The government’s Coronavirus Job Retention Scheme (CJRS) presented a lifeline to millions of workers after the turmoil caused by lockdown measures put in place to stem the spread of COVID-19.
At its peak, over 11.6 million workers were furloughed through the CJRS in August 2021.
Under the scheme, the government initially paid 80% of wages up to £2,500 for furloughed workers, costing over £68.5 billion over an 18-month period.
The high cost of the CJRS and the economy reopening from April 2021 led the government to begin to wind down the scheme in summer 2021 before drawing it to a close on 30 September. According to HMRC data, over one million workers were still receiving support when the CJRS ended.
The spread of support
As of the end of July 2021, London (19.5%) and the South East (14%) accounted for the highest number of people furloughed in the United Kingdom. The North West (10.6%) also had a high furlough rate, particularly in the manufacturing, construction, wholesale and retail sectors, where demand declined sharply during the pandemic.
Unsurprisingly, the Health and Social Care, Professional Services and Other Services sectors had lower furlough rates, with the former recording a surge in demand and workers in the other two sectors being able to work from home. However, a significant proportion of firms still participated in the CJRS as they struggled to meet wage costs owing to demand uncertainties.
The three sectors with the highest take-up rates for the CJRS were Transportation and Storage, Food Service, and Arts and Entertainment.
These sectors contended with forced closures, social distancing measures and reduced capacity for much of 2020-21. Many industries in the sectors, such as the Full-Service Restaurants and Pubs and Bars industries, require physical interaction between employees and customers in order to function properly, which made them unviable during the lockdown periods and led to higher uptake of the CJRS.
Currently, a high proportion of people are still working from home, resulting in the Transportation sector operating at reduced capacity. The Intercity Passenger Rail Transport and Urban Passenger Rail Operations industries have been particularly affected by less commuting. This has been compounded by global travel restrictions and reduced air travel leading to weak demand for airline operators.
The Arts and Entertainment sector was significantly affected by the pandemic and is set to be most affected by the end of the CJRS.
According to HMRC data, one in three workers in the Arts and Entertainment sector were still on furlough at the end of September.
This is because investment in the sector has declined, as audiences have been slow to return to venues such as cinemas and theatres, putting new productions on hold.
Ending effects
Prior to the end of the CJRS, labour unions raised concerns that the end of the scheme would lead to job cuts and a high unemployment rate. However, this has yet to materialise with the number of firms, reporting redundancies remaining at a record low, according to the Insolvency Service.
The number of job vacancies between July and September 2021 was a record high of over one million, while the unemployment rate was 4.5%, according to the Office For National Statistics.
For instance, major airline British Airways, which was one the of largest participants in the CJRS, claiming over £10 million in June 2021 alone, has brought back all its furloughed employees as global travel restrictions have eased. Other transport companies, such as operators in the Coach and Bus Transport industry, have followed suit as demand has begun to recover.
Currently, staffing levels have returned to pre-pandemic levels the Education, Health and Social Work, and Finance and Insurance sectors. However, staff shortages remain. The Hospitality sector has struggled to find workers after reopening at full capacity once lockdown restrictions were fully lifted.
As a result of the COVID-19 pandemic and Brexit effects, more than one in 10 workers have left the Hospitality sector in the past year, according to UKHospitality.
Long hours and relatively low pay in have encouraged many hospitality workers to retrain or seek alternative employment. According to research by IT management company NTT DATA UK, in April 2021, 51% of furloughed workers were considering or had already decided on a career change, while 13% of survey respondents were already reskilling to change careers. This trend is expected to exacerbate labour shortages.
Companies in industries with significant shortages, such as the Freight Road Transport industry, have resorted to offering higher pay, joining bonuses and other incentives in order to fill shortages. Other sectors are expected to follow suit due to fall in the pool of workers available now that the UK has left the European Union and introduced its new points-based immigration system.
As the pool of workers decreases, firms will have to offer higher wages, which is anticipated to increase wage expenditure and weigh on profitability across a wide range of sectors.
Despite the easing of lockdown measures, labour shortages are likely to dampen economic growth as the government attempts to implement policies aimed at solving supply chain disruptions ahead of the busy Christmas period.
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