UK employment falls at fastest rate in more than a decade as 220,000 people drop off company payrolls

Record drop in hours worked as millions remain on furlough during coronavirus pandemic; official unemployment rate remains broadly unchanged

UK employment dropped by 220,000 between April and June, in the largest quarterly fall since the aftermath of the financial crisis more than a decade ago.

A further 81,000 people dropped off company payrolls in July, taking the total to 730,000 since March, official figures show. The fall was driven mostly by a reduction in the number of employees aged 65 and over, and fewer part-time workers.

The total number of weekly hours worked – considered by many economists to be the best measure of Covid-19’s impact on employment – was 849.3 million between April and June, down a record 203.3 million hours on the previous year and down 191.3 million hours on the previous quarter.

Much of this drop was due to people who were on furlough during the quarter.

The Office for National Statistics (ONS) said that around 7.5 million people were estimated to be temporarily away from work in June; around 5.5 million more than would be expected in normal times.

Approximately 300,000 people in the UK were away from work because of the pandemic but receiving no pay last month, the statisticians revealed.

The headline unemployment rate remained unchanged at 3.9 per cent. Many people currently out of work are not looking for a new job so do not meet the official definition of unemployed, the ONS said.

Wages fell by 1 per cent after taking inflation into account, while real total pay including bonuses shrank by 2 per cent.

Job vacancies rose 40 per cent to 472,000 in July, but are still down 41 per cent on February.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “Figures from our main survey show there has been a rise in people without a job and not looking for one, though wanting to work. In addition, there are still a large number of people who say they are working no hours and getting zero pay.

“The falls in employment are greatest among the youngest and oldest workers, along with those in lower-skilled jobs.

“Vacancy numbers began to recover in July, especially in small businesses and sectors such as hospitality, but demand for workers remains depressed.”

The data also showed a record rise in the number of people changing their status from self-employed to employed, with many making the change despite remaining in the same job, the ONS said.

The number of non-UK EU nationals working in Britain dropped by 284,000 to 2.06 million – the fewest since October to December 2015. EU workers make up a significant proportion of the hospitality industry, which has been among the hardest hit by the pandemic.

Experts have expressed concern that the extent of joblessness in the UK is being concealed by the government’s furlough scheme, which covers up to 80 per cent of wages for staff who are not currently needed.

Furloughed workers are classified as employed but many fear they may not have a job to return to as the scheme winds down between now and the end of October.

One in three companies expect to make redundancies by the end of September, a survey by the Chartered Institute of Personnel and Development found.

Nye Cominetti, senior economist at the Resolution Foundation, said: “Despite the easing of restrictions on economic activity through June and July, there is little good news in today’s labour market statistics.

“Today’s data does confirm the heavy lifting that the job retention scheme has done to keep mass unemployment at bay, with over 5 million more people than before the crisis reporting that they had a job but were not working.

“However, August is a turning point in the response to the crisis, with employers contributing to furloughed workers’ pay for the first time. Job openings, although slightly recovered since hiring stalled during lockdown, remain at low levels in the hardest-hit industries, creating a worrying environment for any workers in companies that have recently announced significant redundancy plans.

“The government needs to heed these early indicators and extend support to those sectors and workers that are going to be hit hardest by the economic fallout of this crisis.”

Suren Thiru, the head of economics at the British Chambers of Commerce, said: “While the headline data continues to lag behind the reality on the ground, the decline in the number of employees on payrolls and hours worked is further evidence of the damage being done to the UK labour market by the coronavirus pandemic.

“The furlough scheme has been successful in preserving millions of jobs. However, with firms continuing to face a perfect storm of increased costs, reduced demand and diminished cash reserves, unemployment is likely to surge as the government support schemes wind down, unless action is taken.”

More than 1,700 large firms notified the government in June about plans to cut 20 or more jobs – a total of 139,000 roles in England, Scotland and Wales, according to the latest figures obtained by the BBC.

“I would expect it to be bigger in July and bigger again in August,” said Tony Wilson, director of the Institute for Employment Studies.

“I think it is inevitable now that redundancy numbers will be higher than they were at the peak of the last recession in 2008.”