Record number of redundancies drives up unemployment, ONS finds

Experts say furlough extension and promise of a vaccine will ‘boost confidence’ but warn of a tough winter ahead for employers

The UK’s unemployment rate rose to 4.8 per cent in the three months to September, up 0.7 percentage points from the previous quarter, official data has shown. 

The spike was driven by the largest quarterly number of redundancies on record. Redundancies rose to a record high of 314,000 in July to September – an increase of 195,000 from the previous year and 181,000 from the previous quarter – according to data from the Office for National Statistics (ONS).

The number of individuals on company payrolls also fell over that time. There were 33,000 fewer payrolled employment in October compared to September, and since the beginning of lockdown restrictions in March the number of payrolled employees had fallen by 782,000, with the biggest falls seen at the start of the crisis.

Tej Parikh, chief economist at the Institute of Directors, said the pandemic continued to “bring turbulence to the UK labour market”. Employers had been planning for the furlough scheme to end in October and so were already making difficult decisions about staff retention – some of which could not now be reversed – he explained. 

“The extension of the furlough scheme through to March is welcome as it has given directors certainty to plan ahead for their staff. Unfortunately, the change appears to have come too late in the day for some,” Parikh said. 

He added that the job support scheme – which was set to replace furlough this month but had now been delayed while the government extended the job retention scheme instead – “didn’t provide a smooth off-ramp” from furlough.

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There was, however, reason to be positive, said Jonathan Boys, labour market economist at the CIPD. The extension of the furlough scheme alongside recent promising news of a vaccine rollout could buoy businesses through a rough couple of months ahead, he said: “This will boost business confidence and help stabilise employment through to the spring. Businesses now have a scheme that they understand and a reasonable timeframe in which to conduct workforce planning.” 

But the “economic pain” of the pandemic would start to increase over the winter, he added.

The CIPD’s own research found 30 per cent of firms intended to make redundancies in the three months to December 2020. The poll of 1,006 employers, undertaken before the introduction of new lockdown measures in England and the subsequent extension of the coronavirus job retention scheme, also found 17 per cent of businesses could not predict whether they would make redundancies in the next three months.

The ONS data showed an estimated 1.62 million people were unemployed between July and September, 318,000 more than during the same period in 2019 and 243,000 more than the previous quarter. 

The estimated unemployment rate for men was 5.2 per cent, 1.1 percentage points higher than a year earlier and 1 percentage point higher than the previous quarter. The estimated unemployment rate for women was 4.3 per cent, 0.7 percentage points higher than a year before and 0.4 percentage points up from the previous quarter. 

Young people continued to bear the brunt of the economic impact of the pandemic, the figures showed. The number of young people aged 16 to 24 in employment fell 174,000 between July and September to a record low of 3.52 million. This pushed the unemployment rate for young people to 14.6 per cent (compared to the overall rate of 4.8 per cent).

Kirstie Donnelly, CEO of City & Guilds Group, said the latest unemployment data painted a “truly worrying picture for the long-term health” of the UK jobs market. She said it was now time to accept that the government’s attempts to “redirect and retain” the newly unemployed did not go far enough. 

“We urge the government to prioritise working with local authorities and business leaders to create long-term solutions to curtail the looming jobs crisis and make employment pathways more accessible,” Donnelly said.

Particularly in light of England’s second lockdown, Donnelly urged the government and businesses to provide people with the right support and framework to gain the necessary skills, advice and access to meaningful employment for the future. 

The ONS data showed there were early signs of the labour market starting to pick up in the autumn, before the resurgence of the virus led to tighter restrictions across the UK.

Between April to June 2020 and July to September 2020, the total actual weekly hours worked in the UK increased by a record 83.1 million, or 9.9 per cent, to 925 million hours. Additionally, there were an estimated 525,000 job vacancies posted between August and October, a quarterly increase of 146,000 posts. This was also an 182,000 increase from a record low in April to June.

Small businesses, with one to nine employees, saw the largest quarterly growth in vacancies, with an estimated increase of 36,000 (51.8 per cent). This compared to an estimated increase of 18,000 (12.4 per cent) for larger businesses with more than 2,500 employees. 

But despite the increase, vacancies remained below pre-pandemic levels, at 278,000 (34.6 per cent) fewer than a year ago.