The UK has recorded its biggest ever monthly increase in unemployment claims with 856,500 people added to the benefits list in April.
The overall number of people claiming universal credit and jobseekers allowance spiked to almost 2.1 million, according to official figures released by the Office for National Statistics (ONS).
Economists said the 69% spike in claims for unemployment benefits in April would have been much higher were it not for the furlough scheme introduced by the government to try and save jobs and businesses during the coronavirus crisis.
UK facing severe recession ‘the likes of which we haven’t seen’ – Sunak
Chancellor Rishi Sunak today (Tuesday) issued a grim warning that the UK is “likely to see a severe recession the like of which we haven’t seen and of course that will have an impact on unemployment”.
Sunak, who was giving evidence to the House of Lords economic affairs committee, added: “I certainly won’t be able to protect every job and every business… The longer the recession, it is likely the degree of that scarring will be greater.”
The UK is expecting its deepest recession in 300 years and the Bank of England warned last week that “the scale of the shock” means a “significant loss of economic output” is inevitable.
Unemployment is already close to 3 million’
Job vacancies in the UK fell by a quarter in the three months to April and the Institute of Employment Studies (IES) warned the worst off parts of Britain now faced the fastest rises in unemployment.
The ONS’s Jonathan Athow said the numbers show the “major impact” of Covid-19 on the labour market which had “held up well” in March because “furloughed workers still count as employed.” However, the number of hours worked fell sharply at the end of March – especially in construction and hospitality – and tax data showed the number of employees on payrolls “fell noticeably” in April with vacancies “sharply down” across sector but “hospitality again falling steepest,” said Athow.
“In reality, unemployment today is likely to already be close to three million,” said IES director Tony Wilson, explaining the jobless figures understate the severity of the crisis because they only count benefit claims up to April 9.
Furlough gives government onerous task
The furlough scheme has so far cost around £10 billion to pay 80% of the wages of more than 7.5 million staff of almost one million companies.
Sunak laid out the government’s plans to gradually wind down the scheme last week and Tej Parikh, the chief economist at the Institute of Directors, said: “While furloughing is holding off some job losses for now, it’s not yet clear how firms will react as the scheme changes in August and as social distancing continues.”
The economist said companies will still struggle with any increase in costs as they will “still be in the middle of a cashflow crisis” meaning the “government faces an onerous task in winding down the scheme without causing too much pain.”