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Unemployment could surge once furlough ends, think tank warns

Time 10 months ago

Ending the coronavirus furlough scheme this autumn would seem ‘to be a mistake’ that will end in a surge in the number of people out of work, a leading economic think tank warned today (Jul 29).

The National Institute of Economic and Social Research (NIESR) said the rate of unemployment was poised to surge to around a tenth of the workforce by the end of 2020.

It hailed the government’s coronavirus job retention scheme but called on chancellor Rishi Sunak to extend it into next year to try to preserve jobs.

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Around 9.5m jobs have been supported by the furlough scheme, but it will be wound down from next month and removed entirely at the end of October.

The NIESR urged a rethink by the government, saying that extending the programme until the middle of 2021 would drastically reduce the number of redundancies and probably pay for itself.

Earlier this week, trade body Make UK – which represents manufacturers including the car industry – said more than half of its members planned to cut jobs by the end of the year, with some looking to shed a quarter of their workforce

The NIESR said that if the government continued with current plans, unemployment would recede as the recovery gathered speed in 2021 but would stay above its recent level of around four per cent.

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Deputy director Garry Young said: ‘The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending.

‘The scheme was intended by the chancellor to be a bridge through the crisis, and there is a risk that it is coming to an end prematurely and this increases the probability of economic scarring.

‘The scheme has been an undeniable success in terms of keeping furloughed employees attached to their jobs.’

The think tank also forecast that the UK’s GDP would fall by 10 per cent in 2020, before going up by sic per cent in 2021.

Car Dealer discussed the topic of the furlough scheme earlier this month – click the video at the top of the story to hear how flexible furlough could impact you and your business.

John Bowman's avatar

John has been with Car Dealer since 2013 after spending 25 years in the newspaper industry as a reporter then a sub-editor/assistant chief sub-editor on regional and national titles. John is chief sub-editor in the editorial department, working on Car Dealer, as well as handling social media.

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