What now for the millions on furlough?

This month marks a crucial point for millions of households and businesses as the furlough scheme winds down. The Government has moved from paying 80% of wages up to a cap of £2,500, to 60% up to a cap of £1,875. Employers are expected to top up wages and other contributions as part of the changes, before the scheme is removed entirely at the end of October.

As of 26 July, a record 9.5 million staff remained on furlough with 1.2 million employers taking part in the Coronavirus Job Retention Scheme. Last week, the Treasury revealed the cost of the scheme had risen to £31.7 billion.

Predictions on how much unemployment could rise are gloomy. But recruiters can make a difference as we strive to keep Britain working. 

Bleak predictions

There are increasing concerns about the impact of the changes to the furlough scheme. The National Institute of Economic Research warns that ending the scheme in October will cost approximately 1.2 million jobs.

Last month, the Office for Budget Responsibility published its updated analysis exploring three economic scenarios:

• Upside scenario: a sharp rebound in activity and no medium-term economic scarring
• Central scenario: activity recovers more slowly and incorporates some scarring to potential GDP
• Downside scenario: recovery is slower still and scarring is deeper.

Based on this analysis, the unemployment rate at its peak ranges from just under 10% to above 13%. Notably, in the period March-May, the UK unemployment rate was estimated at 3.9% with 1.35 million unemployed.

OBR Fiscal Sustainability report 2020 scenarios (14 July)	Upside scenario	Central scenario	Downside scenario
Peak unemployment rate (%)	9.7 (Q3 2020)	11.9 (Q4 2020)	13.2 (Q1 2021)

 

Meanwhile, the total number of weekly hours worked was 877.1 million in March-May, down a record 175.1 million hours on the previous quarter. Indicators for June suggest that the number of employees on payrolls is down around 650,000 compared with March.

The next three months will be critical to understand the true impact of the furlough scheme especially as more firms announce redundancies. The country’s largest firms have announced more than 205,000 redundancies and reports last week revealed almost a quarter of small UK businesses have cut jobs in the past few months. This comes as no surprise – more than 2.6 million people claimed unemployment-related benefits in June, an increase of 1.36 million since March 2020 when lockdown began.

But there are encouraging signs

While it is clear the economy will not return to normal levels for some time, it is positive to see a slow rise in business confidence and job posting activity in certain sectors, locations and occupations in recent weeks. 

There were 106,000 new job adverts posted in the week of 6-12 July taking the total number of active job adverts to 1.05 million. This was up from 990,000 in the final week of June. The rise was most pronounced in north-west England with 125,000 job postings. Encouragingly, there are indications of growth for roles such as IT professionals and designers. These roles are critical for many businesses as they adapt to meet the challenges of a changed, increasingly digital market.  

Recruiters make a difference

With availability of candidates increasing markedly as the furlough scheme draws gradually to a close and redundancies on the rise, there are reports of hundreds of people applying for each advertised role and employers inundated with CVs.

As the market shifts from a candidate-led to an employer-led, this presents an opportunity for businesses to choose the right fit for the role amongst a greater pick of candidates. But they require specialist help to achieve this. Recruiters are best placed to:

• filter through the increasing number of applications
• use clear selection criteria ensuring a fair and inclusive process
• access specialist skills
• secure the perfect match to their client's needs.

As the jobs market specialists, recruiters can help identify opportunities and ensure people get back into work quickly. In the weeks and months ahead, recruiters will play a key role as we strive to keep Britain working.