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UK unemployment rises and redundancies hit record high as London Tier 3 set to boost joblessness

Tom Belger
·Finance and policy reporter
·4-min read
A man wearing a protective face covering to combat the coronavirus walks past a closed shop in central London on November 10, 2020. - Britain's unemployment rate has jumped to 4.8 percent as the coronavirus pandemic destroys a record number of UK jobs, official data showed Tuesday. (Photo by Tolga Akmen / AFP) (Photo by TOLGA AKMEN/AFP via Getty Images)
Analysts and firms warn UK unemployment will continue to rise after London was placed in lockdown. Photo: TOLGA AKMEN/AFP via Getty Images.

The number of unemployed Brits rose again in the three months to October and redundancies hit a record high, amid warnings London’s coronavirus lockdown will deepen joblessness.

According to Office for National Statistics (ONS) data on Tuesday, the unemployment rate rose to 4.9%, up from 4.8% a month earlier. Redundancies reached an all-time high of 370,000, as employers axed jobs in the run-up to the planned withdrawal of furlough support at the end of October. The wage subsidy scheme was subsequently extended.

Employment has fallen at its fastest pace in a decade from close to record highs a year ago. Since February, just as the pandemic first hit, the number of payrolled employees has also dropped by 819,000.

Meanwhile the claimant count— including those claiming unemployment- and low pay-related benefits — rose by 64,300 to reach 2.7 million.

READ MORE: London braces for Tier 3 restrictions

The increase in the headline unemployment rate was lower than expected by analysts, however, who had predicted it would reach 5.1%.

But the continued rise in Britain’s official jobless data comes amid warnings it is likely to “accelerate further” as London braces for stricter coronavirus restrictions.

WATCH: Matt Hancock announces areas entering Tier 3

Business chiefs warned thousands of jobs were at risk on Monday after the capital and parts of Essex and Hertfordshire were placed on ‘very high alert’ in Tier 3 of England’s regional lockdown system. The move will see pubs, bars, restaurants, cafes, cinemas, museums, zoos and other culture, hospitality and other venues shut down for a third time from Wednesday.

Michael Hewson, chief market analyst at CMC Markets UK, said the national employment picture had already started to deteriorate even before full-scale lockdown restrictions were imposed in parts of the UK from late November.

The official unemployment rate has risen since the pandemic hit, though it has not reached highs seen in the aftermath of the global financial crisis. Chart: ONS
The official unemployment rate has risen since the pandemic hit, though it has not reached highs seen in the aftermath of the global financial crisis. Chart: ONS

He noted UK chancellor Rishi Sunak had forecast that unemployment will peak in the second quarter of 2021 at around 7.5%. The government has announced multiple schemes to support jobs and jobseekers into work, including a £3bn Restart programme to help the long-term unemployed.

“While this is very welcome, along with the furlough scheme which has now been extended into March, it is likely to have come too late for a lot of people in vulnerable jobs, given that a lot of employers decided to make a start on reducing headcount when the November lockdown was announced,” he said.

“This could well accelerate further in the coming months given yesterday’s announcement of Tier 3 restrictions for most of London and the South East.”

The British Beer & Pub Association warned the measures risked 8,000 jobs, forcing another 1,250 London pubs to shut. Chief executive Emma McClarkin called it "another nail in the coffin" for pubs, forcing cancelled bookings in the lead-up to Christmas.

A string of business leaders have called for more support to firms hit hard by the restrictions.

Tej Parikh, chief economist at the Institute of Directors, said cutting employer national insurance contributions could ease cashflow troubles and prevent the furlough scheme’s wind-down in March becoming another cliff-edge.

“While the roll-out of the vaccine has buoyed employers, it won’t automatically undo the damage done to their businesses by the pandemic,” he warned.

WATCH: London traders react to Tier 3 coronavirus restrictions

Matthew Percival, director of people and skills at the Confederation of British Industry (CBI), added: “With millions more expected to be living under the toughest tier before the end of the week, the government must continue to do what it can to help businesses get through winter.”

Chancellor Rishi Sunak said the UK government had provided £280bn of support to firms and jobs.

“We know that, sadly, many people are already facing unemployment. That’s why our Plan for Jobs is also helping to create new jobs, including through our £2 billion Kickstart scheme and expanded apprenticeships and traineeships, to ensure nobody is left without hope or opportunity,” he said.