UK unemployment hits four year high as redundancies reach record levels
Redundancies hit a record high in the three months to September while the unemployment rate jumped, according to new figures which show the UK’s labour market declined rapidly before the chancellor U-turned on coronavirus support measures.
A record 314,000 British workers were made redundant in the three months to September, 181,000 more than in the previous quarter, the Office for National Statistics (ONS) said.
Read more: Rishi Sunak extends furlough scheme until end of March
The unemployment rate rose 4.8 per cent during the period – in line with economists’ expectations, and the highest rate since the three months to November 2016. The figure compares to a 4.5 per cent increase in the previous quarter.
“September’s rise in the unemployment rate from 4.5 per cent in August to 4.8 per cent suggests that the previous scaling back of the furlough scheme took its toll,” said Capital Economics’ Ruth Gregory.
“And with the second lockdown set to send the recovery into reverse, the unemployment rate may yet climb to about nine per cent next year.”
Overall, unemployment for the three months to 30 September reached its highest level in four years.
The Bank of England last week forecast that UK unemployment would reach 6.3 per cent by the end of this year and peak at nearly eight per cent in the second quarter of next year.
The latest experimental figures from HMRC show there were some 28.2m active PAYE payrolled jobs in October – a fall of around 780,000 from March.
Chancellor Rishi Sunak last week extended the furlough scheme, which provides 80 per cent of the pay of temporarily laid-off workers, until the end of March and he announced billions of pounds in other forms of support.
The BoE expects around 5.5 million employees will need support from this programme during an England-wide lockdown this month, up from just over two million in October.
Sunak said this morning that the new ONS figures “underline the scale of the challenge we’re facing”.
“I want to reassure anyone that is worried about the coming winter months that we will continue to support those affected,” he said in a statement.
Sunak’s critics have said a series of U-turns over employment support policy made it hard for companies to plan ahead at the expense of many jobs.
Samuel Tombs of Pantheon Macroeconomics said the ONS figures were broadly in line with expectations, adding that the extension of the furlough scheme “has greatly improved the near-term outlook for employment”.
Read more: Rishi Sunak’s furlough extension ‘to cost £6.2bn a month’
“Meanwhile, positive news on a Covid-19 vaccine suggests that demand in the consumer services sector could recover to pre-Covid levels in the second half of 2021; this might persuade firms to maintain headcounts through the first half of next year, when they still might be operating at a loss,” Tombs continued.
“The unemployment still will rise over the coming months, as people move from inactivity to unemployment, firms scrap unviable jobs and new labour market entrants struggle to find new work,” he said.