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Official figures show UK employers have shed almost 650,000 jobs since March, in the latest sign of the toll of the coronavirus on Britain’s labour market.
Office for National Statistics (ONS) figures on Thursday showed the number of employees on UK payrolls in June continuing to drop as the economy buckles under the weight of the pandemic.
The official unemployment rate remained near record lows at 3.9% in May, despite the crisis. “In the face of the sharpest downturn in recorded economic history, the damage to the labour market is remarkably limited,” said Andrew Wishart, UK economist at Capital Economics.
But the unemployment rate comes with a time lag and is an average over three months, covering the period March to May. They also do not include furloughed staff, and only include people actively seeking new jobs. Some redundant workers “are not looking for new ones given the slim chance of finding one,” Wishart noted.
Analysts said the government’s furlough scheme had staved off a much steeper rise in these official figures in the early stages of the pandemic. More than 9.4 million workers have been placed on government-subsidised furlough leave since lockdown, and are classed as employed even though most have not been working. Separate official figures capture a stark collapse in total hours worked.
But concerns have grown in recent months that a fresh jobs crisis is looming, with economic recovery seen as too weak to sustain employment levels as government furlough support is tapered off.
Almost a third of UK firms are planning to slash jobs in the next three months, according to a separate survey published on Thursday by the British Chambers of Commerce (BCC). Around a third had already reduced staff numbers in the past three months.
The Office for Budgetary Responsibility has warned 1.4 million workers on furlough may not get their jobs back, despite the UK chancellor’s new bonus scheme for firms who keep furloughed staff.
Matthew Percival, the Confederation of British Industry’s director for people and skills, said rising job losses were “still only the beginning” of COVID-19’s impact on the labour market.
Capital Economics predicts employment levels will eventually decline by twice as much as during the global financial crisis, and expects the unemployment rate to hit 7% in mid-2021.
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The ONS said the pace of deterioration in Britain’s labour market had in fact slowed in June, but noted it was “before recent job losses were reported.” He said firms may need more direct government support in the coming months, such as grants and extended business rates relief.
Britain has seen a wave of well-known firms announce thousands of job losses in recent weeks, from high street shops and food chains like John Lewis, Boots and Burger King to manufacturers like Airbus and Rolls-Royce.
“That number [of job losses] is likely to continue to rise as we head into the end of the year and the furlough scheme runs off,” said Michael Hewson, chief market analyst at CMC Markets.
The latest figures include some limited positive signs for the job market. The claimant count, the most up-to-date figure as it covers the period up to 11 June, actually fell by 28,100 people to 2.6 million. But it remains 1.4 million or 112.2% higher than in March.
The claimant count includes workers claiming universal credit who are on low wages as well as the unemployed, however, and the ONS does not separate out the two. It noted that the government’s decision to make universal credit more generous during the crisis had increased the number of people eligible, which could be partly reflected in the figures.
The latest figures also include a slight increase in vacancies, though they remain at their lowest level since 2001.