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UK unemployment hits 1.5 million on record leap in redundancies

·Finance and policy reporter
·4-min read

Watch: UK unemployment hits 1.5 million

Unemployment rose more than expected over the summer in the UK, hitting 1.52 million as the coronavirus crisis triggered a record surge in redundancies.

The UK unemployment rate rose from 4.1% between May and July to 4.5% between June and August, according to the Office for National Statistics (ONS) figures published on Tuesday.

Redundancies have hit their highest level since the global financial crisis more than a decade ago, jumping by a record 114,000 on the previous quarter.

The figures are likely to heap pressure on the UK government amid warnings job cuts will continue, as its new job support scheme gives employers less help than the furlough scheme it is due to replace.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, and other economists had predicted the official unemployment rate would rise to 4.3%.

People walk past a closed Tattoo studio in Sunderland, following the outbreak of the coronavirus disease (COVID-19), Sunderland, Britain, June 2, 2020. REUTERS/Lee Smith
Sunderland pictured during the first UK lockdown in June, with north-east England facing particularly high unemployment. Photo: REUTERS/Lee Smith

In a note before the latest figures were published, Tombs said the growing unemployment count likely reflected more people who had lost jobs earlier in the pandemic starting to look for work. Anyone without a job is not officially classed as unemployed unless they are actively looking for work, despite the bleak labour market discouraging job-hunting.

Tombs said some of the official figures, which have to meet internationally recognised criteria, “likely remained beset by sampling issues.”

READ MORE: UK unemployment expected to hit almost three million by Christmas

He added: “A range of indicators point to a surge in redundancies last month, when firms had to start to make a 10% contribution to the costs of staff on the coronavirus job retention scheme.”

James Reed, chairman of recruitment firm REED, said the latest figures on top of new local restrictions “suggest that the Bank of England’s forecasted unemployment rate of 7.5% by 31st October is still a real possibility.”

He said vacancies were up 28% month-on-month on the site however, and said more focus on re-skilling would be vital to staving off a further stark rise in the jobless figures.

"With the furlough scheme unwinding, cash-strapped firms have been forced into difficult decisions about retaining their staff," said Tej Parikh, chief economist at the Institute of Directors.

Watch: Why have job losses risen despite the economy reopening?

“Demand remains weak and as restrictions ramp up again many businesses will be stretched when it comes to paying wage bills. The job support scheme may need to be beefed up if the government wants to avert further rises in unemployment."

Some 6.4 million people are described as temporarily away from work between June and August, compared to between 2 and 2.5 million before the pandemic. It includes not only those on parental and annual leave, but also furloughed workers.

There were some positive signs in the data, however. The figures also show a record rise in total hours worked, following record declines earlier in the year, as lockdown restrictions eased over the summer. Meanwhile vacancies saw a record jump to reach 488,000 between July and September, after hitting record lows during the first national lockdown.

The number of staff on payrolled employment also rose by 20,000 between August and September after months of declines. Growth in regular employee pay, excluding bonuses, was positive between June and August, up 0.8%, though including bonuses it was flat year-on-year.

Chancellor Rishi Sunak said: “I’ve been honest with people from the start that we would unfortunately not be able to save every job.

“But these aren’t just statistics, they are people’s lives. That’s why trying to protect as many jobs as possible and to helping those who lose their job back into employment, is my absolute priority.

“This is why we put together an unprecedented £190bn package of support and have a comprehensive Plan for Jobs.”

It comes after separate analysis released on Monday predicted 1.5 million more job cuts by Christmas, with the end of the furlough scheme this month blamed for forcing employers’ hand.

READ MORE: UK government warned firms face job ‘cliff edge’ by Christmas

The Centre for Economic and Business Research (CEBR) expects unemployment to hit almost 3 million or 8.4% of the workforce — those in or looking for work — in the final quarter of the year.

Most of the cuts are expected to hit 1.2 million workers still on full or partial furlough leave, who are “waiting in vain to return to jobs that no longer exist.”

Another study published on Monday suggested even more jobs were at risk from the wind-down of the furlough scheme, warning 1.8 million “viable” roles could be lost.

The Institute for Public Policy Research (IPPR) argued there were flaws in the new job support scheme and the government’s job retention bonus, with employers only likely or able to gain help retaining one in 10 furloughed staff.

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