The UK scheme to pay wages of workers on leave because of coronavirus will be extended to October, Chancellor Rishi Sunak said.
He said the government backed workers and companies going into the lockdown, and would support them coming out.
Mr Sunak confirmed that employees will continue to receive 80% of their monthly wages up to £2,500.
But he said the government will ask companies to “start sharing” the cost of the scheme from August onwards.
Mr Sunak rejected suggestions some people might get “addicted” to furlough if it was extended.
Some 7.5 million workers are now covered by the scheme, up from 6.3 million last week, he said.
The chancellor told the Commons that from August, the scheme would continue for all sectors and regions of the country but with greater flexibility to support the transition back to work, he said.
Employers currently using the scheme would be able to bring furloughed employees back part-time.
Speaking of the announcement Dame Carolyn Fairbairn, CBI Director-General, said: “The Chancellor is confronting a challenging balancing act deftly. As economic activity slowly speeds up, it’s essential that support schemes adapt in parallel.
“Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs.
“Introducing much needed flexibility is extremely welcome. It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation. That’s essential as the UK economy revives step-by-step, while supporting livelihoods.
“Firms will, of course, want more detail on how they will contribute to the scheme in the future and will work with Government to get this right.
“Above all, the path of the virus is unpredictable, and much change still lies ahead. The Government must continue to keep a watchful eye on those industries and employees that remain at risk. All schemes will need to be kept under review to help minimise impacts on people’s livelihoods and keep businesses thriving.
“The greater the number of good businesses saved now, the easier it will be for the economy to recover.”
Mike Jackson, Entrepreneur Success Director, Tech Nation added his comments, saying:“The UK tech and founder community is one of the most collaborative in the world. Many collaborative tech projects have sprung up in response to the pandemic. And many tech companies have been crucial to help us navigate the coronavirus, from homeworking solutions to healthtech.
“We therefore welcome the Chancellor’s announcement to extend the furlough scheme through until October.
“This type of intervention has been invaluable to many of the UK’s tech companies who have struggled with cash flow in the immediate term and needed to rely on this measure to retain staff. According to our most recent Tech Nation survey, 38% of companies have furloughed staff, with only 6% having made staff redundant, which is significant.
“We believe this is the right move, to get the economy back on its feet. And we’re optimistic about the UK’s tech economy continuing to thrive.”