The UK could see a period of prolonged mass unemployment if the Chancellor does not extend the furlough scheme, a group of business leaders and unions have warned.

Ahead of the Budget on March 3, the group told Rishi Sunak that the economy is too fragile to end the scheme.

Francesc O’Grady, director general of the TUC, urged the Chancellor to extend the furlough scheme until at least the end of the year, and to announce it immediately, rather than waiting for the Budget.

She said: “It would be a dereliction of duty of any government [not to extend furlough]. Nobody should think it is responsible or acceptable for any government to consign people to the dole queues.

“The government must understand we need to work our way back to growth, and for that we need people in jobs. Otherwise we are going to end up with real, deep economic and social problems.”

Ms O’Grady added: “To cut back now would be a complete waste of all that effort, and it would be just obscene to confine a whole generation – particularly young people – to unemployment.”

Adam Marshall, director general of the British Chambers of Commerce (BCC), called for an extension to July. But he also insisted that anticipated easing of lockdown restrictions in the spring and summer will not spell the end of the challenges facing businesses.

He said: “What one can’t do is say that once the vaccine rollout has happened, everything will be OK. That is not the case. You’ve got businesses in deep trouble, and still the possibility of flare-ups in the virus. It’s not a case of just vaccinate and forget about it.”

The CBI, the UK’s largest business lobby group, also called for an immediate extension. Its chief economist, Rain Newton-Smith said: “If the government brought it to a sudden stop, that would almost certainly impact job decisions, just as we see hope on the horizon.”