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20 September 2021

Britain defrosted: What happens when furlough ends?

After 18 months on ice, UK jobs and the lives of workers will look very different when the Coronavirus Job Retention Scheme closes at the end of this month.

By Anoosh Chakelian

Every morning for over a year, Catherine*, a 31-year-old Londoner living in a four-person flatshare, divided her day into two to three-hourly slots between meals, filling them in on her calendar.

Breakfast. A two-and-half-hour slot to fill before lunch. Lunch. Two three-hour slots to fill before dinner. Dinner. Two hours to fill before bed. Bed.

Sometimes she slipped, going to bed ever later and lying in longer, and occasionally spending three days straight on TV marathons before she managed to shake herself out of her lethargy.

Routine was difficult. She had no deadlines, no commitments, no pressures, and no need to earn. Over the previous 18 months, she had begun studying Greek and Roman mythology, completed online professional development courses, designed and created her own dresses, sold handcrafted facemasks for charity, darned jumpers, made clothes for her baby niece and baked countless cakes for her housemates.

Is furlough still available?

Catherine is a furlough “lifer”: a worker whose job has been kept on ice for all or the majority of the life of the Coronavirus Job Retention Scheme, introduced last March to support businesses and employees, in which the government pays 80 per cent of furloughed staffers’ salaries.

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Having worked in events for a West End cinema in London for three years, she was furloughed last March for over 14 months before returning to her job in mid-May, when the industry reopened enough for her employer to ask her back.

The events sector was hit hard by the pandemic. In October 2020, the Events Industry Alliance warned Prime Minister Boris Johnson and Chancellor Rishi Sunak of 90,000 job losses if the furlough scheme was to be watered down to the abortive Job Support Scheme, which was only intended to prop up “viable” jobs.

At its peak in May 2020, the furlough scheme had nearly nine million workers – almost a third of all UK employees – like Catherine being paid to stay away from work. Yet as more of her friends (and most of her own colleagues) began returning to work in the months after the pandemic’s first wave in the UK, Catherine felt her situation as a furlough lifer was becoming “rarer and rarer”.

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The number of people furloughed full-time fell below one million at the end of June 2021, and the latest provisional figures show this number decreased again in July to 820,000 jobs on full furlough by the end of that month – the lowest level since the scheme began.

When does furlough end?

In July, the government reduced its salary contribution to 70 per cent, and employers began contributing 10 per cent up to £312.50 a month of unworked hours. In August, this again was watered down to 60 per cent from the government, and 20 per cent from the employer up to £625.

At the end of September, the scheme will close entirely.

Catherine’s experience, along with millions of others, was bittersweet. While she was financially able to support herself on 80 per cent of her salary, the mental toll of doing nothing was significant.

“Furlough has been the hardest year, for certain”

Uncertainty, fear of redundancy and feelings of rejection and lacking value haunted her long months of furlough. “It’s a very weird situation, where it’s out of your control but it’s also within your control,” she says. “It has been the hardest year [and a bit], for certain, just the not knowing.”

Having never before experienced a panic attack, she began suffering from chest pains, and “the constant heavy, weighing anxiety over a sustain period of time, which physically does things to your body”. She was very aware, whatever happened, that she was “not going to make it out of this scratch-free”.

What does furlough mean?

Yet her experience also transformed her relationship with working life. Having regularly worked until 9 and 10pm at night, one shift stretching to 21 hours straight, she was “very prone to getting sucked into it”. By March 2020, when Covid-19 was spreading, she was exhausted and in need of “a break and a pause to step back to look at what I was doing”, she says, laughing that she didn’t plan for it to be over a year.

Furlough meant she began enjoying her evenings again, socialising (albeit over Zoom during the lockdowns) on weeknights, and finding time for her crafting hobbies.

“Being able to do those other things I’ve got used to doing now, I don’t know if I’d want to give those up,” she reflects. “I’d like to think that my life will stay being more than work, and I’m definitely going to strive for that.”

As ministers chivvy people back to their offices and companies grapple with the future of working from home, there has been less focus on the long-term impact of furlough on the nation’s psyche.

A year after the first lockdown, I explored the potential for the Covid-19 crisis to bring about a gradual societal “reset” in our relationship with work, leisure time and care.

As furlough has kept the jobs market on ice, profound changes in the workforce and certain industries will be exposed as it melts. Yet this won’t necessarily manifest itself in a wave of job losses. Unemployment forecasts after furlough ends are more positive than previously expected.

“The strength of the jobs market at the moment, coupled with the steady fall in the number of people furloughed in recent months, means that the increase may not be as large as feared earlier,” says Dan Tomlinson, a former Treasury official and senior economist at the Resolution Foundation think tank.

The figure is more likely to be in the low hundreds of thousands, in contrast to the 1.2 million people who moved from unemployment into work in April-June 2021, he says.

There are conflicting predictions, however. The New Economics Foundation calculated in August that the full-time equivalent number of jobs at risk of redundancy, loss of hours or loss of pay is likely near 500,000; the Treasury is forecasting 250,000, and the National Institute of Economic and Social Research has indicated a potential rise to 6.5 per cent – meaning 550,000 job losses.

Redundancies have not been rising over summer as the furlough scheme has tapered off in July and August. They were back to their pre-crisis levels in July, notes Tomlinson, which “bodes well for the end of the scheme”. Last August, in contrast, redundancy notices shot up, which then translated into a spike of redundancies in September and October. Such plans for redundancies are not yet evident this year.

Yet the labour market will not bounce back to pre-Covid normality. Workers like Catherine – whose jobs are still available when the scheme ends – will be approaching working life differently. They have experienced a dramatic change in their daily lives and unprecedented paid time away from work.

“You’ve got a significant number of people on furlough who’ve not been doing their jobs for quite a long time,” says Jonathan Cribb, senior research economist at the Institute for Fiscal Studies (IFS).

“A good number of people will have lost the experience that you might have expected them to gain during the past almost 18 months, when the scheme ends. Generally, you’d think that people over 18 months would get better at their job, most people get some form of pay rise over that course of time – so there’s going to be slightly less experienced labour than otherwise.”

For Catherine, returning to work after nearly a year and a half off is “like going to school after the school holidays; you suddenly have to work out where your pencil case is and things like that!

“There’s going to be a sort of rusty period of not really being up to speed again, and I wonder if I should ever get back up to the speed that I was at before. I probably could work less [than I did pre-Covid].”

“We expect there to be more jobs in warehouses and distribution than in shops on high streets”

Coupled with widely adopted remote working practices, this mentality could have an as-yet unclear effect on workplace culture. Whole industries may also have been transforming, with the 18 months of furlough having preserved the pre-Covid status quo in aspic. The pandemic may even have changed the type of jobs we need.

The accelerated shift of retail sales from the high street to online is one clear trend. “If at least some of that stays, you would expect there to be more jobs in warehouses and distribution and online retail in general than in shops on high streets,” suggests Cribb.

A change like this could mean rising demand for different skills – working in warehouses is more physical, for example – and in different locations (distribution centres are based in certain parts of the country well-connected by motorway, as opposed to high street retail jobs peppered across town and city centres).

“How many jobs are we going to need for people to reallocate towards new, growing industries? Furlough has probably prevented that reallocation because it’s kept people in old jobs,” says Cribb. “It hasn’t facilitated people to move to new jobs where they’re going to be needed and valuable in new occupations.”

[See also: To Boris Johnson’s government, our vanishing high streets are simply a parallel universe]

As furlough closes ahead of autumn, the foreign travel sector will continue to struggle with the effects of Covid restrictions. By late June 2021, 58 per cent of employees working in passenger air transport were furloughed and 49 per cent of travel agency staff were furloughed, compared with 6 per cent of employees across the whole economy.

A profound impact on both the young and old will also become clearer once Britain’s frozen jobs market defrosts.

Despite being a successful government intervention, furlough has not helped younger people who have just left education – whether it be school, college or university.

“To benefit from the furlough scheme, you need to already have had a job as an employee,” says Cribb. “So even if nobody loses their job at the end of furlough, and everybody gets taken back – which won’t happen – you’ve still got this set of younger people in particular who are going to need to find jobs. So that’s one challenge.”

At the start of the pandemic, people aged 16-24 were twice as likely to be working in industries that were most vulnerable under coronavirus conditions, like hospitality, retail, leisure and the arts. They were the most likely to lose their jobs during the crisis as well. Almost two-thirds of people who had lost their jobs in the pandemic were under 25, according to the Office for National Statistics in March.

[See also: How Covid-19 has sparked a youth unemployment crisis]

Since then, a “U-shaped crisis” has emerged, according to analysis by the Resolution Foundation, with the youngest and oldest workers affected more than those in the middle of their working lives.

The youngest and oldest workers (particularly those around or above state pension age) were most likely to be furloughed. Although economists do not have a full explanation for this, it is in part because of the industries they work in, “so older people are more likely to have worked in the retail side of things”, notes Cribb.

At the start of the crisis, 35 per cent of 60-65-year-olds were either no longer working by January 2021, or if still working, were furloughed or earning at least 10 per cent less than they were pre-Covid, compared with 41 per cent of 18-25-year-olds, and just 20 per cent of 40-44-year-olds, according to a Resolution Foundation survey.

“For the first time, older workers are now most likely to be furloughed”

It is now older workers who are thought to be most at risk when furlough ends.

“Younger workers in hospitality have moved back into employment as the economy has opened up, which means that – for the first time during the pandemic – it is older workers who are most likely to be furloughed,” says Tomlinson.

Older workers spend longer out of work when they become unemployed, and there is now what Tomlinson describes as a “double risk” of them losing their jobs when furlough ends while finding being the demographic who find it most difficult to return to work. “The risk is not just that older people move into unemployment,” Tomlinson continues, “but that they stop searching for work altogether and move into economic inactivity.”

These trends are mainly due to older people in the workplace having less experience “finding new jobs in general, because they’ve often been with their employers for a relatively long period of time, so they’re not as used to that”, Cribb says.

They are also less flexible than younger workers – less able to move location for a new job, for example, or to change skills or occupation type. “The benefit of doing some sort of retraining is lower for older people, who might not have a long career ahead of them,” he adds.

As furlough falls away, the true picture of a jobs market ravaged by Covid-19 will become clear. Yet welfare will be cut at the same time. At the end of this month, the government also plans to remove the £20 weekly uplift to Universal Credit that it introduced last March to support people through job losses and reduced hours.

The nature of the UK’s welfare system (which is less generous and a far lower proportion of a claimant’s previous earnings compared with European equivalents) plus this reduction in support will mean big income losses for those who end up unemployed at the end of furlough.

Two types of furloughed employees, identified by the IFS, will face the most drastic reduction of support from the government if their jobs no longer exist at the end of this month: those who have a relatively high-earning partner or significant savings (which mean they may qualify for no or very little Universal Credit), and those who were middle- or higher-earning individuals before they lost their jobs (whose drop from their furlough rate to Universal Credit will be significant).

The end of furlough could, therefore, intensify the rising reliance on Universal Credit among those in more affluent demographics, which has been a major shift during the pandemic.

Will furlough be extended?

Instead of cutting welfare, the government should be providing adequate income protection for the unemployed and underemployed, says Tomlinson, who also suggests employment support for other ages – beyond the government’s Kickstart scheme for young people. This could involve a specific “return-to-work bonus” – similar to those used in the 2000s to incentivise older people to return to work with a tax-free weekly “employment credit”.

Yet those left without work in furlough’s wake may only have a reduced rate of Universal Credit to fall back on come October. This will mean a harsh return to a new reality for hundreds of thousands set to lose their jobs.

For Catherine, her experience of furlough felt like “a blessing and a curse. It is incredibly mentally demoralising,” she says. “To go from 150 to zero has been a real shock. There were some really bad months where I barely moved because I just didn’t have any motivation whatsoever.

“I didn’t realise I had an inherent need to feel useful. It’s about convincing yourself to keep going after having your company turn around and go: ‘We don’t need you for now.’”

*Second name omitted on interviewee’s request.

[See more: “I’ve never relied on anyone in my life”: Covid-19 and the new Universal Credit claimants]