Four in five furloughed employees now back at work, says think tank

But report warns labour market is still far from fully recovered and positive signs risk  ‘dangerous complacency’ among employers

Employees are coming off furlough at a “rapid pace”, a report has found, but experts warn against complacency as the economy has far from recovered.

A survey of 8,000 workers by YouGov, commissioned by the Resolution Foundation, found that of the employees furloughed during the first and second national lockdowns, four in five (80 per cent) were back working in the first week of June.

The research also found that almost seven in 10 (69 per cent) of those who were still furloughed in October 2020 – a group the think-tank said were the least likely to return to work post furlough – have since returned to work.

In addition, the unemployment rate has fallen to 4.7 per cent in June, down from its peak of 5.1 per cent at the end of 2020.

The Resolution Foundation suggested this was because of the extension of the job retention scheme and the fact that the UK produced more GDP during the pandemic than previously thought.

But, while the rate of people returning to work was encouraging, the report warned that “although the labour market is tightening, it is very far from tight”.

Get more HR and employment law news like this delivered straight to your inbox every day – sign up to People Management’s PM Daily newsletter

It said the total hours worked in the UK were still down 5 per cent on pre-crisis levels, with the Resolution Foundation estimating 2.3 million people were still not fully working. 

In addition, the report found the underlying annual wage growth was just over 2 per cent: a third lower than it was before the crisis when it was just under 3.4 per cent.

Gregory Thwaites, research director at the Resolution Foundation, warned that while these were encouraging signs, they risked “breeding dangerous complacency” and an “over-playing” of the health of the labour market. 

“A recovering labour market is not the same as a recovered one”, he explained. “Labour shortages in hospitality aren’t a huge problem, and there is no real evidence of a new pay boom. Instead these things are part of the bumpy ride that emerging from a pandemic inevitably involves.”

The report said there was still anecdotal evidence that the hospitality sector was struggling to recruit during its reopening because of the move from a “standstill” business in lockdown to recruiting quickly while opening up. The fact that the sector recruits heavily from a young and largely unvaccinated population may have also been a factor, the report said.

The think-tank said people who had worked in the sectors hardest hit by the pandemic, including hospitality, were 30 per cent more likely to have taken jobs elsewhere during the crisis.

The figures come as the UK prepares to restart the process of rolling back the furlough scheme.

From Thursday (1 July) the government’s contribution to furloughed workers’ wages will drop from 80 per cent to 70 per cent for hours not worked, while employers will be expected to start contributing 10 per cent on top of the National Insurance and pension contributions already being made.

The government furlough payment will fall again to 60 per cent in August, with the employer contribution increasing to 20 per cent, and the scheme will stop completely at the end of September.