London: Unemployment in the United Kingdom (UK) is widely expected to hit levels not seen since the mid-1980s over the coming months. This is due to the coronavirus-induced recession. Unemployment figures will change in the near future.
The number of people officially labelled as unemployed held steady in April, the first full month after lockdown. However, analysts said Tuesday it’s only a matter of time before the full impact of the economic collapse is seen.
Government’s scheme
That’s because the British government’s efforts to insulate the jobs market from the economic damage of the lockdown is coming to an end. Under its Job Retention Scheme, it has been paying up to 80% of the salaries of workers retained. The amount could be as high as 2,500 pounds (USD 3,150) a month.
Many companies have held off from cutting jobs. More than one million employers have so far taking advantage of the scheme. They have furloughed 9.1 million people at a cost to the government of 20.8 billion pounds (USD 26 billion).
Huge costs involved
Given the colossal costs involved, Treasury chief Rishi Sunak has now laid down conditions. He has said from August, firms will have to start contributions and that the scheme will close two months later. The end to the scheme has raised concerns of a spike in unemployment to potentially more than three million for the first time since 1987.
In April, the internationally recognised measure of unemployment in the UK stood at 1.34 million, or 3.9%. This is according to figures published Tuesday by the Office for National Statistics. Some of those furloughed workers will have returned to their jobs Monday. This is due to the re-opening of non-essential shops in England for the first time in nearly three months.
Shrinking economy
But it’s clear that not everyone will be able to sidle back given that many firms are likely to go bust as a result of the lockdown. Figures last week showed the British economy shrank by a massive 20 per cent in April alone.
“The policy is softening the blow for workers that have fallen on hard times in all industries. Some proportion of the furloughed workers will end up unemployed in time. This will especially happen in services industries like retail and travel. Demand in these two segments will remain structurally lower after the pandemic has run its course. So job losses will happen,” said Kallum Pickering, senior economist at Berenberg Bank.
A deeper dive into the figures from the statistics agency shows that big changes are imminent. It noted that the number of people in the UK claiming job-related benefits increased by a monthly 23.3% in May to 2.8 million.
Crisis just beginning
“If the public health crisis is just starting to ease, today’s figures show that the unemployment crisis is only just beginning,” said Tony Wilson. He is the director of the ‘Institute for Employment Studies’. Wilson said that unemployment is rising faster than during the ‘Great Depression’ in the 1930s. It is set to top three million this summer.
Unions and employers are urging more support from the government. Sunak is expected to announce a big fiscal stimulus in the coming weeks.