The UK’s Treasury Select Committee is calling for the UK Government to consider a targeted extension of its furlough scheme which is due to end on October 31. 

In the second report of its enquiry into the economic impact of Covid-19, the committee said a blanket retention of the scheme would not be good value for money. However, they said Chancellor Rishi Sunak should “carefully consider” continue support for sectors of the economy that are struggling most. 

In its previous report, the committee highlighted the need for additional help for more than one million employed and self-employed people who fell between the cracks in previous emergency support schemes.  

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“The committee’s disappointment that the Government did not implement our recommendations to help those who have fallen through the gaps in support persists,” said Mel Stride, the Conservative MP who chairs the committee. “Our second report of the enquiry focuses on emerging challenges as lockdown measures are lifted. 

“One such challenge is to target assistance effectively at those businesses and individuals who need it. The chancellor should carefully consider targeted extensions to the coronavirus job retention scheme and explain his conclusions.” 

The UK economy recovered half of its Covid-19 crash by the end of July, helped by pubs and restaurants reopening from lockdown, but the bounce-back is expected to slow as job losses mount and Brexit tensions rise. 

Latest figures from the Office for National Statistics (ONS) show that after shrinking by a record 20 per cent in the second quarter, output expanded by 6.6% in July. The economy remains 12% smaller than in February, before the pandemic reached the UK. 

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“July was probably the last of the big step-ups in activity and a full recovery probably won’t be achieved until early 2022,” said Thomas Pugh, an economist with Capital Economics. 

Britain suffered the sharpest second-quarter fall of any of the Group of Seven nations during the period from April to June. Hopes for a swift rebound have faded as firms struggle to cope with social distancing rules, shifting restrictions on travel and local lockdown measures to contain new outbreaks. 

The European Union has stepped up planning for a “no deal” Brexit after the UK Government refused to revoke a plan to break the divorce treaty that Brussels says will sink four years of talks. 

Prime Minister Boris Johnson’s government said explicitly this week that it plans to break international law by breaching parts of the Withdrawal Agreement it signed in January when it formally left the EU trading bloc. The EU has demanded that Britain scrap this plan by the end of this month. 

“As the United Kingdom looks to what kind of future trade relationship it wants with the European Union, a prerequisite for that is honouring agreements that are already in place,” said Pascal Donohoe, chairman of the euro zone finance ministers. 

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“It is imperative that the government of the United Kingdom respond back to the call from the (European) Commission.” 

Investment banks have increased their estimates of the chances of a messy end to the UK’s exit from the trading and political bloc it first joined in 1973. The tensions have also pushed the value of sterling lower against both the dollar and the euro.