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CONDITIONS APPLY

The UK economy is barreling toward normalcy

British Prime Minister Boris Johnson visits business owners in Cornwall in April 2021
Reuters
More jabs, more jobs
  • Samanth Subramanian
By Samanth Subramanian

Looking into the Future of Capitalism

Published

The UK’s furlough program appears scheduled to end right on time. But, as ever with Covid-19, conditions apply.

New data show that the number of jobs supported by the government’s furlough scheme dropped in June from around 2.5 million to 1.9 million, ending the month at the lowest level since the pandemic began.

It was the first time since March 23, 2020, that the Coronavirus Job Retention Scheme paid for the furloughs of fewer than 2 million employees, according to data from HM Revenue and Customs. The scheme paid 80% of employees’ regular wages for any hours they couldn’t work, up to a maximum of £2,500 a month.

The UK’s Coronavirus Job Retention Scheme is winding down

The scheme is already being phased out. In July, the government paid 70% of wages up to £2,187, and in August and September, it will pay 60% up to £1,875. On Sep. 30, the furlough program will end altogether.

By that time, the government hopes, the number of furloughed jobs will have followed its downward trajectory to reach near-zero. If that does happen, it will be a feat of predictive—and lucky—policymaking: a coordination of vaccination drives, reopening measures, and public spending that somehow managed to plow past variants and lockdowns to sync up with the Sep. 30 deadline.

Pandemic risks remain

But this fine coordination may yet go awry, particularly as the UK’s economy opens up further. With the removal of social distancing norms and the relaxation of travel rules, new variants may spread. The vaccination drive has slowed as it targets the youngest age brackets. Several industries, such as travel, hospitality, and the arts, will still be running at less than full steam come September.

The Resolution Foundation, a London-based think-tank, also warned that older workers might find themselves “parked” on furlough even as younger workers were brought back. And the end of furlough, economists predict, is almost sure to be accompanied by a rise in unemployment. In this case, as in many others, the impending normalcy won’t be a neat return to a pre-pandemic economy.

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