Redundancies could rise sharply in the months before the UK’s furlough scheme is fully wound down, a leading economic think tank has warned today.
The Institute for Fiscal Studies expects there to be a rise in “redundancies over the summer even before the final end of the scheme.”
Bosses will need to pick up 10% of their furloughed workers’ pay in July, rising to 20% in August and September before the scheme is removed entirely.
The IFS said it will cost businesses £322 in July to keep an employee earning £20,000 a year on the books.
In August and September this will rise to £489.
Tom Waters, a senior research economist at the IFS, says: “The furlough scheme does need to be wound down as the economy recovers, rather than attempting to keep every job on life support. But this does mean that some will end up unemployed.”
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Around 450,000 companies who still have furloughed staff will need to start picking up 10% of the bill from today, according to Labour Party statistics.
This will cost them a combined £225 million, the party said.
Over 2m workers still on furlough
According to data published by HMRC today, 2.4m people are still on furlough in the UK, down from a high of 9m in May 2020. However, the figure is dropping rapidly and around one million people were taken off the scheme in May.
Daniel Tomlinson, Senior Economist at the Resolution Foundation, says: “The grand reopening of the economy in May has caused over a million people to return to work from furlough. It’s especially encouraging to see so many young people – who have been hardest by the Covid economic crisis – finally returning to work.”
ONS data shows the labour market is recovering as economic activity starts to gather momentum as a result of coronavirus restrictions being lifted. The number of pay rolled employees rose for the sixth consecutive month in May 2021, up by 197,000 to 28.5m.
Chancellor Rishi Sunak said: “Our Plan for Jobs has supported people’s jobs and livelihoods throughout the pandemic and it’s fantastic to see so many people coming off furlough and into their workplaces with our restaurants, pubs and shops reopened.”
“These figures show what we always hoped would happen – that the scheme is naturally winding down as the economy reopens, but continuing to support those businesses and employees that need our help.”
By Jack Barnett
Source: City AM
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