A quarter of British businesses expect to fire staff if finance minister Rishi Sunak does not extend a job furlough programme that is due to expire at the end of April, the British Chambers of Commerce said on Thursday.
Sunak is due to deliver his annual budget on March 3 and has promised to provide more support for jobs hit by the coronavirus pandemic. But he is also mindful that Covid-related spending has already pushed Britain's budget deficit to its highest since World War Two.
Britain entered a third national lockdown last month, which forced schools and most businesses to close their doors to the public, although staff can continue to work on site if there is no good alternative.
Official data released on Thursday showed 20% of private-sector employees were currently furloughed as of Feb. 11, up from 18% two weeks earlier, though below the 30% who were on leave during the first lockdown.
The furlough programme cost 46 billion pounds ($64 billion) up to mid-December - the government's most expensive single economic support measure.
While new coronavirus infections have fallen by more than three quarters since a peak at the turn of the year, the government remains concerned about the risk posed by new variants of the disease and has not yet eased lockdown rules.
Most staff worked entirely from home last week, in line with government guidance to avoid workplaces where possible.
The BCC said 61% of firms had suffered a fall in sales since October, based on a survey of 1,115 of its members carried out between Jan. 18 and Jan. 31, and ONS data shows spending on credit and debit cards is about 28% lower than a year ago.
Cashflow was a major worry for businesses, the BCC said. Just under a quarter of businesses said that they only had enough money to keep operating for a further three months.
Some 25% of businesses said they would need to make staff redundant if the furlough programme and loan support is not extended, and 25% also said they would cut staff hours in that situation.
"It is vital that the UK government keeps financial support going until firms can reopen and rebuild," BCC Director General Adam Marshall said. "Pulling the plug now would be a huge mistake, and would be akin to writing off the billions already spent helping firms to survive."
The Resolution Foundation think tank, in a report being launched on Thursday, said nearly 2 million British people had either been unemployed or fully on furlough for at least six months.
The report said Sunak should begin to phase the programme out at the budget and take a more sector-specific approach, priotising support for sectors such as hospitality and leisure which remain hard hit by the lockdown.
($1 = 0.7219 pounds)