Nearly 2m have not worked in UK for past six months, study finds

Almost 2m workers in the UK have been unemployed or fully furloughed for at least six months, according to research that highlights the risks of lasting damage to careers and earnings.

Although January’s lockdown has not hit the labour market as hard as the initial spring shutdown, about 10 per cent of the working age population has been out of the workplace for at least half of the last year, the Resolution Foundation said in a report published on Thursday.

The think-tank estimated that the number of workers on full or partial furlough rose from 4m to 4.5m between December and January — far lower than the 9m who were receiving wage subsidies through the government’s job retention scheme at its peak last spring.

But a survey conducted at the end of January, on which the Resolution Foundation has based its estimates, suggested that very large numbers now face job insecurity and poor earnings prospects because they have been out of work for so long, losing skills and missing out on experience.

Almost 500,000 people have been on full furlough for more than six months, while 689,000 have been unemployed for a similar period, the think-tank estimates. After including those who have combined spells of both unemployment and full furlough, the total reaches 1.9m.

Nye Cominetti, senior economist at the Resolution Foundation, said the figures underlined the need for the chancellor to phase out the furlough scheme gradually, while ramping up help for job seekers and incentives for companies to hire, to limit the damage from “long Covid in the labour market”.

Winding down wage subsidies without triggering unnecessary job losses is one of the more delicate tasks facing Rishi Sunak in his March 3 Budget. He will set out plans next month to support the economy through what he hopes will be the final phase of the pandemic and set it on the road to recovery.

Some extension of wage subsidies beyond April — when the job retention scheme is set to expire — is expected. But the Institute for Fiscal Studies, among others, has warned that the economy will not be able to adjust to a post-pandemic “new normal” until most emergency support is removed.

However, the Resolution Foundation said workers who had spent a long time on full furlough faced many of the same challenges as the long-term unemployed, even if they had fared better financially.

Those able to return to a previous employer could face slower earnings growth because of the experience they had missed — an acute problem for the many young people affected. And more than a fifth of those on long-term furlough either expected to lose their job when the scheme ended, or had already been told they would be made redundant.

The report argued the job retention scheme should remain in place offering “blanket coverage” for at least two months as lockdown began to ease, and for longer in sectors or regions where restrictions remained. Elsewhere, it could be withdrawn by gradually increasing the minimum number of hours furloughed staff were expected to work to qualify for wage subsidies.