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Summary
- UK government’s furlough scheme is coming to an end on 31 October
- Economists have urged the British government to extend the furlough scheme to save businesses and jobs
- UK’s entertainment and hospitality sector has been the worst-hit due to the coronavirus pandemic
The UK government’s coronavirus job retention scheme, which was announced in March 2020, will end on Saturday. This would close the first phase of the UK’s economic response to the pandemic. The scheme allowed all UK employers with employees on a PAYE scheme to designate their employees as ‘furloughed workers’. Employers could access government support to pay the salaries of these furloughed employees.
Economists have expressed their concern over the second wave of the coronavirus pandemic, which has triggered a nationwide chaos and is expected to affect businesses and industries. At the end of 32 weeks, government data shows that businesses and individuals are heavily relying on government support. A political economy professor at Warwick University said that the UK government should increase its spending that will curb the rise in unemployment.
Besides, experts feel that even if the government extends the furlough scheme, then even there will be massive layoffs as the economic activities have slowed down and people need more support for skills and training.
Government Support Schemes
The UK government announced the job retention scheme in March and under the scheme, the government ensured to pay 80 per cent of wages (up to a monthly limit of £2,500). Now, the furlough scheme is set to be replaced by the Job Support Scheme on 1 November, which will run for 6 months until 30 April 2021. Under which, the government will pay 62 per cent of workers’ wages and neither the employer nor the employee needs to have benefitted from the Coronavirus Job Retention Scheme.
Chaos in Job Market
Ever since the lockdown was announced, Britain has seen a surge in layoffs across industries. Overall, 750,000 people had lost work even before the end of the furlough scheme since the beginning of this year. During the pandemic crisis, the unemployment rate has risen to 4.5% of the workforce in August, compared with a four-decade low of 3.8% before the pandemic arrived.
According to the UK’s Office for National Statistics, the number of people that were terminated from their jobs in Britain nearly doubled in the three months to August.
This has resulted in 1.5 million people with no jobs. Data compiled by the UK’s HM Revenue and Customs show that London was the worst hit with the largest proportion of workers losing their jobs. Northern Ireland was the least affected part of the UK.
Also Read- UK unemployment rate at a three-year high
Impact on industries
Though the coronavirus outbreak has crippled most sectors and industries, the worst affected of all was the entertainment and hospitality sector.
In fact, nearly 30 per cent of workers from the arts and entertainment sectors are still on furlough at the beginning of October, followed by restaurants and hotels, according to the ONS Business Impact of Coronavirus survey.
The data shows that nearly 16 per cent of the workers from arts, entertainment and recreation are working remotely. About 25 per cent of workers from hotels and the food sector are either on partial or full furlough scheme, while 6 per cent of workers are working remotely.
Talking about administrative and support industries, nearly 14 per cent of workers in these industries are on a partial or full furlough, while 22 per cent are working from home. Meanwhile, 6 per cent of workers in the real estate sector are either on partial or full furlough, whereas 47 per cent are working remotely.
Similarly, industries such as transport and storage, nearly 13 per cent of workers in this sector are on partial or full furlough scheme, while 20 per cent are working from home. Likewise, about 7 per cent of workers in the wholesale and retail industry are on partial or full furlough, whereas 18 per cent are working remotely.
About 5 per cent of workers in the manufacturing sector are on partial or full furlough scheme, while 20 per cent are working from home. Also, 5 per cent of workers in the education sector are on partial or full furlough, while 48 per cent are working from home.
Conclusion
Earlier, at the beginning of the lockdown, many economists felt the furlough scheme was a positive move that could curb the unemployment numbers. However, with the rise of Covid-19 cases and the uncertainty over the coronavirus spread, some of the economists feel that the British government needs to pump in more money to protect the business across the country. On the other hand, HMRC officials have warned the government that the furlough scheme is expected to have overpaid by as much as £3.5 billion.
Though the number of vacancies has fallen sharply during this period, there are faint signs of recovery. But there are major concerns like the second wave of coronavirus infections and Brexit. Taking the current economic situation in account, the UK government should extend the support scheme to safeguard the business from collapsing.
