The scheme will ensure that workers who have been furloughed because of the coronavirus pandemic are paid 80% of their monthly wages up to £2,500.

Mr Sunak said that the government has supported UK workers and companies going into the lockdown, and would support them coming out.

However, he said that the government will ask companies to “start sharing” the cost of the scheme from August. He also rejected suggestions some people might get “addicted” to furlough if it was extended, BBC News reports.

Mr Sunak highlighted that an estimated 7.5 million workers are now covered by the scheme, marking an increase from the 6.3 million recorded last week.

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.

Mr Sunak also revealed that employers currently utilising the scheme would be able to bring furloughed employees back part-time.

Dr Liz Cameron, chief executive of the Scottish Chambers of Commerce, commented on the announcement. She said:“This is great news. Businesses and employees across Scotland will be extremely relieved by the Chancellor’s decision to extend the furlough scheme to October rather than face a cliff edge with its originally planned withdrawal at the end of June.

“This direct employee financial support has been a lifeline which has enabled many jobs to be retained rather than businesses having to face making massive redundancies. As we begin to consider a ‘return to workplace’ plan to restart the economy, flexibility in these schemes will be paramount to protecting jobs until businesses are able to trade normally once more.

“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 lock down eases. Trading conditions will differ depending on location and sector and the flexibility of the furlough scheme must take these factors on board.

“We will continue our engagement with the Treasury to make sure business support remains flexible and accessible for Scottish businesses.” 

Tracy Black, CBI Scotland director, added:“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 the UK Government to get this right.

“Above all, the path of the virus is unpredictable, and much change still lies ahead. The UK and Scottish governments 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.”

• Read all of our articles relating to COVID-19 here.