Tue, 11 May 2021

UK to slowly reduce aid as unemployment falls

Robert Besser
22 Apr 2021, 19:35 GMT+10

LONDON, England: Held down by the government's huge jobs subsidies programme, Britain's unemployment rate surprisingly fell for the second month in a row to 4.9 percent in the December-to-February period, official figures indicated.

The Office for National Statistics linked this to a large volume of men leaving the jobs market altogether. The inactivity rate rose by 0.2 percentage points in the three months to February, echoing a rise during the first lockdown of 2020.

Figures from Britain's tax office also indicated that the number of employees on company payrolls fell by 56,000 between February and March, the first decline in four months, highlighting the precarious state of the labour market.

This increased the total number of jobs lost since the onset of the coronavirus pandemic to 813,000 - more than half of which were held by people aged under 25 years - with London emerging as the hardest-hit region, the Office for National Statistics said.

"If we don't act quickly, in particular by focusing our support on the long-term unemployed, then we are risking another lost generation," Tony Wilson, director of the Institute for Employment Studies, said.

Some 363,000 people have been classified as long-term unemployed after having been out of work for a year or longer, but with a similar number in the six-to-12-month bracket that figure could soon rise sharply.

The jobless rate was expected to have been far higher if finance minister Rishi Sunak had not extended his furlough scheme - which pays the wages of roughly one in five employees - until the end of September. However, employers will have to start contributing towards some of its costs beginning in July.

To determine how long it needs to keep its huge economic stimulus programme in place, the Bank of England will be observing how many jobs are lost once the scheme expires.

"Further action will be needed to support the labour market when the furlough scheme ends, including supporting businesses to recruit and retain staff through a temporary cut in employer national insurance contributions," said Suren Thiru, head of economics at the British Chambers of Commerce.

Britain's economy shrank by almost 10 percent in 2020, a bigger fall than almost all its European peers, after it locked down later and for longer than many of them. However, following the fast rollout of vaccinations, Britain is in the process of lifting its third lockdown while other countries in Europe have recently tightened their restrictions.

The Office for National Statistics said there was a marked rise in job vacancies in March, especially in sectors such as hospitality, which reopened for outdoor business last week.

Britain's headline measure of pay growth again rose strongly in the three months to February, up 4.5 percent in annual terms, a reading the Office for National Statistics described as skewed higher by a drop in the number of lower-paid and part-time jobs. After accounting for this, pay growth was much weaker at 2.5 percent, it estimated.

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