Coronavirus: 9 million workers furloughed as cost of scheme hits £20bn

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK
Chancellor Rishi Sunak, who launched the job retention scheme. (Downing Street/AP)

The number of workers furloughed under the government’s job retention scheme continues to climb, fuelling fears that the end of the scheme will lead to surging unemployment in the UK.

New data from the Treasury, published on Tuesday, showed that 9.1 million people had been been placed on furlough as of midnight on 14 June. It means 200,000 new workers have been furloughed across the UK in just the last week.

The cost of the job retention scheme has now climbed to £20.8bn ($26.2bn), the Treasury said. Under the scheme, which was launched in March, the government pays up to 80% of furloughed staffs’ wages, to a maximum of £2,500 per month.

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The continued rise in the number of furloughed workers will fuel fears that the end of the scheme could spark a wave of unemployment when the job retention scheme comes to an end.

“There is also growing concern about where unemployment is headed over the summer months,” James Smith, a developed market economist at ING, said in a note on Tuesday.

No new workers will be able to be furloughed under the scheme from the end of June and employers will be asked to start contributing to costs from August. The programme is due to end in October.

“With social distancing rules likely to make it difficult for some firms to operate profitably during the reopening phase, there is a risk that some companies begin to make more permanent changes to their operations, and are forced to resort to redundancies,” Smith said.

READ MORE: UK employers have slashed 600,000 staff since March

Unemployment data released separately by the Office of National Statistics (ONS) on Tuesday showed a relatively modest uptick in unemployment in March, with the official joblessness rate remaining at a record low. But experts said the unemployment rate was being kept artificially low by the job retention scheme, which was masking problems in the labour market.

“This picture belies the significant number of workers (8.9 million, or one in four) being furloughed as a result of the fall in economic activity as these workers are still classified as being employed,” Jing Teow, a senior economist at PwC, said. “Some furloughed workers may not have jobs to return to when this is over.”

The Treasury said 2.6 million self-employed people had now claimed £7.6bn under the government’s self-employed income support scheme, broadly unchanged on last week’s figure.