FT on UK unemployment:
Official figures showing that 950,000 people have applied for the government’s universal credit benefit since the UK’s lockdown began on March 16 confirm the extent of financial hardship people are feeling as a result of the measures taken to combat the virus.
The surge in claims suggests that despite the support promised by government for workers furloughed by their employers and for the self-employed, the UK is suffering job losses on a scale and speed unprecedented even in the aftermath of the global financial crisis.
“I suspect more is to come,” said Paul Dales, at the consultancy Capital Economics. He argued that many businesses would try to hold on to staff but find themselves unable to balance the books, or potentially ineligible for the government’s job retention scheme.
Not all of those applying for UC will have lost their jobs: many may be still working, but on lower pay, or applying for other welfare measures such as child tax credit or housing benefit.
But Mr Dales said that if the current rate of new claims continued for a further two weeks, based on past patterns it could translate into a rise of around 450,000 people drawing unemployment benefits by mid-April.
This would take Britain’s unemployment rate from 3.9 per cent before the Covid-19 outbreak to 5.2 per cent in April — reversing all the improvement seen over the past three years within just two months.
The Department for Work and Pensions has moved more than 10,000 staff to help process claims and call back those unable to get through the long queues on the UC helpline; it says staff are working flat out and that the system is “standing up well” given the pressures.
However, it was unable to say how many of the 950,000 registered claims had been processed or had even passed identity verification checks. Weekly data published by the Cabinet Office suggests that only a small proportion have succeeded in verifying their identity through the online process.
Charities that help claimants navigate the system say two issues — problems with the system for online identity checks and the need to arrange an appointment by phone after registering a claim — lie behind the very long waits to reach the UC helpline.
Although surveys suggest that around half of companies are planning to use the government’s new job retention scheme — paying 80 per cent of wages for furloughed workers — there also appear to be many that are unwilling or unable to wait for the money to come on tap, which the government has said will be late April at the earliest.
“Some companies are either tight already and that wait is too long for them, or they are not 100 per cent sure they will get the money,” said Yael Selfin, economist at KPMG, adding that many businesses were desperate for information on how the scheme would work and found it unhelpful that it could not be used when putting workers on reduced hours.
The Office for National Statistics said on Thursday that more than a quarter of businesses surveyed were cutting staff levels in the short term and a separate survey published this week by the CIPD organisation for HR professionals showed that a similar proportion expected to make permanent redundancies.
If the government fails to convince employers to use the new scheme, unemployment could rapidly reach levels seen after the 2008 crisis, when the jobless rate peaked at 8.4 per cent.
This will mean acute hardship for workers forced to fall back on UC, rather than receiving the much more generous wage subsidy. It could also mean that companies are unable to pick up production as quickly as they otherwise would once the lockdown eases.
However, some economists argue that the UK labour market could recover from this shock more quickly than in previous recessions owing to its strong starting point and because many businesses would want to hire instantly once they were allowed to operate.
