Ending the furlough scheme too early could damage the recovery and push unemployment higher, trade unions warned as official figures showed the number of workers on the scheme in May fell at a slower rate than expected to 2.4 million employees.
Without an extension of furlough or extra support for the hardest-hit industries, the bounce back on economic activity could be choked off, unions said.
The government is reducing the contribution it makes to the coronavirus job retention scheme (CJRS) from this month, with employers having to start making a 10% contribution to workers kept at home. In August firms will need to contribute 20% to the wages of furloughed staff.
The chancellor, Rishi Sunak, has come under pressure from welfare groups to protect vulnerable people who are more likely to be made redundant when the scheme is wound up at the end of September.
Thousands of workers could be made redundant in September, just as the government reverses a £20 a week increase in universal credit that was introduced in April 2020.
The GMB union’s general secretary, Gary Smith, said: “Ending the furlough scheme too quickly could kill a recovery before it even starts.
“Instead of driving us off a furlough cliff-edge later this year, the government should provide continued support for employers that need it – especially in those sectors that have been hammered by the pandemic.”
A spokesperson for the Unite union said: “Industries such as aviation, automotive and hospitality are still on the ropes, hit hard by repeated lockdowns, supply chain disruption and inconsistent government decisions, which is why the furlough scheme needs to match those of our competitor countries and be continued until at least the spring of 2022.”
Official figures showed more than 1 million workers came off furlough in the four weeks between the end of April and the end of May, which coincided with the start of lockdown restrictions being lifted and non-essential retail, restaurants and pubs reopening.
The drop from 3.5 million to 2.4 million furloughed workers was welcomed by Sunak, who called it a “milestone moment” that showed the scheme was “naturally winding down as the economy reopens”.
The Resolution Foundation thinktank said the fall was driven largely by the under-25s returning to jobs in the hospitality sector – halving the number of young people on furlough from 616,000 to 322,000.
However, the fall was more modest than a survey last month by the Office for National Statistics suggested and showed firms were finding it difficult adjusting to life after lockdown.
“While the recent fall is encouraging, the total number of employees still on furlough is far higher than the ONS survey estimate that just 1.7 million employees were furloughed at the end of May,” the Resolution Foundation said. “The ONS survey also suggested that the pace at which furlough rates are falling has slowed considerably post-17 May.”
A study by the thinktank found the age profile of furloughed workers was increasing, with about half now aged 45 and over. It said older workers had been “parked” on furlough during the recent reopening – and that more than 600,000 workers aged 45 to 64 had now been unemployed or fully furloughed for at least six months.
