The end of furlough will lay bare Britain’s twin-speed recovery from Covid

There are signs outside almost every pub, restaurant and hotel dotting Torquay’s harbour: Staff wanted.

“It’s been packed solid busy, you can’t get a table anywhere,” said Brett Powis, owner of three hotels in the area including the Riviera and Lincombe Hall. For the hotelier, staff shortages made it harder to take full advantage of the busiest summertime boom in the Devon resort for decades.

“We struggled, but got through by paying higher wages, bonuses, and said, ‘Can you do as many hours as you can?’ We had just about enough, but there are other hotels who weren’t able to open because they couldn’t get the staff,” he said.

The contrast with the depths of the pandemic, when lockdowns starved the resort of tourists and left it a ghost town, could not be starker. In Torbay, the local authority that includes Torquay, the number of workers on furlough has dropped to one of the lowest rates in Britain, at just 5%.

Yet for every Torbay, there are areas such as Hillingdon, which neighbours Heathrow airport in west London, where the pioneering job retention scheme remains a lifeline, with one in 10 workers still on furlough and receiving up to 80% of their wages from the government. That twin-speed recovery leaves chancellor Rishi Sunak facing a dilemma when the scheme – on which about £68.5bn has been spent so far to protect almost 12m jobs – finally ends this month.

Severe shortages of workers and materials have dragged Britain’s economic recovery from lockdown to close to stall speed. Yet faced with the worst supply chain crisis since the 1970s, ministers are reluctant to act, betting the end of furlough this month may help plug the gaps. Reflecting a vast potential labour supply as firms struggle to hire chefs, baristas, butchers, lorry drivers and builders, about 1.6m jobs were still furloughed at the end of July, according to the latest available figures from HMRC.

However, business leaders warn removing the scheme at the end of September will have little impact on job vacancies, due to mismatches in the workforce. Turning an airline pilot into a butcher or trucker is unlikely overnight, as is the movement of thousands of workers from job-bereft cities to labour-starved towns like Torquay.

Tony Danker, the director general of the CBI lobby group, said: “The thing that I’m concerned about with the end of furlough is that government believe the labour shortage problem will be corrected. And I think they are completely wrong about that.”

The lobby group is calling for a relaxation of post-Brexit migration rules to help firms hire EU workers, after a sharp fall in their numbers during the pandemic. Longer term, investment by government and business in training schemes and higher wages are required.

“The idea that you slam the brakes on now, and that the market corrects itself in the short run, that is completely unfounded,” he said.

For Powis, it is personal: his sister works as a steward for British Airways, and is still on furlough. “I feel for her and what they’re going to do. The government has to look at it sector by sector. If they’re withdrawing furlough for airlines, I have no idea what BA are going to do. What can they do?”

His story exemplifies the problems, showing how the end of furlough will be smooth and bumpy at the same time, depending on where you work and where you live. Close to Heathrow airport where Powis’s sister lives, rates remain stubbornly high as aviation remains under severe pressure from Covid restrictions.

“I cannot imagine a single hotel in Torquay that has any staff still on furlough,” said Powis, who hasn’t had any of his 150 workers on the scheme since May and doesn’t think the end of the programme will help him to hire more staff. “We’ve been very lucky in the south-west where we’ve been packed, in London I can imagine they’re still struggling.”

In Torbay, numbers on furlough have halved in two months from 5,200 to 2,700 at the end of July, dropping from 10% of the local workforce – above the national average – to 5%, among the lowest rates nationwide, according to official statistics.

In the London boroughs surrounding Heathrow – Hillingdon and Hounslow – the rate is twice the national average. The story is similar in Gatwick’s hinterland, where Crawley has among the highest rates of furlough in the country.

More than half (51%) of all air passenger transport workers in Britain were still on furlough at the end of July, the highest of any industry. More than a quarter of travel agents and tour operators are in the same position, in a stark contrast to the 5% average for all sectors.

Mark Legg, who works in the terminal at Gatwick for a contractor, is among employees whose hours will be cut by 25% to save jobs when the scheme ends, as flights and passengers have not returned sufficiently to cover wages.

“I don’t think the reality has set in yet for some staff who’ve been at home,” he said. Travelling to work under empty skies, along quiet roads and past desolate departure halls has been an eerie experience for the Unite union member.

“It’s just been devastated. Eighteen months ago we knew it would be the workers paying for Covid. And here comes the trumpets: we’ve got an increase in taxation on low earners,” he said.

John McDonnell, the Labour MP whose Hayes and Harlington constituency includes Heathrow, said targeted economic support for aviation was required beyond the end of furlough to support whole communities. Cuts to universal credit benefits, just as thousands face unemployment, could make matters worse.

“We’re facing a tough time and government has to step up to the plate. What they are doing effectively is pushing people off the edge of that cliff [the end of furlough], and below them what faces it? Real hardship,” he said.

The former shadow chancellor said his final phone call with Rishi Sunak before leaving the Labour frontbench was to warn him of the unique risks facing aviation.

“I can have whole families dependent on airport work in my constituency, it’s like a mining town with dependency on one sector. Of course there are longer term climate concerns, and we need a programme to rebalance the economy; investing in training, redeployment, technology,” he said. “But we’ve had a policy of crossing fingers and hoping for the best, turning a blind eye and looking away.”

Executives at Gatwick and Heathrow are calling on ministers to relax international travel rules to help the sector. They want bespoke financial support to avoid severe damage to workers’ livelihoods and the wider economy while the travel industry takes time to recover.

In the shadow of the UK’s busiest airport, Hounslow council has sent £20 vouchers direct to every household from the start of this month to spend in local shops, theatres and restaurants, aiming to boost high street activity as thousands of workers lose out from the end of furlough and cuts to universal credit benefits.

“People are naturally having to watch their pockets,” said Shantanu Rajawat, cabinet member for finance on the Labour-run council. For each of the thousands of aviation workers in the local area, thousands more benefit from their spending in the supply chain and wider economy.

“When you look at that high number, if those jobs are no longer deemed to be viable then local economic activity is going to be depressed. You worry what will happen.”