Rishi Sunak has released a film about the furlough scheme as the job retention programme draws to a close.
The chancellor tweeted a video filmed in Hollywood-esque fashion documenting the origins of the scheme put in place at the start of the pandemic when many businesses were forced to close.
It features several firms who said they would have gone to the wall without government assistance, with one saying she “dreads to think what would have happened without it”.
Others said the consequences could have been “absolutely heartbreaking”.
Furlough, the biggest state intervention in the UK’s labour market in peacetime, comes to an end this week.
The wage subsidy has been in place for 18 months and has cost £70 billion to the taxpayer.
But there are concerns over what will happen to the more than 1 million still-furloughed workers once employers are responsible for paying their wages in full.
At the Bank of England’s September meeting, its monetary policy committee (MPC) said the number of full and part-time furloughed jobs had continued to decline but at a “materially lesser degree” than it had estimated in its three-monthly update on the economy in August.
The Bank said the slower pace of people coming off the furlough coupled with record job vacancies meant the labour market was hard to read: “Key questions include how the economy will adjust to the closure of the furlough scheme at the end of September; the extent, impact and duration of any change in unemployment; as well as the degree and persistence of any difficulties in matching available jobs with workers.”
Samuel Tombs, UK economist at Pantheon Macroeconomics, said he doubted whether the economy would grow fast enough next month for businesses to fully re-employ all the 1.6 million staff who were still furloughed at the end of July.
“While the unemployment rate probably will rise only to about 5 per cent in the fourth quarter of 2021, from 4.5 per cent in the third quarter, we expect underemployment to rise sharply, as people return to their former employers, but work fewer hours than they would like.
“As in the early 2010s, this reservoir of ‘hidden’ labour market slack should exert considerable downward pressure on wages.”
The Bank will be closely monitoring the impact of ending the scheme, with the MPC noting there was “high option value” in seeing how the labour market coped before raising interest rates.
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