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UK unemployment to hit almost 3 million despite job support scheme

File photo dated 19/05/20 of a Jobcentre Plus in London. Unemployment levels will go above two million people by Christmas 2021 unless the Government takes action, a think tank has said.
Unemployment is expected to rise. Photo: PA

UK employers are expected to slash 1.5 million jobs by Christmas, as the end of furlough triggers a fresh wave of layoffs despite the government’s new job support scheme.

Stark new analysis suggests 1.2 million furloughed workers are “waiting in vain to return to jobs that no longer exist,” and will face redundancy by the end of the year.

Another 300,000 employees who have either returned to work or were never furloughed are also predicted to lose their jobs by a leading economic consultancy.

The continued wave of job cuts would push UK unemployment up to almost three million, or a rate of 8.5% in the final three months of the year.


READ MORE: Coronavirus: UK hiring could return to 'normal' by January

The figures were released on Monday by the Centre for Economic and Business Research (CEBR). They mark a deterioration compared to the centre’s previous forecasts of unemployment reaching 8%.

“As the chancellor said, he can’t be expected to save every job throughout the crisis and a readjustment of the economy will be required,” said in a blog post on the organisation’s website.

“But as hopes for an early return to normal recede and it indeed looks like some businesses in Covid hotspots will need to close in the coming weeks and months, the chancellor needs to act now despite the fiscal cost.”

Watch: Government to pay two-thirds of employee wages if firms shut

The CEBR said the number of workers still on furlough had “worryingly” not moved between August and September, standing at around 11% or around 3.3 million in mid-September.

It comes in spite of the government hiking employer contributions to furlough pay, and the looming withdrawal of government subsidies altogether at the end of October.

The chancellor Rishi Sunak recently announced a new job support scheme to replace the furlough scheme, but subsidies and wages are lower and employer contributions higher.

The CEBR said it had “not convinced businesses it is attractive” so far.

READ MORE: Factory workers 'robbed of tens of millions in wages' UK retail group tells Priti Patel

“The low skills, low pay sectors which are particularly affected by this crisis will not make extensive use of this. The scheme is, therefore, unlikely to prevent a major loss of jobs,” it said.

It comes as separate research on Monday argued even more jobs were at risk from the wind-down of the furlough scheme.

The Institute for Public Policy Research (IPPR) said 1.8 million “viable” jobs would be lost because of flaws in the new job support scheme and the government’s job retention bonus.

Only around one in 10 workers in furlough could benefit from the new support, according to the think tank.

“Only a narrow set of workers earning between £625 [$814] and £987 a month would be expected to benefit. Those who fall below the lower bound do not qualify for the job retention bonus and the bonus is too small to be an incentive to keep workers earning above the higher band,” said the IPPR research.