Furlough end leaves nearly 1 million in limbo

The end of the government furlough scheme on Thursday leaves those who have not yet returned to work in uncertainty.

According to estimates by the Office for National Statistics, by the end of September, around one million workers are still expected on the scheme. But it is unknown how many of them rely on it for their full income.

Many, including the Bank of England, now expect a slight increase in unemployment levels when it comes to an end.

Since the Covid pandemic began, the scheme has helped to pay 11.6 million people’s wages.

Chancellor Rishi Sunak is “immensely proud” of the almost £70bn scheme. But he says that it is the right time to close it now, despite badly hit companies calling for support to continue.

The travel industry is one of the most affected sectors during the pandemic. It is suffering due to waning consumer confidence and constantly changing restrictions.

Who knows what will happen next?

Animal Aircare, a company which helps pets travel abroad through Gatwick Airport, may have to make some employees redundant if business does not improve. Director Mark Andrew says the reason they have not had to lay anyone off yet is “purely down to furlough”. The end of furlough leaves “a real question mark” for the firm. They are still waiting for things to pick up at Gatwick. But “it seems the airline industry is not buoyant enough yet”.

Despite the scheme closing at a time when job vacancies are at a high, “no-one really knows what is next”. Fidelity International’s investment director, Maike Currie, thinks that many returning to work will not have full time contracts. This means they may need to supplement their income from elsewhere.

Furlough launched in March 2020 when Covid-19 forced parts of the UK economy into closure.

The Coronavirus Job Retention Scheme, to give it its official title, saw the government make payments towards people’s wages, up to a limit of £2,500 per month. It helped those who could not work, or whose employers could not afford to pay them anymore. At the start, it paid 80% of the usual wage. Changes in August meant the government paid 60% while employers paid the remaining 20%.

However, Citizens Advice say people can work somewhere else while on furlough, if their contract of employment permits it.

A recruitment drive

As businesses get back on their feet, the hospitality sector, HGV drivers and warehouse workers have seen a big drive in recruitment.

Latest figures show that between April and June, the UK’s economy grew by 5.5%, up from the original estimate of 4.8%. A surge in household spending after the lockdowns eased is the main driving factor for this increase. However, many companies are held back now by labour shortages.

Senior investment and markets analyst Susannah Streeter thinks it is “wishful thinking” to suggest the furlough scheme ending is “the magic wand to solve the supply chain crisis”. The skills and experience of those emerging from furlough is likely to mismatch those required for the jobs available.

Meanwhile, Simon Clarke, the chief secretary to the Treasury believes the furlough scheme has “done an enormous amount to shield our economy and our society from the worst of Covid”. He estimates there are around two million less people unemployed than there would have been without it.

The Resolution Foundation, a think-tank focusing on people with low incomes, praises the scheme as a “great success”. Senior economist Dan Tomlinson says furlough helped protect living standards. He says it was “as critical to fighting the Covid crisis as nationalising the banks was to fighting the global financial crisis”.

However, recent research suggests a “real risk” of a small increase in unemployment for those still on the scheme as it closes. In particular for older workers or staff in the travel industry.

A bridge over uncertainty

The Coronavirus Job Retention Scheme is described as a bridge over the pandemic uncertainty. Despite its high costs, it has still proven value for money by keeping unemployment levels to fewer than half pre-pandemic expectations.

But now it is coming to an end, it creates some uncertainty over the fate of those workers still having wages subsidised.

Industries that have not returned to normal, for example airlines, call for the scheme to remain in some form. Many businesses not yet fully re-opened have to welcome back furloughed workers so they don’t get caught out by staff shortages at a later date. Unions also argue maintaining it in some form in case of future crises. the government has already shown its willingness to spend billions on trying to avoid large-scale rises in unemployment.

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