Nearly a quarter of British employees furloughed in last fortnight

British workers

Nearly a quarter of employees in Britain have been furloughed in the past fortnight as evidence mounts of the damage caused by the Covid-19 pandemic to the economy.

With the government weighing up how and when to start lifting restrictions imposed at the end of March, figures released by HMRC showed that companies have flocked to take advantage of the job subsidy scheme since it was launched on 20 April.

HMRC said a total of 6.3m jobs had been temporarily laid off by 800,000 companies, with claims amounting to £8bn by 3 May.

Official figures show the UK had a record employment level of 76.4% before the crisis, with more than 33 million people in the labour force. The number of employees was 27.9 million, of whom 23% have now been furloughed.

Fears that the decision to quarantine large chunks of the economy would result in the unemployment rate surging from 4% – close to its lowest levels since the mid-70s – to well over 10% have prompted the chancellor, Rishi Sunak, to announce the coronavirus job retention scheme (CJRS) within a few days of the lockdown commencing.

Under the plan, workers who are furloughed have 80% of their wages paid by the government up to a ceiling of £2,500 per month. At present, wage subsidies are to remain in place until the end of June, although there is already pressure from employers for the scheme to be extended.

The Office for Budget Responsibility, the independent body that has the task of forecasting the economy for the government, said last week it expected the cost to the exchequer to be £39bn between March and June. That does not include the cost of a separate scheme covering many of the five million self-employed workers which was announced later.

However, the chancellor, Rishi Sunak, told ITV News on Monday that the scheme would have to be wound down at some point because of its steep cost.

Pledging that there would be no “cliff edge” termination of the scheme, he said: “I am working as we speak to figure out the most effective way to wind down the scheme and ease people back into work in a measured way.

“But as some scenarios have suggested we are potentially spending as much on the furlough scheme as we do on the NHS for example. Now clearly that is not a sustainable situation.”

The high level of demand from employers to take advantage of the scheme suggests the government has so far succeeded in limiting the rise in unemployment.

Last week an official survey showed two-thirds of UK firms had asked for public money to pay staff they have temporarily laid off. An employers’ organisation, the British Chambers of Commerce, said its surveys showed more than 70% of private firms planned to furlough workers.

The figures came as pensions minister, Thérèse Coffey, said the government received 1.8mclaims for welfare payments between 16 March and the end of April via universal credit. It is paid to people in work as well as those who have lost their jobs.

Coffey said that overall, the volume of welfare claims had been six times larger than pre-coronavirus during that period, and that in one particular week the increase had been tenfold. The number of people claiming jobseekers allowance – one of the methods use to calculate the level of unemployment – had risen by 250,000.

The 6.3m jobs being furloughed shows in stark terms the scale of the economic shutdown in Britain.

Torsten Bell, the chief executive of the Resolution Foundation thinktank, said the furlough and universal credit numbers showed the UK was experiencing “an economic crisis like no other”.

He added: “Even despite mass furloughing, unemployment is still soaring, with over two million new claims for benefits coming though. This should remind us how badly needed the retention scheme is, but also that we are likely to be living with the legacy of high unemployment that coronavirus has given Britain, long after it has been phased out.”