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Furlough: Why the jobs market is facing a wakeup call

Suban Abdulla
·3-min read
Telecommuting was already a growing trend that left out many low-wage workers. (Getty Images)
Telecommuting was already a growing trend that left out many low-wage workers. Photo: Getty

Many British employers face a double edged-sword to axe staff to save money as Boris Johnson’s government is keen to restart the UK economy.

With lockdown rules relaxed and schemes such as Eat Out to Help Out encouraging people to support local restaurants, cafes and pubs — while the dangers of a second coronavirus spike, and the end of the furlough scheme loom.

It comes as chancellor Rishi Sunak said that government support for the scheme is decreasing, with firms facing a compulsory 5% contribution from this month.

As the government winds down its furlough scheme—due to end in October—many workers face the grim reality of joining the tens of thousands who have already lost their jobs, after the COVID-19 pandemic radically changed the business environment.

Since the crisis started in March, the wage-subsidy scheme has kept up to nine million people in work, with the government covering up to 80% of staff salaries up to £2,500 each month.

In the last seven days it was announced that more than 8,000 high street jobs could be on the chopping block as the pandemic continues to batter an industry that was already struggling prior to the coronavirus crisis.

READ MORE: Coronavirus: MPs blast British Airways for its treatment of staff during crisis

Administrators at burger chain Byron said a last minute sale will result in 651 redundancies, while Currys PC World and WH Smith (SMWH.L) could axe 2,300 jobs between them.

Pizza Express also announced it would close up to 15% (67) of its restaurant — a move, which would put up to 1,100 jobs at risk.

Meanwhile, Wetherspoons (JDW.L) also revealed plans to cut 130 head office roles as the hospitality sector reels from the coronavirus pandemic.

Hays Travel said it had “no choice” but to axe 878 out of 4,500 jobs, after being hit by the government’s last minute ban on travel to Spain and new changes in the furlough scheme.

Continuing the jobs bloodbath, Dixon’s Carphone (DC.L) slashed 800 store management jobs in an overhaul.

Earlier in the week, 1,700 jobs were put at risk as DW Sports collapsed into administration, citing the impact of the coronavirus pandemic and pointed to government restrictions on its entire business.

On Friday, British Airways (BA) announced that it would cut more than 10,000 jobs on a day unions at the airline have dubbed “Black Friday.”

In April, BA used the government’s scheme to furlough 30,000 staff until the end of May.

Elsewhere, M&Co announced that 380 are at risk after announcing it would shut 47 stores and 55 jobs could go at Arsenal FC.

READ MORE: DW Sport falls into administration putting 1,700 jobs at risk

Last month, the National Institute of Economic and Social Research (NIESR) said that ending the scheme in October was a “mistake” that will cost 1.2 million jobs — despite the Treasury's pledge to pay employers who keep their staff on until January 2021.

NIESR also dashed hopes of a v-shaped recovery and said that the UK economy would not return to pre-pandemic levels until the second-half of 2023.

The think thank expects unemployment to jump from 1.3 million to 3 million by the end of 2020, but said that extending furlough beyond October could reduce unemployment in the following four years.

The Office for Budget Responsibility (OBR) said it expects unemployment to rise near to 10% and remain above the present level of 3.9% until 2024.