Tapering furlough unlikely to widen the scope of job losses
In March 2021, the government announced that from 1 July 2021 the national furlough scheme would taper to 70% and then in August and September to 60%. It will then stop altogether at the end of September.
However, the last time furlough was tapered, on 1 September last year, it sparked record redundancies across the nation.
This time round, there are far fewer people on furlough, and much of the economy is already open. If the UK were going to see a similar pattern of redundancies, it would be expected it to kick in from May. Official figures aren’t yet available, but real-time information indicates that there were 197,000 more people in payrolled employment in May than April.
Sarah Coles, personal finance analyst, Hargreaves Lansdown spoke to Business Leader on the issue.
The tapering of furlough is unlikely to widen job losses this time round. Last time, when the support for jobs was kicked away, employment collapsed, but this time round both the economy and the jobs market are on a much firmer footing. However, an awful lot still remains in the balance.
The last time furlough was tapered, on 1 September 2020, it was announced in late spring. At that point, several million people were still using the scheme, and employers struggled to see how they could bring staff back before they’d have to start paying a sizeable chunk of their salary. It meant they started letting people go: redundancies accelerated from May, and were up a record 181,000 in the quarter to July-September.
This time round, when the tapering was announced in March, furlough numbers had already started to drop, as we headed towards partial reopening of the economy in April. At the end of March there were 4.3 million people on furlough, at the end of April there were 3.4 million , and while this is the latest official figure, early indications from the ONS Business Insights survey indicate this may have fallen to around 1.7 million in late May. The Bank of England says this has dropped faster than it expected.
The drop in furlough doesn’t seem to have come from redundancies either, because real-time information indicates that there were 197,000 more people in payrolled employment in May than April.
Of course, if there’s anything that the past 18 months has taught us, it’s that we can’t rule out a sudden and unexpected shock. The Bank of England has warned that people who gave up looking for a job during the pandemic (possibly because they were shielding or because they had given up hope) could start looking again as they are vaccinated or as they see vacancies increase. This could mean a rise in unemployment as well as employment. Meanwhile, with infections on the up, there’s always the risk of more delays to the economy reopening, and even the outside possibility of more closures. It means unemployment has the potential to catch us by surprise.