ASKING employers to contribute to furloughed staff wages risks creating redundancies rather than saving jobs, business leaders warn.

Chancellor Rishi Sunak announced a four-month extension to the Government’s job retention scheme yesterday, extending it until October, and saying it had helped to save more than 7.5million jobs across the UK so far.

Industry bodies largely welcomed the extension but called for more detail on changes due to come in from August, which include requiring businesses to contribute to furloughed staff salaries, and allowing workers to be placed on part-time furlough.

The questions came as a survey by the Federation of Small Businesses shows up to one-third of firms in Scotland fear they are now closed permanently.

The Scottish Chambers of Commerce (SCC) and think-thank the Resolution Foundation have called for any employer contributions to be based on how quickly they will be able to recover from the economic effects of the pandemic.

Downing Street sources say that firms, for example pubs and restaurants which are expected to be the last to re-open again, can apply for government-backed loans to minimise redundancies.

And today the Government opened its self-employment support scheme, allowing freelancers to apply for grants worth 80 per cent of their monthly trading profits.

Director of the SCC Dr Liz Cameron said: “We look forward to seeing further detail on the proposed employers’ contribution. We would ask that this takes into consideration, particularly for SMEs, their ability to pay contributions depending on how quickly their income recovers as lockdown eases. Trading conditions will differ depending on location and sector and the flexibility of the furlough scheme must take these factors on board.”

Resolution Foundation director Torsten Bell said: “A further extension for the hardest hit sectors, such as pubs and bars, may well be needed beyond October.”

But Scotland’s tourism industry may not be helped by the measures, according to its industry body.

The Scottish Tourism Alliance (STA) said many firms will have missed their prime trading period over the spring and summer, and will not get a chance to re-open their companies again until spring, therefore missing out on a chunk of their annual income.

Marc Crothall, chief executive of the STA, said: “The Chancellor’s announcement will offer comfort to many within the tourism industry and is very much welcomed.“As always, the devil will be in the detail. Given the dependence of Scotland’s tourism industry in terms of seasonality; assurance will not be felt by all.

“There are a great many businesses that will not survive beyond October as it will simply not be viable for them to start trading again until the spring.

“Sadly, the extension to furlough alone will not be sufficient to stop many businesses from making redundancies. However, we look forward to learning more detail over the coming weeks.”

Last night the Chancellor said it was “heartbreaking” to see that already people have lost their jobs.

He said: “We already know that many people have lost their jobs and it breaks my heart. We’ve seen what’s happening with Universal Credit claims already. This is not something that we’re going to wait to see; it’s already happening. That’s heartbreaking to me and that’s why I’m working night and day to limit the amount of job losses.”