Furlough was ‘huge success’ but risks of rising unemployment remain, says think tank

Experts say UK is set for ‘bumpy autumn’ as closure of job retention scheme coincides with rising energy bills and cuts to Universal Credit

The government’s job retention scheme has been a “huge success” in saving jobs, a think tank has said, but rising unemployment is still on the cards after the scheme comes to an end this week.

Throughout the pandemic – which was the worst recession the UK has seen in 300 years – the unemployment rate peaked at just 5.2 per cent, the Resolution Foundation has said; the smallest rise in any recession in living memory.

However, with the furlough scheme coming to an end on Thursday (30 September), the think tank said there was still a risk of high unemployment.

Citing figures from the Office for National Statistics, the Resolution Foundation estimated that, if people continued to return to work at the same rate as they did over the summer, around one million people could still be on either full- or part-time furlough when the scheme ends.

And while most furloughed workers were due to return to their previous roles, particularly those on partial furlough, it said it expected hundreds of thousands more workers would be looking for new jobs from 1 October.

Meanwhile, older workers are now the most likely to be on furlough and face the greatest risk of unemployment, according to the think tank.

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It found that, with the re-opening of hospitality and leisure businesses by July 2021, just 5 per cent of employees aged 18 to 24 were furloughed – down from 22 per cent in February.

In comparison, the proportion of employees in their early sixties on furlough fell from 15 down to 6 per cent during the same period.

Dan Tomlinson, senior economist at Resolution Foundation, said the furlough scheme had been critical for protecting people’s living standards throughout the coronavirus crisis. “The scheme has prevented the UK experiencing catastrophic levels of unemployment, and its extension to 18 months – at a cost of £70bn – has been worth every penny,” he said.

But, while record levels of job vacancies should mean that any increase in unemployment should be short-term, Tomlinson warned that there would still be “hundreds of thousands more workers” looking for work when the scheme does end.

“Britain is set for a bumpy autumn as the end of furlough coincides with rising energy bills and the £20 a week cut to Universal Credit,” he said.

Ahead of the furlough scheme’s end, separate research has found nearly seven in 10 (69 per cent) employers expect to make redundancies within the next year, the majority of which will take place within the coming months.

The survey of 253 HR professionals and company directors by Renovo also found nearly half (46 per cent) of organisations expect to make redundancies within six months, while 23 per cent said they were anticipating redundancies within six to 12 months.

Further polling of 173 of the respondents found half (50 per cent) of employers felt the financial impact of the pandemic on business performance would be the key cause of future redundancies.

However, the pandemic was not the only cause of redundancies. More than one in five (28 per cent) said new technology would mean that some existing jobs would no longer be needed, while 12 per cent said that the move to remote or hybrid working meant that certain roles would no longer be necessary.