One million UK workers at risk of unemployment when furlough scheme ends in October

An estimated one million furloughed UK workers are at risk of unemployment when the UK Government’s furlough scheme ends in October, according to the latest analysis by the Resolution Foundation.

One million UK workers at risk of unemployment when furlough scheme ends in October

The research has found that the coronavirus crisis has caused typical working-age household incomes to fall 4.5% between the pre-crisis period and May this year, signalling the biggest short-term income drop since the oil-crisis induced inflation spikes of the mid-1970s.

In contrast, the biggest annual income fall during the financial crisis was -2.7%.

The Living Standards Audit 2020 considers the position of households on the eve of the crisis, how the initial lockdown phase has affected household incomes, and the prospects for a living standards recovery as the economy reopens but policy support is withdrawn.

The report has indicated that between March and May, the number of employees fell by 574,000 and two in five self-employed workers lost over a quarter of their income. In the year to May, total hours worked fell by 17%. 

The temporary £9 billion social security boost meant that the incomes of the poorest fifth of households didn’t fall during the initial phase of the crisis. Without this policy action, these households would have faced an income shock of at least 8%. However, low-income couples without children, who are less likely to receive Universal Credit (UC) and derive a higher proportion of their overall income from employment, have experienced a far greater income shock than average, of over 8%.

The foundation has warned that while the initial phase of the COVID-crisis is over as lockdown conditions begin to ease, the threat of further living standards squeeze is far from over.

It notes that business surveys suggest around one in seven, or over one million, furloughed workers are at risk of losing their jobs completely once the Job Retention Scheme (JRS) ends this October.

Moving from the JRS, where a worker on £20,000 can currently expect to receive 83% of their take-home income, to UC, where they would receive just 29%, will cause a huge income shock for any household affected.

Poorer households are most at risk from this second wave of unemployment. Almost one-in-four (23%) workers in the poorest households are employed in retail, hospitality and leisure – the sectors most at risk of widespread redundancies – compared to just one-in-ten (9%) workers in the highest income households

The foundation has warned that a further income shock could be due next year if the government proceeds with its plan to withdraw the recent increase in the generosity of Universal Credit.

Allowing it to expire next April as currently planned would mean an income cut of over £1,000 for over six million households, and an income fall of 4% for the bottom half of the working-age population. This would delay any hope of a post-COVID living standards recovery for millions of low-to-middle income households.

  • Read all of our articles relating to COVID-19 here.
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