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Coronavirus: UK unemployment 'could more than double' to 27-year high

Tom Belger
·Finance and policy reporter
·3-min read
An information note displayed on the Government Gateway website advises people to stay at home during the Coronavirus (COVID-19) outbreak as a person visits the website to apply for Universal Credit online. Picture date: Friday March 27, 2020. Photo credit should read: Isabel Infantes/EMPICS Entertainment
Universal credit claims have soared. (Isabel Infantes/EMPICS Entertainment)

The UK unemployment rate could more than double to 10% of the active workforce, a UK watchdog predicts as the coronavirus lockdown cripples the economy.

The Office for Budget Responsibility (OBR) released a forecast on Tuesday that more than two million people will be out of work in the second quarter if the lockdown lasts for three months.

Analysis by Yahoo Finance UK shows it would mark a 27-year high in the unemployment rate, with joblessness reaching depths not seen since the recession of the early 1990s. The most recent official figures for November to January put the rate before the pandemic hit at 3.9%.

It comes after a minister confirmed around 1.4 million people have already applied for welfare benefits in recent weeks in the UK. A cabinet member revealed the latest figure on Tuesday for applications to universal credit, jobseekers’ allowance and employment support allowance benefits.

Universal credit is now the main benefit for the newly unemployed, suggesting a steep rise in unemployment as firms have axed staff and many self-employed workers have seen work evaporate.

The new benefit also replaces other benefits including working tax credits however, meaning some applicants may have seen their pay slashed, health decline or other changes rather than lost their jobs.

READ MORE: Spike in tenants not paying rent as coronavirus hits jobs and pay

Millions more workers at risk of redundancy are thought to have been ‘furloughed’ on reduced pay subsidised by the government, though no official figures have yet been released. Some claimants may have applied for benefits to top up low pay or help cover their rent.

"It's now up to about 1.4 million," work and pensions secretary Therese Coffey told Sky News. "We are capable of processing and managing those claims." It marks a rise of around 200,000 on the figure she gave on 8 April.

Hospitality chiefs report hundreds of thousands of job losses in their industry alone, with travel and “non-essential” retailers also hit hard by the government-imposed shutdown and plummeting demand.

A survey published last week showed employers’ overall demand for new staff falling in March, the first month of declining vacancies since the global financial crisis in 2009. Vacancies have dropped just as lay-offs have mounted, with experts warning a steep rise in the official unemployment rate is looming.

READ MORE: UK workers ‘left with nothing’ by small print of government job schemes

A desire to avoid the mistakes of past crises sparked the government’s job retention scheme, with the taxpayer and government borrowing funding ‘furloughed’ workers’ wages who otherwise faced the axe.

Ministers hope it will save firms and jobs, speed recovery and prevent workers becoming long-term unemployed. Many firms are struggling for short-term cashflow however, with frustrations at delays accessing state-backed loans and grants. Some are also reluctant to borrow with the outlook so bleak and no end to restrictions in sight.

The pandemic is taking a toll on employment around the world, with the International Labour Organisation (ILO) warning tens of millions of workers could lose their jobs worldwide this year.

Figures released by the ILO on Tuesday predicted lay-offs and cuts to hours will wipe out the equivalent of 195 million full-time workers’ jobs globally in the second quarter. Official US figures show more than 17 million Americans have filed for unemployment benefits.

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