Chancellor Rishi Sunak has spoken of the “heartbreaking” job losses already caused by the coronavirus lockdown.
He said the government was determined to save as many firms as it could – which was why it would carry on paying the wages of 7.5 million people.
The scheme was “expensive” but the cost to society of not doing it would be “far higher”, he told the BBC.
He earlier announced the extension of the furlough scheme to the end of October.
Employees will continue to receive 80% of their monthly wages up to £2,500 but the government will ask companies to “start sharing” the cost of the scheme from August.
A quarter of the workforce, some 7.5 million people, are now covered by the scheme, which has cost £14bn a month.
The chancellor said 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.
Employers currently using the scheme will then be able to bring furloughed employees back part-time.
Mr Sunak told the BBC’s political editor Laura Kuenssberg: “This is an expensive scheme… but I also believe it’s absolutely the right thing to do.
“And what’s very clear to me is that the cost of not doing this for society, for our economy, for our country would be far higher, and I am simply not going to give up on all these people.”
Asked if the UK was heading for a recession, 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.
“There are already businesses that are shutting there are already people who have lost their jobs.
“And as I said that’s heartbreaking to me and that’s why I’m working night and day to limit the amount of job losses.
Asked about the effect of the lockdown on the future of the British economy, the chancellor pledged to drive up productivity across the UK and “invest” in people and infrastructure.
“That agenda remains even more relevant today than it did then. And we will not we will not at all retrench from delivering on that,” he told Laura Kuenssberg.
Labour has welcomed Mr Sunak’s decision to extend the furlough scheme, calling it “a lifeline for millions”.
But shadow Chancellor Anneliese Dodds said the government had to clarify when employers will be required to start making contributions, and how much they’ll be asked to pay.
“If every business is suddenly required to make a substantial contribution from 1 August onwards, there is a very real risk that we will see mass redundancies,” she added.