A new report finds that though hiring is set to continue following the end of the furlough scheme, unemployment is predicted to see a fresh rise. 

New research conducted by the Resolution Foundation warns that, although unemployment hasn’t hit predicted levels, it is still expected to see a new rise in light of the furlough scheme phasing out at the end of this month (September).

Earlier last year, the Office for Budget Responsibility forecast unemployment levels could rise as high as 10 per cent due to COVID-19’s effect on the labour market.

However, the Bank of England recently expressed that this peak had already passed, with unemployment expected to reach under half of this amount (4.7 per cent) by the end of this year.

Despite this, with the furlough scheme coming to a close at the end of this month, the think-tank predicts this will still have an impact on a sizeable amount of staff.

In particular, the research shows that should furlough rates continue to fall at the same pace as they did between April and June, when the economy was reopening, around 900,000 employees would still be on the scheme at the time of its closure.

However, this is uncertain at present with the fall in workers coming of the scheme recently halting especially in sectors such as international travel. This has led to the question of how many staff will still be on furlough at the time that the scheme ends.

Regardless, many of these staff members, the research explains, will return to their previous roles – especially those on partial furlough.

However, given the rate of hiring occurring at the moment, the report casts doubt on whether firms will have the capacity to immediately take on all furloughed staff.

As such, unemployment would rise from its current level of 4.4 per cent (the June single-month rate) to around 4.9 per cent in the coming months – a significant increase of around 150,000 workers though small compared to what could have been.

Schemes such as the Restart Scheme and the Kickstart Scheme will be particularly important for workers of various age groups, the report states, as well as wider job search support and retraining where necessary.

Restart will be crucial for older workers, who are now the most likely age group to be on furlough, and who are most likely to have been on the scheme for at least six months.

Hannah Slaughter, Economist at the Resolution Foundation, said:

The furlough scheme has protected 11 million jobs and prevented an unemployment catastrophe. But with the scheme ending in less than four weeks’ time, there is huge uncertainty about what will happen next to the jobs market.

As many as 900,000 workers could still be on the scheme when it closes, though the majority are likely to return to their previous jobs. And with firms already reporting ‘hiring bottlenecks’, even a fresh surge in job starts in unlikely to be enough to prevent unemployment rising this Autumn.


*This research has been documented in the Resolution Foundation’s report ‘Labour Market Outlook Q3 2021’.