Furlough scheme ends, fuelling unemployment fears

At the peak of the pandemic in May 2020, close to 90m people had been furloughed and were being supported by the scheme. The latest figures from HMRC show 1.6m people are still being supported.

While a significant number of businesses that had made use of the scheme during the pandemic have returned to full capacity, there are still some in certain industries such as hospitality that are yet to fully reopen and get back to pre-pandemic levels.

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“Overall, we would expect most furloughed workers to return to full-time employment in those sectors such as hospitality and travel, where there has been a reticence by employers to fully staff up,” said Alan Custis, head of UK equities at Lazard Asset Management. “There will also be a percentage who choose retirement over returning to work, but we would expect the unemployment rate to settle at around 5% for the year end, before falling in 2022.”

The latest ONS data showed unemployment in the UK has fallen to 4.6%, with vacancies hitting a record high of more than one million during the summer. However, many employers have voiced concerns about a shortage in specific skillsets, making it difficult to fill those empty job roles.

“Part of an economic rebound means adjusting to a new normal, and that will mean working through temporary frictions and frustrations, including some unemployment until sufficient re-skilling and re-deployment feeds through the economy,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “Brexit though has muddied the waters, adding an extra layer of complexity on the route to recovery, compared to economies in the European Union, where the labour crunch isn’t quite so severe.”

HGV drivers and those able to drive fuel tankers are the latest example of the type of skills shortage in the UK. Recent weeks have seen petrol stations forced to close as the UK public reacted to the shortage of drivers by panic buying fuel.

“Lorry driving is skilled work that requires an expensive licence, and there simply isn’t the testing capacity to rapidly increase the pool of qualified drivers,” Streeter explained. “The long hours culture, and arduous working conditions experienced by HGV drivers in the UK are unlikely to suit many older workers, who are more likely to be on furlough than their middle-aged colleagues.” 

She added that while jobs in the hospitality and food production industries might be a little easier to fill, “the plea from businesses for fast-track visas for overseas workers indicates they are not expecting vacancies to be filled immediately by employees leaving furlough”.

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