Chancellor Rishi Sunak has confirmed that he will extend the furlough scheme until the end of March.
Mr Sunak said the scheme will pay up to 80% of a person’s wage up to £2,500 a month.
He told the Commons that the government will review the policy in January.
It follows several days of wrangling over the scope and duration of furlough. It was due to end on 31 October but has been extended to cover the new four-week lockdown in England.
That announcement at the weekend sparked a row with Scotland and Wales, which argued that it was unfair for the full support package to be available only when England is in lockdown.
They said the scheme – which currently guarantees 80% of wages up to £2,500 a month for people unable to work – should be on offer if they went into their own full national lockdowns later on.
The chancellor told the Commons his intention was “to give businesses security through the winter”.
Mr Sunak’s statement comes after the Bank of England said it was pumping an extra £150bn into the economy.
The Bank warned the resurgence of Covid-19 would lead to a slower, bumpier recovery.
About £40bn has been spent on the furlough scheme since it was introduced in March.
It was originally intended to end in May, but Mr Sunak said at the outset that it would be extended “if necessary”.
About 9.6 million people have benefited at one time or another, with a steep take-up in the first few months.
Responding to the announcement, Richard Alvin, group managing director, Capital Business Media said: “This news will come as a huge relief to the UK’s employers, and the extension of the scheme until at least March shows a welcome long-term commitment to supporting businesses through this phase of the crisis. It will give business leaders the financial assurance and time they need to plan and weigh up their options as they look beyond this lockdown with a view to reopening, in some capacity, for the festive period. Business needs the ability to plan, and this announcement allows for that planning, and it could well be be rewarded with more jobs being able to be saved and less businesses falling into liquidation.
Seb Maley, Qdos CEO, added his comments about the extension saying:“This is good news for employees, but the reality is the furlough scheme simply doesn’t work for most one person companies, whose owners have received very little or no support whatsoever throughout the pandemic. These individuals aren’t eligible for the self-employment scheme either, meaning they continue to fall between the cracks.
“Time is running out for the Chancellor to provide the support that millions of freelancers, contractors and small business owners clearly need. The fact that the furlough scheme will run for a year shows just how serious the situation is, which begs the question, why has the Government cast aside limited company directors for so long?
“The longer this virus continues to affect the UK, the more urgent it becomes that the support packages actually work for freelancers and contractors.”