Britain may be facing high unemployment for the ‘foreseeable future’, economists have warned.
Speaking at the government’s Treasury Committee, Torsten Bell, chief executive of the Resolution Foundation, told MPs today there could be a ‘big labour market shock’, despite the government’s attempts to secure jobs.
‘I think we will see some spark back in activity as we leave the hard lockdown,’ he said.
‘But in terms of employment growth, the reasons to be nervous are that the sectors which are generally the quickest to bring people back to work are hospitality and retail.
‘They were a big part of bringing people back into work in the financial crisis but that won’t be so easy this time.
‘We expect really high unemployment for the foreseeable future.
‘Next year we will be dealing with unemployment when we thought we would be dealing with record employment and we will debating tax rises over the first half of this decade.’
Parts of car industry are already experiencing job losses, with a handful of big brands making workers redundant.
Last week, luxury car firm Bentley said it plans to cut 1,000 jobs – that’s about a quarter of its workforce.
The news followed Aston Martin’s announcement of 500 jobs were to be cut and McLaren, who said in May, it’ll be shedding 1,200 jobs. Dealer group Lookers also said it was cutting 1,500 jobs.
Around the same time as Bentley’s announcement, dealer group Lookers said it would be cutting 20 per cent of its workforce – that’s around 12 people per one of its 136 dealers.
Speaking soon after the announcements, SMMT chief Mike Hawes said the industry was experiencing a ‘black week’.
The Treasury Committee also heard from Paul Johnson, director at the Institute for Fiscal Studies, who said there are ‘a lot of gaps’ in the coronavirus financial support package.
‘Some of these gaps are big,’ he said.
‘There are possibly as many as two million company owner-managers, 650,000 or so self-employed people who set up since April 2019, 200,000 self-employed earning over £50,000 and others working outside the scheme.
‘It was a very broad and rough-and-ready scheme in terms of providing income replacement.’
The Treasury has already paid out £34.9bn to around 830,000 businesses across the UK, latest figures revealed.
Bounce-back loans – designed to quickly inject £50,000 to small businesses – have so far been the most popular.
Nearly £24bn has been paid to more than 782,000 companies, with many car dealers using them to buy stock.
However, Giles Wilkes, senior fellow at the Institute for Government, said he believed the speed at which bounce-back loans were dished out is an ‘incredible red flag’.
‘£20bn went straight out and there’s talk about absolutely massive bad debts,’ he said.
‘It’s very rare for state money to be drawn out without it meaning something has gone slightly wrong and in this case it must be lack of commercial scrutiny that the commercial sector has had to apply to these loans.
‘It’s hard to see how these would be gathered back in.’
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