Economic inactivity has increased over the pandemic, due mainly to illness and people staying in or entering education.
After 18 months, the Coronavirus Job Retention Scheme (CJRS) came to an end on 30 September 2021. The latest statistics for the CJRS were published at the beginning of November, showing how many jobs were still on furlough at the end of the scheme.
The scheme launched in March 2020 and was designed to support employers to retain and continue to pay staff while businesses were closed. The Government paid up to £2,500 per month to furloughed employees.
This Insight looks at who used the CJRS, how successful it was and who is likely to be most affected by it ending.
What was the furlough scheme?
Employers could get a government grant to cover the majority of wages for employees not working due to coronavirus restrictions. The UK did not have an existing ‘short-time work’ scheme, so the CJRS was set up from scratch.
In September 2020, the Government announced that the CJRS would be replaced with a Job Support Scheme (JSS) where employees would work a minimum number of hours, and employers and HMRC shared the cost of their wages when not working. However, on 31 October the Government announced a second lockdown and extension of the CJRS.
The scheme was extended on four occasions, and the level of government support changed. Initially, it was due to close on 30 May 2020, with the Government paying 80% of workers’ wages at first. By the end of the scheme, it paid 60%, with employers covering 20%.
The chart below shows how the CJRS and JSS changed between March 2020 and September 2021.
In July 2020, the Government introduced flexible furlough, where furloughed employees could return to the workplace on a part-time basis and be furloughed for hours they didn’t work.
How many jobs were furloughed?
11.7 million jobs were furloughed, costing the Government £70 billion.
The number of people on furlough peaked at 8.9 million on 8 May 2020. Levels then fell steadily until November 2020 when a second lockdown was announced.
Numbers rose again at the beginning of the third lockdown in January 2021 but remained well below levels during the first lockdown.
Which sectors used furlough the most?
Some sectors of the economy made more use of the scheme than others. Non-essential shops such as clothing, toy and electronics shops, were closed during lockdowns. The wholesale and retail sector had the most furloughed jobs in March and April 2020, peaking at 1.85 million. These numbers quickly fell as shops re-opened.
In comparison, the number of jobs furloughed in the arts, entertainment and recreation sector remained more static, as much of the sector remained under restrictions.
Pubs and restaurants were particularly badly affected by restrictions and the accommodation and food services had the highest value of claims made overall, totalling £12.87 billion.
Younger workers were more likely to be employed in sectors that were worst hit by initial lockdown measures. 41% of under 18s were furloughed as of 1 July 2020, followed by 18–24-year-olds at 28%. As these sectors opened, the take-up rate for younger workers hugely declined.
How successful was it?
The scheme is widely considered to have been successful in reducing redundancy during the pandemic. In April 2020, the Office for Budget Responsibility predicted that unemployment would peak at 10% in 2020 when it actually peaked at 5.2%. However, this came at an average cost of £5,983 per job on furlough.
The Institute for Fiscal Studies (IFS) stated that the CJRS “protected most jobs”. The Financial Times spoke of the mixed success of the scheme, however, observing that while it preserved jobs, it may have prevented workers being reallocated to growing sectors.
The furlough scheme did not protect all jobs. According to the IFS, around 1 million people were made redundant between April 2020 and June 2021. This compares with 550,000 for the same period in 2019.
Due to the speed the scheme was implemented, there were also opportunities for fraud. HMRC estimated in September 2020 that between five to 10% of payments were fraudulently claimed (equivalent to around £3.9 billion). The estimate will be updated at the end of 2021 and HMRC expect to recover over £1 billion in fraudulent payments over the next two years.
Risk of redundancies and unemployment
Provisional Government data suggests 1.14 million jobs were still on furlough when the scheme ended. The Bank of England predicts a small rise in unemployment. In late October, it was estimated that 87% of furloughed employees returned to work, 3% were made permanently redundant, 3% voluntarily left their role and 8% were classified as “other”.
At the end of the scheme, the use of furlough in London was nearly double the UK average, which could make redundancies in this region more likely.
The travel industry
The travel and tourism industry had the highest take up rates at the end of the scheme. 36% of jobs in passenger air transport were furloughed and 35% of those in travel agencies and tour operators. As the travel industry has yet to return to normal, there are concerns staff may face redundancies.
However, the passenger air transport industry also had a 13% drop in the take-up rate between August and September; the largest decrease of all groups.
At the scheme’s end, employees aged 65+ were more than twice as likely to be on furlough as those aged under 30.
Research by the Resolution Foundation suggests older workers take longer to return to work after losing a job and are more likely to have a larger decrease in pay. The Resolution Foundation says that older workers who were furloughed may therefore decide to take early retirement, which could damage labour market supply. In all age groups, as shown in the chart below, men were more likely to be on furlough. However, this was not true for most of the furlough scheme, with greater numbers of women than men on furlough until May 2021.
A permanent scheme?
Some organisations, such as the Trades Union Congress, are calling for a permanent short-time working scheme to deal with potential future disruptions to jobs, such as the transition to net zero, future pandemics and technological change.
The Government has not indicated it will implement such a scheme.
About the author: Harriet Clark is a researcher at the House of Commons Library, specialising in economic policy and statistics.
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