Furloughed jobs in UK plunge to pandemic low as economy opens

THE number of jobs supported by the United Kingdom government furlough programme fell to the lowest level since the start of the pandemic as the economy took a further step towards normality.

At the end of June, the number of people getting support from the Coronavirus Job Retention Scheme was 1.86 million, almost 600,000 fewer than a month earlier, the UK tax authority said on Thursday. A survey-based estimate by the Office of National Statistics (ONS) suggested the decline continued into July.

How quickly furloughed workers return to work is a key question that will determine the speed of the UK's economic recovery this year and beyond. Bank of England policymakers are also closely watching the figures as they consider when to start withdrawing the monetary stimulus deployed to fight the coronavirus recession.

The decline is a boost for Prime Minister Boris Johnson's government, which has spent almost £70 billion (S$132 billion) supporting nearly 12 million jobs at various times since the pandemic began in March last year. The latest data cover the weeks following the reopening of bars, restaurants and cinemas on May 17.

"It's fantastic to see businesses across the UK open, employees returning to work and the numbers of furloughed jobs falling to their lowest levels since the scheme began," Chancellor Rishi Sunak said in a statement. He noted that young people are no longer the biggest users of furlough as jobs in the hard-hit hospitality and retail sectors open up.

Separate figures from the ONS showed the proportion of the business workforce on furlough fell to 4.9 per cent in early July. Given the margin for error, that suggests about one million to 1.5 million people were on wage support, the ONS said.

BT in your inbox

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign Up

Sign Up

With the economy rebounding strongly, a concern is that people on government support are limiting the labour supply, making it harder for employers to fill vacancies. That risks fuelling wage pressures and inflation.

At the same time, unemployment is almost certain to rise when the programme finishes at the end of September. While some who remain furloughed will be re-employed or find jobs elsewhere, many are likely to find themselves out of work.

The jobless rate is expected to reach 5.2 per cent by the end of the year, up from its current rate of 4.8 per cent, according to economists surveyed by Bloomberg.

Under the plan, furloughed workers receive 80 per cent of their pre-pandemic pay. The government's contribution will be further cut in August to 60 per cent of the total, with the rest topped up by employers.

The number of jobs still on furlough remains "a cause for concern" as the programme is wound down, according to the Resolution Foundation.

"With employer contributions to furloughed staff doubling from this Sunday, and the scheme ending completely in just two months' time, it's vital that as many furloughed staff as possible return to work soon, in order to limit the rise in unemployment this autumn," said Charlie McCurdy, an economist at the London-based think tank.

The decline last month was split evenly between those on full furlough, where no work is being done, and those on partial furlough. The number fully furloughed jobs, which are more likely to be eliminated come September, fell below one million to stand at 971,200 at the end of June.

"How much more this drops leading up to September is now, in part, a question of how menacing the Delta variant is and how this could impact the pace of growth in the economy," said Dan Hanson of Bloomberg Economics. "I expect somewhat of a further drop in the number of furloughed jobs in July, but it might be a slow grind down thereafter and there remains a risk that a considerable proportion will become unemployed."

There was also good news for younger workers, who bore the brunt of last year's recession. People aged 25 to 34 saw the biggest fall in furlough numbers last month, and those under the age of 45 accounted for 60 per cent of the total decline.

Furloughed men now outnumber furloughed women, reflecting the reopening of sectors such as accommodation and food services that have a high proportion of female employees. London showed higher levels of staff on furlough than the rest of the country. BLOOMBERG