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Premature end to furlough “seems to be a mistake”

With the government furlough scheme ending in October, unemployment is set to rise to close to 10 percent of the workforce by the end of this year, new research finds.

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Extending the scheme would have been a “relatively inexpensive measure”
Extending the scheme would have been a “relatively inexpensive measure”

The National Institute of Economic and Social Research (NIESR) said unemployment will, however, recede as recovery gathers speed in 2021, but remains above its recent level of four percent.

 

The research explained that unemployment would have stayed lower had the government extended the furlough scheme beyond the end of October. The institute said this would have been a “relatively inexpensive measure”.

 

Garry Young, NIESR deputy director, said: “The planned closure of the furlough seems to be a mistake, motivated by an understandable desire to limit spending.

 

“The scheme was intended, by the chancellor, to be a bridge through the crisis and there is a risk that it is coming to an end prematurely and this increases the probability of economic scarring.”

 

The scheme, which has helped to serve 9.5 million employees on furlough, has been “an undeniable success in terms of keeping furloughed employees attached to their jobs” Young said.

 

However, he added: “The incentives offered to employers by the Job Retention Bonus look too small to be effective given the uncertainty about the economic outlook ─ a one-off payment of £1,000 per employee compared to an average wage of £530 per week.”

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