The number of redundancies in the UK has accelerated at the fastest pace since the financial crisis despite more than half of furloughed workers returning to their jobs after the lifting of lockdown.
As concerns mount over a looming autumn jobs crisis when the Treasury’s wage subsidy scheme closes at the end of next month, the Office for National Statistics (ONS) said 156,000 people were made redundant in the three months to July. This is an increase of 48,000 from the three months to the end of May, and the sharpest quarterly rise since 2009.
The ONS said early indicators from HMRC showed 695,000 workers had dropped from company payrolls since March when the pandemic struck, with younger workers bearing the brunt after the economy plunged into the deepest recession on record.
Despite growing calls for an extension in the furlough scheme as the employment outlook deteriorates, the chancellor, Rishi Sunak, released separate figures which showed large numbers of people returning to work.
Heralding the scheme as a success, the Treasury said the share of the UK workforce on furlough had fallen by more than half since its peak, dropping from 30% in May to 11% by mid August, and said it probably declined further still as the economy builds momentum.
Sunak said the government would continue to provide support to struggling firms to protect the jobs market through its £1,000 job retention bonus and £2bn kickstart job creation scheme for under 25s.
Speaking after a visit to the Emma Bridgewater ceramics factory in Stoke-on-Trent, the chancellor told the BBC he was looking for “new ways” to support jobs. Saying it was his number one priority, he said: “As today’s official employment figures today show, the furlough scheme has done what it was designed to do - save jobs and help people back to work, where they want to be.
“We were clear at the start of the pandemic that we couldn’t save every job, but the furlough scheme has supported millions of workers and we want to help employers keep people on.”
The chancellor will, however, allow a crucial deadline to pass on Wednesday without taking action. Employers seeking to make more than 100 redundancies must run a 45-day consultation, meaning 16 September is the last point they could start this process before the furlough scheme closes at the end of October.
Richard Churchill, a partner at the accountancy firm Blick Rothenberg, said the passing of the deadline meant businesses would no longer have time to plan for the furlough scheme being extended if the government U-turned on its future at the 11th hour, making a wave of redundancies this month more likely.
Warning that businesses would make steeper cuts as rising numbers of Covid infections disrupt the economy, he said: “It appears little thought has been given to what happens from 31 October by government, presumably initially it was hoped that businesses would be able to trade normally from that point onwards which is now clearly not possible.”
Despite the furlough scheme preventing a sharper rise in unemployment, the latest official figures from the ONS showed the unemployment rate increased to 4.1% in the three months to the end of July, representing about 1.4 million people out of work.
Although a slight increase from 3.9% in the three months to the end of June, the Bank of England expects the rate to hit 7.5% before Christmas, which would mean about 2.5 million unemployed.
Business leaders warned further support would be required to prevent a dramatic increase in job losses over the coming months. Adding to calls from the Labour leader, Kier Starmer, the Confederation of British Industry said a successor to the furlough scheme was urgently needed to protect businesses and jobs. Matthew Percival, director of people and skills at the business lobby group, said: “Rising redundancies, rising unemployment and a record fall in the number of young people in work are clear warning signs of what is to come.”
Despite the Treasury figures showing the share of the workforce on furlough has fallen to 11%, the proportion is significantly higher in sectors of the economy that have been hit hardest by the pandemic. More than 40% of workers in the arts, entertainment and recreation industries remained on furlough in mid-August, while almost a third of workers in the sector that includes hotels and restaurants are still away from their jobs.
Nye Cominetti, a senior economist at the Resolution Foundation, said: “All the evidence is pointing to a mounting jobs crisis across Britain.
“The reopening of the economy this summer after lockdown may have boosted economic activity, but it has not spurred a recovery in the jobs market, with unemployment and redundancies rising sharply in July.”
