Coronavirus National & International

NIESR warns unemployment will rise to ‘3 million’ if furlough ends in October

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The Treasury’s plans to “prematurely” end the government’s coronavirus furlough scheme will spark mass unemployment this autumn, one of the UK’s leading economic think tanks has warned, according to Huffpost.  

In its latest report, the National Institute of Economic and Social Research (NIESR) calculated that the jobless rate would surge to around 10% of the country’s workforce – equivalent to three million people on the dole – by the end of the year.

NIESR praised the government’s coronavirus job retention scheme but called on chancellor Rishi Sunak to extend it into next year and abandon his plans to wind it down next month and scrap it completely by the end of October.

Labour’s shadow chancellor Anneliese Dodds said that the figures showed that the Treasury’s failure to tailor its scheme to specific sectors could prove “a very costly mistake” for people’s jobs and the economy.

Fresh Treasury figures released on Tuesday showed that, as of July 26, 9.5m workers were on the furlough scheme, with 1.2m employers taking part. The cost to the taxpayer to date totals £31.7bn.

But the think tank said extending the programme until the middle of next year would dramatically cut the number of redundancies, be “relatively inexpensive” and by preventing a rise in long-term unemployment would have “paid for itself”.

Garry Young, NIESR deputy director, said: “The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending.

“The scheme was intended by the chancellor to be a bridge through the crisis, and there is a risk that it is coming to an end prematurely – and this increases the probability of economic scarring.

“The scheme has been an undeniable success in terms of keeping furloughed employees attached to their jobs.”

The think tank also forecasts that UK GDP is set to fall by 10% in 2020, before increasing by 6% in 2021. 

Treasury chief secretary Steve Barclay refused to reconsider the furlough withdrawal plan, saying the rationale was keeping a link between staff and their jobs. “If you stretch the elastic of that too long, then people start to lose their skills,” he told an event hosted by the Onward think tank.

But Barclay did offer some hope to the worst-hit sectors of the economy, suggesting that assistance packages similar to the £1.7bn provided to the arts will be possible.

Not extending furlough doesn’t mean “that targeted measures won’t be taken where there is a strong business case for doing so,” he said.




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