Ending furlough scheme could result in unemployment hitting 10%

It has been predicted that closing the furlough scheme at the start of November could result in unemployment reaching 10 per cent this year.

This is according to the National Institute of Economic and Social Research (NIESR), an independent economic research institute. Currently, 9.5 million people are using the scheme which translates to a cost of £31.7 billion for the Treasury.

NIESR also believes the UK economy could shrink by 10 per cent as well and will not recover until 2023. According to the Office for National Statistics (ONS) the unemployment rate for the UK between March to May was 3.9 per cent.

Garry Young, deputy director of the NIESR said:

The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending.

The scheme was intended by the chancellor to be a bridge through the crisis and there is a risk that it is coming to an end prematurely.

The scheme has been an undeniable success in terms of keeping furloughed employees attached to their jobs.

Unemployment is going to rise to about 10 per cent by the end of this year, before dropping back next year, and we think that an extension of the furlough scheme would have been a relatively inexpensive way to limit that rise in unemployment.

Still, Mr Young did explain that these forecasts are “plausible outcomes” and not concrete predictions.

Also, XpertHR found that 46 per cent of employers expect staff on furlough to start working again by August, as well as 19 per cent believe workers will return part-time at the end of the summer. These two figures add up to 65 per cent. 

On 29/05/20 Rishi Sunak, Chancellor of the Exchequer announced that employers will start having to pay towards the cost of the Coronovarius Job Retention Scheme (CJRS), from September companies must pay 10 per cent and then 20 per cent in October of the 80 per cent of wages the furlough scheme entitles to employees.

The amendments to the scheme outline that employers will also pay National Insurance Contributions (NICs) and pension contributions from August onwards. Workers will be allowed to work part-time whilst on furlough from 1st July instead of 1st August which was previously announced. Employers have to pay the full amount of salary for the time worked where the CJRS will cover 80 per cent of the remaining days that did not see the employee at work.

In addition, Mr Sunak announced on 08/07/20 during his summer statement that employers will receive a £1,000 “job retention bonus” for every employee they bring back from furlough who will work until January 2021.

At the time, Mr Sunak said:

People are anxious about losing their job, about unemployment rising. We want to ensure no-one will be left without hope.

If you stand by your workers, we will stand by you.






Darius is the editor of HRreview. He has previously worked as a finance reporter for the Daily Express. He studied his journalism masters at Press Association Training and graduated from the University of York with a degree in History.