UK Risks Social Crisis As Jobs Support Scheme Ends

Britain's furlough scheme that has kept millions of private-sector workers in jobs during the coronavirus pandemic ended Thursday, with predictions of an increase in unemployment and a slump in living standards.

Prime Minister Boris Johnson's Conservative government has spent almost ?70 billion ($96 billion, 82 billion euros) on paying the bulk of wages for staff stuck at home, helping to keep the official unemployment rate relatively low.

"Despite this success, significant challenges remain in the labour market," the Institute for Fiscal Studies (IFS) said in a report Thursday.

This included "low re-employment rates for those made redundant", it added.

Official data Thursday showed Britain's economy rebounded more strongly than expected in the second quarter.

However, separate indicators are pointing to a growth slowdown as the country struggles with a supply chain bottleneck and global inflationary pressures that have sent fuel prices rocketing.

And while "furlough was a lifeline to many... it acted like a curtain, hiding the real jobs picture", noted Danni Hewson, financial analyst at AJ Bell.

"There will be plenty of employers hoping that Friday does finally deliver the anticipated flood of labour back into the market but in reality, nobody really knows for sure how many of those listed as still on furlough... have been welcomed back into their old jobs."

Some 12 million people were furloughed during the 18-month scheme, with about one million workers still supported up until its end.

Of those remaining, more than 25 percent work in construction and manufacturing.

"These people are susceptible to persistently low living standards should they be made unemployed," the IFS said, citing the fact that many were the only adult wage-earner in their household.

Also among those hit hardest by the end of the scheme will be Londoners and older workers, the IFS added.

While workers in the British capital make up 14 percent of all UK employees, they accounted for almost 20 percent of those still accessing the scheme in July, it noted.

The emergency jobs package "initially helped younger workers weather the pandemic... (but) it is older workers who are now more likely to be furloughed", said Daniel Tomlinson, senior economist at the Resolution Foundation think-tank.

Compounding the situation will be the government's plan from next month to axe a ?20 per week increase in unemployment benefit during the pandemic, Tomlinson added.

Amid high UK inflation caused in part by surging energy prices, the "cut to Universal Credit... will return the real value of unemployment benefit to its lowest level since the early 1990s", he argued.

A new ?500-million government scheme to help vulnerable households over winter was sharply criticised by charities.

"It does not come close to meeting the scale of the challenge facing millions of families on low incomes as a cost-of-living crisis looms and our social security (benefits) system is cut down to inadequate levels," said Helen Barnard, deputy director at the Joseph Rowntree Foundation.

Finance minister Rishi Sunak defended ending his furlough project.

"With the (economic) recovery well under way, and more than one million job vacancies, now is the right time for the scheme to draw to a close," he said in a statement Thursday.

Capital Economics analyst Paul Dales said the "end of the furlough scheme may help ease some of the UK's current labour shortages".

"This probably won't happen immediately, but some of those people who have been kept on the furlough and who will lose their jobs will be free to look for and start work elsewhere," he told AFP.

Staff shortages have been triggered by the global health crisis and Brexit, which saw many foreign workers leave.

Britain's unemployment rate stands at 4.6 percent, down from a pandemic-peak of 5.2 percent at the end of last year.

At the same time, a significant shortage of lorry drivers is reducing the number of goods in shops, while motorists are panic-buying fuel at petrol stations.