Hundreds of thousands of viable jobs will be put at risk when the furlough scheme ends as workers in industries where voluntary restrictions persist lose the support, analysis by the New Economics Foundation suggests.
Employers must now pay 20 per cent of the wages covered by furlough, up to a maximum of £625 a month, to admit staff to the scheme as the staged withdrawal continues. Furlough is due to be removed completely from the start of October.
The foundation, a think tank, said that yesterday’s changes would threaten 250,000 jobs as the 20 per cent contribution “will not be cost-effective” for some employers. When the scheme ends, 660,000 workers will still need support because many industries, such as travel, transport, arts and hospitality, may not be able to return to normal despite the removal of official restrictions.
Alex Chapman, senior researcher at the foundation, said: “The current end date for the furlough scheme is arbitrary and can cause unnecessary harm to thousands of workers.
“Our analysis highlights that demand will remain suppressed because of voluntary measures that the public will take in response to the uncertainty around the Delta variant.”
The findings echo a survey by the British Chambers of Commerce (BCC) which found that one in five businesses planned to let staff go as a result of the new terms of engagement this month.
The Treasury is gradually making the scheme less generous to ease businesses back to normal and expects many jobs to be made redundant.
Furlough covered 80 per cent of salaries up to £2,500 a month between March last year and the end of June. Last month the taxpayers’ share dropped to 70 per cent and employers were asked to contribute 10 per cent. This month and next month the state will pay 60 per cent and the employer 20 per cent. At its peak, almost nine million jobs were furloughed and 1.9 million people were still on the scheme at the end of June, official figures show.
The foundation used modelling and forecasts for social mixing after lockdown ended on July 19 to estimate that 660,000 jobs would continue to be affected until the pandemic was under greater control. Its full estimate ranged from 450,000 to 1.1 million jobs.
The BCC warned that this month’s change would lead to the loss of thousands of jobs and called on ministers to ensure that those affected can retrain. The foundation called for people on furlough to use their subsidised hours for training.
The think tank said that the increase in employer contributions should be rolled back and furlough extended “until a realistic point where voluntary social distancing is likely to end”.
It also called for a permanent replacement short-time work scheme to respond to future economic shocks. The foundation said this would “bring the UK into line with other European nations”. Germany had a furlough-type scheme long before the pandemic which is widely thought to have prevented a sharp rise in unemployment after the 2008 financial crisis.
Workers older than 50, who account for a third of those on furlough, are among the most vulnerable.
Stuart Lewis, founder of Rest Less, which advocates for older people, said that the end of the scheme would “deliver another blow to workers in their 50s and 60s”.
The Treasury wants to unwind the scheme gradually to ease the transition for employers. It also fears that the scheme is making it hard for employers to find staff and driving up wages.
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250,000 viable jobs at risk as furlough scheme winds down
