Further to our previous article, new figures released by the Office for National Statistics (ONS) on the 23rd September 2021 show that 6% of the workforce remains on furlough. Given this, this has led some to predict a large rise in unemployment once the coronavirus job retention scheme (aka the furlough scheme) ends.
Unemployment Likely To Rise
New statistis released by both the ONS and HMRC have led some to warn of a sharp rise in unemeploymed once the furlough scheme ends.
The new figures released by the ONS show that as at the end of August 2021, 6% of the workforce remains either on full or partial furlough. The ONS estimates that this amounts to between 1.3 million and 1.7 million workers. Of this number, the ONS state that 2% of the workforce remains on full furlough, amounting to between 0.3 million to 0.8 million workers.
New data released by the HMRC on the 9th September 2021 revealed that 340,000 had come off the furlough scheme during July 2021, and that as at the 31st July 2021, the number of workers on furlough had fallen to 1.6 million. Of this 1.6 million workers, 740,000 were on partial furlough, whilst 860,000 were on full furlough.
In a press release, the Resolution Foundation stated that they estimate that around £1 million workers will still be on either full or partial furlough when the furlough scheme ends on the 30th September 2021. They estimate that the total number of furloughed workers had fallen to 1.4 million as at the end of August 2021, with around 40% of that total still on full furlough. Nevertheless, whilst the Resolution Foundation believe that most of those still on furlough will return to work once the furlough scheme closes, in particular those who are currently only partially furloughed, several hundred thousand could end up being rendered unemployed, with older workers likely to be most impacted
Given that unemployment is likely to rise considerably once the furlough scheme ends, the Resolution Foundation call for the planned cut to Universal Credit to be abandoned.
The latest Unemployment Statistics
The most recent statistics on unemployment show that the rate fell by 0.3% to 4.6% in the 3 months to July 2021, according to the ONS. At the same time, the number of payrolled employees increased by 241,000 to 29.1 million in August 2021. This represents a return to the pre-pandemic level in February 2020.
Nevertheless, whilst these statistics highlight that large scale unemployment has been averted by the furlough scheme, it was always likely to be the case that unemployment would rise significantly once the scheme came to an end.
Nevertheless, it may well be the case that those who find themselves unemployed at the end of the furlough scheme will quickly find themselves back in work, given the considerable labour shortages in many areas of the economy. Indeed, separate statistics released by the ONS highlight that there are now 1,034,000 job vacancies, a new record, representing the first time that vacancies have gone over the 1 million mark.
Furthermore, since Brexit, the Government has repeatedly emphasised the need for employers to train up those looking for work within the UK to fill vacancies, as opposed to recruiting workers from abroad. Indeed, commenting upon the current crises involving the lack of HGV drivers and the queues at petrol stations, the Department for Transport stated that allowiing 5000 HGV drivers from abroad to work in the UK for 3 months to ease the crises "will not be the long-term solution". Instead, the aim and the long term solution they assert is to train up HGV drivers within the UK as part of an overall economic strategy of creating a "high-wage, high-skill economy".
Nonetheless, the National Institute of Economic and Social Research (Niesr), forecast that even once the current labour shortages are factored in, the end of the furlough scheme could add around 150,000 people to the ranks of the unemployed, with the unemployment rate peaking at 5.4%.
Reaction
Commenting upon the likely rise in unemployment, the senior Economist at the Resolution Foundation, Dan Tomlinson, states: "The furlough scheme has been a living standards lifeline during the pandemic. The fact that 1.4 million employees were still on the scheme just one month before it closes shows that our labour market is still far from full-health. The end of furlough is set to prompt a testing period in the labour market as even more people, particularly older workers, look for new jobs. This is another reason not to press ahead with the cut to Universal Credit."
