UK Job Losses Set to Surge Despite Stable Unemployment Figures

July 16, 2020 Updated: July 17, 2020

The British labour market weakened at a slower pace in June and unemployment has remained stable, but analysts say the jobs situation is set to deteriorate once the government-backed furlough scheme comes to an end.

Between March and June, the number of employees in the United Kingdom on company payrolls decreased by around 650,000, according to new figures released by the Office for National Statistics (ONS) on July 16.

While the number of payrolled employees is still falling, the decline is slowing and unemployment has held at 3.9 percent in the three months to May, the ONS said.

“What the figures today show is that the furlough scheme has been effective at protecting millions of people from unemployment,” Chancellor of the Exchequer Rishi Sunak told broadcasters.

UK Treasury Chief_Rishi Sunak
Britain’s Chancellor of the Exchequer Rishi Sunak stands outside No 11 Downing Street and holds up the traditional red box that contains the budget speech for the media,, in London, Britain, on March 11, 2020. (Kirsty Wigglesworth/AP Photo)

To reduce the economic impact of the Chinese Communist Party (CCP) virus, the UK government launched the Coronavirus Jobs Retention Scheme, under which workers placed on leave can receive 80 percent of their pay, up to a maximum of £2,500 ($3,144) a month.

But around half a million people are away from work because of the pandemic and receiving no pay, according to the ONS.

An increasing number of people are out of work but not currently looking for work, and are therefore not counted in the unemployment statistics, which only include people without a job who have been actively seeking work within the last four weeks and are available to start work within the next two weeks.

The new ONS data represents “the calm before the storm,” said Yael Selfin, chief economist at KPMG UK.

“As the Job Retention Scheme unwinds in coming months, the full impact of the recession on unemployment is likely to be revealed,” she told Reuters.

The government plans to phase out the scheme by the end of October.

A survey by the British Chambers of Commerce showed 29 percent of companies expected to lay-off staff in the third quarter.

A string of major firms, including John Lewis, Boots, and G4S have announced thousands of job losses.

Britain’s budget forecasters say the unemployment rate could rise as high as 13 percent this year, exceeding a previous post-war high of 11.9 percent set in 1984.

Reuters contributed to this report.