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A year on from furlough

Published date
Today marks the one-year anniversary of the furlough scheme being introduced.

The scheme, a big win for the union movement, guarantees that employees working for businesses that have been closed due to social restrictions, who may have otherwise lost their jobs, receive at least 80 per cent of their wages while they’re unable to work.

Numbers using the scheme

The furlough scheme has undoubtedly protected millions of jobs throughout the pandemic, making it one of the few big successes in the government’s response to the pandemic.

Between the scheme’s introduction and the middle of February 2021, 11.2 million jobs have been furloughed at some point, with 1.3 million employers making use of it.

Use of the furlough scheme peaked in early May 2020, when 8.9 million jobs were furloughed. 4.7 million jobs were still furloughed at the end of January 2021, the latest available day that HMRC figures cover. A business survey from the ONS provides more up-to-date information, showing that 19% of the private sector workforce was furloughed in early March. This has been the same since January, and suggests the number of people furloughed has likely stayed around the same since January.

The number of people furloughed in January 2021 is the highest it’s been since July.

As you’d expect given the sectors most impacted by social restrictions, use of the scheme has been much higher in some industries than others. At the end of January, 44% of all furloughed jobs are within two industries: accommodation and food services (24%) and wholesale and retail (20%). This equates to 1.1 million jobs in accommodation and food, and 940,000 jobs in wholesale and retail.

Chart 1

While the arts and entertainment sector has less jobs furloughed (315,000), this constitutes a large percentage of its workforce. 55% of the workforce was furloughed at the end of January 2021. This is a similar rate to accommodation and food (56%).

Across all industries, the number of jobs furloughed at the end of January was 47% lower than it was when furlough was at its peak. But, again, this varies by industry.

Construction and manufacturing, for example, both had large numbers of jobs furloughed in May 2020. While there’s still a significant number of jobs furloughed in these industries, the number has fallen by around two-thirds. In contrast, the number of employments furloughed in accommodation and food and arts and entertainment has fallen by 30%.

And it’s worth noting where these jobs may have gone. HMRC data on the number of payrolled employees shows that accommodation and food and arts and entertainment saw the most job losses between April 2020 and January 2021. It therefore seems likely that some workers in these industries are losing their jobs rather than returning from furlough.

Chart 2

The scheme hasn’t been perfect

While the furlough scheme has undoubtedly saved millions of jobs, it hasn’t been perfect. A key flaw of the scheme is that there’s no protection to ensure no one is paid below the minimum wage while furloughed. While employers can choose to top up the wages of furloughed workers, not all do.

Low-paid workers are more likely to not to have their pay topped up. Because of this, in April 2020, around the peak of the scheme, just over two million employees were not being paid the legal minimum. This means that the household finances of many low-paid workers, already being paid an insufficient minimum wage, have been hit hard.

Young workers, part-time workers and workers in the hospitality sector have also been more likely to be affected. Shockingly, a third of all accommodation and food workers were not earning the legal minimum wage in April 2020.

As well as this, the government’s attempts to wind down the scheme have often proved premature. The number of jobs furloughed hit its lowest point on October 31st, when it dropped to 2.4 million. The scheme was due to end on this day, but was extended at the last minute. The number of employments furloughed went up to 3.7 million on November 1st, and then increased further a few days later due to stricter lockdown measures being introduced. This uncertainty around the future of the furlough scheme seems to have led to unnecessary job losses.

And the government has struggled to reach those in non-conventional work, whether self-employed forced to operate through companies, zero-hours workers, and those mixing employment and self-employment. The government introduced the Self Employment Income Support Scheme (SEISS) alongside the furlough scheme, but the two didn’t seamlessly interact to cover all workers, and the requirements of the scheme have meant that millions of workers have fallen between the cracks, unable to get support.

What next?

The government has committed to keeping the furlough scheme running until the end of September. The amount the government contributes to the wages of furloughed workers will begin to reduce before then, dropping to 70% in July and 60% in August and September.

The current roadmap out of lockdown provisionally plans for all areas of the economy to be up and running months before the end of furlough. However, the September end date creates a cliff edge, especially as it comes alongside the end of the Universal Credit uplift. The government must ensure it adapts the scheme to any changes of the roadmap. If business closures last longer than expected, so too should the scheme.

It’s also urgent that the government overhauls our broken social safety net so that it properly supports for those who need it. This includes raising both Universal Credit and legacy benefits to at least 80% of the national living wage (£260 per week), ending the five-week wait by converting advance payment loans to grants, and scrapping the two-child limit, benefits cap and no-recourse-to-public-funds rules.

Finally, it’s important that the government begins to look beyond the scheme. Investing now in good, well-paid jobs will help to replace any jobs lost when the scheme ends. Fast tracking spending on projects such as broadband, green technology, transport and housing, for example, could deliver a 1.24 million jobs boost by 2022, and the TUC has set out plans to fill and create 600,000 jobs in the public sector.

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