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Summary
- Unemployment rate in the UK was 4.5 per cent as per the latest government estimates
- It is expected to rise further for the rest of the year 2020, with the onset of a second wave and new local restrictions in place
- A big wave of job losses expected in November with diminishing government support
The unemployment rate in Britain has shot up sharply by 0.4 per cent, from 4.1 per cent (May to July 2020) to 4.5 per cent (June to August 2020). This is the highest rate for joblessness observed in the nation since the year 2017. Close to 1.5 million people were officially unemployed throughout the country for the three-month period.
FTSE 100 ended 0.1 per cent lower at 5995 points, after the announcement of a rise in unemployment came in on 13 October 2020. Mainly property companies had led this fall in this premium footsie index.
The number of redundancies has risen even more steeply (227,000), crossing the level of 2009, as per the estimates from Office for National Statistics (ONS).
More and more people are getting out of jobs since the Covid-19 pandemic broke across the UK in March 2020, despite substantial government support measures.
Another unfortunate fallout of the sluggish state of British businesses has been that more younger people are out of jobs (16-24 years old), almost totaling 60 per cent of the overall unemployed people in the nation.
A big chunk of lay offs has taken place across the worst affected sectors of aviation, hospitality, leisure, arts, entertainment, and physical retail.
Consequently, the number of people claiming social benefits like universal credit has been rising across the country.
The government furlough scheme (coronavirus job retention scheme) would be ending on 31 October 2020, and more people could be getting out of work from the very next day, in case their employers are not in a position to retain them without a government support. The scheme is being replaced with a less generous wage subsidy plan, as government has its own fiscal limitations.
How about the future?
With the advent of the second wave of Covid-19 cases in the UK, beginning September 2020, the economic activity is forecasted to be severely hit.
The government has been forced to put very strict health and safety restrictions including local lockdowns, especially at coronavirus hotspots. This is expected to further jeopardise trade and commerce at those places and could also have a big spillover effect throughout the economy by hampering the overall supply chain.
Therefore, the rate of unemployment could touch 8 per cent or more by the end of the year 2020, lament many economic experts. It could further rise during the first half of 2021, which will break the records of 1990s as well, they claim.
In terms of numbers, this means that the UK unemployment could rise up to 3 million people by December 2020.
Paul Dales, chief UK economist, Capital Economics said that we need to be prepared as a worse scenario lies ahead of us. Businesses could find it even harder to survive and could be looking out for prolonged financial aid to sustain themselves.
According to a latest survey from the Center for Economics and Business Research (CEBR), companies using the furlough scheme are planning to layoff more than 35 per cent of their staff beginning 1 November 2020, after the scheme expires. This translates into more than a million people losing their sources of income at one go and is a scary number.
This kind of a scenario might lead to social unrest, fear sociologists. Rishi Sunak, Chancellor, UK Treasury has already warned the British people of a tough winter lying ahead. He added that despite his best efforts, he might not be able to save every job.
