Experts call for furlough extension after November increase in numbers

29 Jan 2021 By Jessica Brown

Government figures reveal nearly four million people were on the job retention scheme during the last two months of 2020

More people were furloughed in both November and December last year than in October, the latest government figures have shown, despite a temporary easing of restrictions at the start of December.

Statistics from HMRC show the number of furloughed workers increased by 1.3 million at the start of November to a peak of 4.1 million, before dropping to 3.9 million by the end of the month. Provisional estimates for December show this fell slightly to 3.8 by the end of the month.

Workers aged 25 to 34 were the most likely to be furloughed, with the accommodation and food services sectors being the most affected. Across the country, London had the highest number of people on furlough, at 15 per cent, compared to the UK average of 13 per cent.

Joe Dromey, deputy director for research and development at the Learning and Work Institute, warned this sharp increase in the number of furloughed workers was a sign of the impact that renewed restrictions were having on the labour market. “We can expect the number of furloughed workers to remain high, but to gradually reduce as the economy unlocks and businesses get going,” he said.

This has led to concerns around what will happen to employment rates if the scheme – which has been extended several times and is currently planned to finish at the end of April – isn’t extended again. Rachelle Earwaker, economist at the Joseph Rowntree Foundation, predicts there will be a sharp rise in unemployment. “We know people on the lowest incomes are suffering the most during this pandemic and are likely to be hit hard by job losses,” she said. 

And Charlie McCurdy, researcher at the Resolution Foundation, warns that the scheme must be brought to an end carefully. “The winding up of the scheme in just three months’ time is expected to cause a fresh wave of unemployment,” he said. “It’s therefore vital that the chancellor ensures a flexible transition out of the scheme, in order to avoid millions of workers simply moving from furlough straight into unemployment.

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“Options to facilitate this could include subsidising part-time working, as well as continuing the scheme for the sectors most affected by ongoing public health restrictions, such as retail, hospitality and leisure.”

However, news of various vaccinations are providing businesses with “much-needed light at the end of the tunnel”, said Kirsty Rogers, employment partner at DWF. “It’s hoped that as the mass vaccination programme is in full swing, employers will delay making redundancies and continue to use the [job retention scheme] until the end of April when restrictions may be reduced, as the impact of the vaccine takes full effect and the work may pick up,” she said.

Jonathan Wadsworth, professor of economics at Royal Holloway College, University of London, was also unconcerned by the increased use of the furlough scheme, arguing that the alternative would be double-digit unemployment.

“The principle of subsidising firms to keep workers on during a deep downturn is almost certainly a good thing. Lots of other countries have done this in previous recessions, but this is the first time it’s been tried in the UK,” he said.

“We know that unemployment and its ensuing problems in the past has started with mass layoffs, so trying to reduce this – in a downturn not in perpetuity – should avoid expenditure on welfare payments and schemes to try to get the long-term unemployed back into work a year or so down the line, with fewer businesses and fewer vacancies.”

If the furlough scheme is to be extended again, Dromey called on the government to ensure businesses have enough notice to avoid a repeat of last October when the government announced the scheme would be extended on the day it was due to expire – too late for many employees who had already made redundancies in anticipation of the support ending.

“With the furlough scheme now due to end in April, we must avoid repeating the same mistake again,” said Dromey. “Rather than another last-minute extension – which will lead to more unnecessary job losses – we should give employers confidence that support will last as long as the restrictions do."

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