its current form, so any business previously eligible for it can still use it. A business needs a UK payroll and a UK bank account to be eligible (individual employees cannot apply for furlough themselves).

The businesses most affected by the lockdown will be pubs, restaurants, non-essential shops and anything else (such as entertainment or hospitality businesses) that remain unable to operate due to the restrictions. Unlike the first lockdown, it is expected that the property market will remain open.

Furlough will also be available to employees who have not previously been furloughed – the first time new applications have been accepted since 1 July. Now any employee hired before 31 October 2020 will be eligible.

How much are furlough payments?

Employers can claim 80% of each furloughed employee’s normal wages, up to a maximum of £2,500 per month. Currently this cap is set at the full duration of the new lockdown, which is expected to last a month. However, this may well end up being longer.

What other support is available besides furlough?

Local authorities are also being issued with a total of £1.1 billion for one-off payments to support businesses in their area. The amount is based on the population covered by that local authority, and is set at £20 per head (but actual payouts will obviously be higher since not all employers will need to receive payments).

Any business in England that needs to close due to the lockdown will also be eligible for a Local Restrictions Support Grant, which is worth up to £3,000 per month. Currently the various business loan schemes are also still available, and these may well be extended too.

I’m not sure if I’ve been furloughed or not

If you are an employee affected by the new restrictions, it’s very important to know your rights and exactly where you stand with regard to furlough. Employees who are furloughed are not permitted to continue to work, and employers are not permitted to ask them to continue working. Employees on furlough must be officially informed in writing that they are furloughed.

There are many anecdotal reports on social media of employees being furloughed without their knowledge and made to continue working from home on 80% pay, with their employers presumably pocketing the difference. If you suspect this has happened to you, your employer has broken the law and should be reported.

I’m self-employed – what help is available for me?

The Chancellor is expected to announce more help for the self-employed. The current provisions – widely criticised as inadequate – mean that self-employed people can receive a grant worth up to 40% of their previous profit, and must wait until January to get it. A second grant (amount yet to be determined) will be available from April 2021. The grant for sole traders is currently capped at £3,750 or 40% of average profits in previous years, whichever is higher.

However, Michael Gove has strongly implied that the Treasury is working on new measures to help tide over self-employed workers during the new lockdown. An official announcement is expected this week, but the new improved measures are still likely to be less generous than the furlough scheme.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.