Jobless rate could reach 15pc if cases surge
Chancellor told to replace furlough with job stimulus as OECD reveals risk of soaring unemployment
THE jobs catastrophe facing Britain has been laid bare by a string of bleak forecasts as Rishi Sunak seeks to kickstart the recovery today.
Unemployment could soar close to 15pc if Britain is struck by a second wave of the coronavirus, according to the Organisation for Economic Cooperation and Development (OECD), its highest level since the Great Depression 90 years ago.
It urged countries to end policies such as the UK’s furlough scheme, which pays up to 80pc of workers’ wages, and focus on measures that encourage employers to create new jobs.
Recruiters have warned that demand is falling sharply for new staff in all industries. Think-tanks said it could take until 2024 for the economy to fully bounce back. The predictions underline the scale of the disaster that the Chancellor is seeking to avert as he sets out new measures this afternoon in an effort to bring the country back from the brink. Mr Sunak’s plan is expected to include £2bn for youth jobs, hiring thousands of new job centre staff and pumping resources into training positions and work experience.
Economists at the OECD expect UK unemployment to surge from below 4pc at the start of 2020 to 11.7pc by the end of this year, a far greater hit than during the financial crisis and the highest rate since the Eighties. If a second spike in virus cases occurs, it could send unemployment up to 14.8pc, the highest since 1932.
The initial blow struck by the pandemic has been 10 times worse across the rich world than the financial crisis in 2008, the OECD said, with a decade of jobs growth wiped out in just three months.
The group said ending furlough “would reduce the pressure on public budgets and also the risk that job retention schemes become an obstacle to the recovery by curbing job reallocation towards more viable and productive firms. Concerns about potential abuse may also become more prominent as some firms continue to claim support for shortened hours even after workers have resumed their normal schedules”.
The furlough scheme has so far helped to preserve jobs, with almost one worker in every three paid by the Government to stay at home at the peak of the pandemic.
However, it is feared that redundancies will now snowball as support is gradually withdrawn before the scheme ends in October. Major firms announced more than 12,000 lay-offs last week alone. Returning to the record employment levels of the pre-pandemic era will not be easy.
GDP will not fully recover until 2024, according to forecasts from the Centre for Economics and Business Research and accountant BDO.
Separately, new data from the Treasury showed more than a million taxpayer-backed bounceback loans of up to £50,000 have now been approved to help small businesses weather the pandemic, worth a total of £30.9bn, on top of more than £2.5bn of loans for larger firms.