Almost 2 million people in Britain have not worked for more than six months during the coronavirus pandemic, amid growing risk to workers from long-term economic damage caused by the crisis.
The Resolution Foundation said up to 1.9 million people in January had either been out of a job or on full furlough for more than six months, revealing the lasting impact on employment caused by Covid and multiple lockdowns.
Highlighting the risks to workers from long-term unemployment, it called on the chancellor, Rishi Sunak, to use next month’s budget to extend targeted support for sectors of the economy hardest hit by the crisis.
The report warned that while the outlook for the economy was steadily improving thanks to the vaccination programme and as the government prepares to roll back Covid restrictions, many workers remained concerned about their job prospects.
Redundancies are rising at the fastest rate on record, and the Treasury’s independent economics forecaster, the Office for Budget Responsibility, expects unemployment to hit 2.6 million by the middle of the year as the furlough scheme is wound down.
The scheme, which has cost almost £50bn and subsidised the wages of almost 9m jobs at its peak in May last year, is due to close at the end of April. About 4.5m jobs are furloughed during the current lockdown, according to the Resolution Foundation.
According to the study, 8% of workers currently employed either expect to lose their jobs in the next three months, or have been told they would be made redundant. This figure rises to 21% among those who have been furloughed for at least six months of the crisis.
The findings come as pressure mounts on the chancellor to extend furlough and to announce a fresh package of tax cuts and business grants at the budget to ensure a swift economic recovery from the pandemic. The British Chambers of Commerce (BCC) warned on Thursday that sales to UK customers had fallen in the last three months for as many as 61% of companies, according to a survey of 1,100 firms.
Underscoring the risks to businesses from the cumulative impact of a year of Covid restrictions, it said a quarter of companies planned to make staff redundant if state support is brought to a sudden halt this spring.
Adam Marshall, director general of the BCC, said: “Firms are desperate to start trading again so they can boost revenue and start thinking about the future. To do so they need to see a clear, evidence-based plan for reopening, and they need time to get back on their feet without unnecessary additional taxes, and the security of knowing that government will once again support them should we see additional restrictions imposed at any point.”
A cross-party group of more than 40 MPs also warned on Thursday that pubs, bars and nightclubs risked “extinction” unless the chancellor used the budget on 3 March to increase emergency support for firms. In a report warning that urban centres risked becoming “ghost towns”, it said 85% of people working in the nighttime economy were considering leaving the industry.
The Resolution Foundation said the furlough scheme needed extending while pubic health restrictions remain in place, and should be kept for longer in sectors that still faced legal restrictions, such as hospitality and leisure. It should then be phased out gradually.
The Treasury’s £2bn kickstart scheme, designed to support young people with job placements, also requires extending beyond the end of 2021, it added.
Nye Cominetti, a senior economist at the Resolution Foundation, said: “While the UK’s economic prospects are finally looking up, job insecurity remains high, particularly among those who have spent long periods not working, or who are currently furloughed.”
A Treasury spokesman said it was doing all it could to support jobs during the crisis. “We will continue to invest in protecting and creating jobs through the remainder of the pandemic and through the recovery, and we will set out further details via the next stage of our ‘plan for jobs’ at the upcoming budget.”