The furlough scheme prevented “catastrophic levels of unemployment” by supporting 11.6 million people and subsidised 2.3 billion working days, analysis has found.
The coronavirus job retention scheme, which closes this week, has been a “huge success during the crisis”, the Resolution Foundation says.
The think tank said that the total cost to the state had been about £70 billion, about the same as the schools budget for 18 months, and was “worth every penny”.
It had helped to “limit unemployment during the sharpest economic contraction in over 300 years to just 5.2 per cent at its peak”.
Under the scheme the government covered 80 per cent of an employees’ wages, up to £2,500 a month. Employers were required to contribute up to £312.50 a month per furloughed employee in July and £625 in August and September, as the scheme is wound down.
At its peak last year, 8.9 million workers were furloughed. It was announced in March 2020 by Rishi Sunak who said that it would last for at least three months but it was extended to the end of this month.
Resolution said that the extension was essential as the pandemic lasted far longer than anyone first expected.
There is uncertainty about the fate of about a million people expected to be on the scheme on the day it closes. Some could lose their job.
Resolution said that most of them would return to work, particularly those on a part-time version of the scheme who account for the majority of remaining furloughed workers.
However, it expects hundreds of thousands more workers will be looking for new jobs by the end of the week. Older workers, who are the most likely to still be on furlough, face the greatest risk of unemployment.
There are labour shortages, raising hopes that many will be able to find new work. The Office for National Statistics reported 1,034,000 vacancies in June to August, the first time it has counted more than a million job openings.
Despite this, there is likely to be some degree of mismatch between the skills of those made redundant and the nature of the vacancies.
Dan Tomlinson, senior economist at the Resolution Foundation, said: “Furlough has been as critical to fighting the Covid crisis as nationalising the banks was to fighting the global financial crisis . . . The scheme has prevented the UK experiencing catastrophic levels of unemployment, and its extension to 18 months has been worth every penny.
“As we prepare for a post-furlough jobs market this autumn, hundreds of thousands more workers will be looking for work and older workers in particular face the risk of unemployment and early retirement as they are most likely to still be on furlough. Record levels of job vacancies should hopefully mean this mass job search is relatively short-term, but Britain is set for a bumpy autumn.”