Furlough Scheme end date nears but planned job cuts fall

Despite the imminent end date for the government’s furlough scheme, August had the lowest number of proposed job cuts in seven years.

Published figures from the Insolvency Service show that employers in Britain planned 12,687 job cuts in August. This is a decrease of 11% since July. It suggests the unemployment predictions for autumn will likely be less than expected.

Companies foresaw more than 150,000 job cuts per month during the height of the coronavirus pandemic.

Businesses planning 20 or more staff redundancies must notify the Insolvency Service when the process begins. The number of proposed cuts indicates the direction of the job market, before official unemployment data a few months later.

The month of August is the first time that firms had to pay furloughed staff 20% of their wages, as well as National Insurance and pension contributions. At the end of September, the furlough scheme completely comes to an end. From then on, employers will either have to pay workers’ full wages themselves, or let them go.

High labour demand and less workers

At the end of June, data shows that 1.9 million workers remained on furlough. Experts predicted that a lot of these would end up being made redundant. However, August saw only 12,687 proposed job cuts, the lowest amount for seven years. Therefore, a surge of job cuts in autumn now seems unlikely.

Director of the Institute for Employment Studies, Tony Wilson, says “unemployment is going to keep falling back over the next few months even as the furlough scheme winds up”. This is because of the “exceptionally high labour demand and fewer people in the labour market due to the crisis and Brexit”. Mr Wilson says, the end of furlough may “slow or reverse” the decline. But the big issue in the labour market now is “not enough workers rather than not enough jobs”.

Several firms report difficulty finding enough workers, and employers’ organisation, CBI, warn that staff shortages may continue for a further two years.

According to recent figures, the number of job vacancies is at an all time high.

Low number of redundancies

The UK job market is rebounding more strongly than predicted, with the low number of proposed redundancies further proof. Some of the lowest figures on record show that 143 companies filed a total of 201 redundancy notification forms.

The data reveals a huge increase in redundancy plans during spring and summer last year. But the information does only cover those companies with 20 or more proposed job cuts. Therefore, smaller firms are not taken into account.

Employers sometimes make less people redundant than they originally propose, but cannot make more.

Proposed redundancy figures have not always been published in the UK, but were available for request via the Freedom of Information Act. However, the Insolvency Service has begun publishing monthly figures on their website this year. Although it is worth noting that these figures are not classed as Official Statistics. Official data is subject to rigorous quality control procedures.

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