HMRC has said more than 430,000 businesses have applied for the Coronavirus Job Retention Scheme to pay 80 percent of the wages of their employees. Official figures state there are 3.2 million workers across the UK who are currently furloughed. The Chancellor, Rishi Sunak, highlighted 140,000 applications were made on the first day of the scheme alone.
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However, a former member of the Bank of England’s Monetary Policy Committee (MPC) has stated many of these workers could face losing their jobs as a result of the crisis.
Danny Blanchflower CBE, who served on the MPC from 2006 until 2009, outlined the potential for Britain’s unemployment rate to significantly rise following the lifting of lockdown measures.
He told Yahoo Finance UK that unemployment could reach up to 20 percent, including furloughed workers as a result of the pandemic.
This would be five times above the current official rate of four percent, according to data collected in February.
While data indicates at least 3.2 million workers are included on the government’s furlough scheme, Mr Blanchflower said data counts furloughed workers as employed – a move he disagreed with.
In a research paper published by Mr Blanchflower and academic David Bell, furlough was described as a “rather novel definition of employment”.
The pair stated some employees could return to work, but only if their companies were in a solid financial position and have a market to sell to.
However, Mr Blanchflower, who is also an economics professor in the USA, stated lockdowns in the UK could drag on longer than expected.
This would result in consumer caution for an additional period of time, with spending cutbacks expected.
He told Yahoo: “Are people going to go back to gyms, concerts, sports events, restaurants, bars and malls? People are going to hunker down.
“Is the government going to pay a gym to stay open even though no-one is going there? After the lockdown is over and they stop paying the money, what’s going to happen? The gym is going to close.”
Mr Blanchflower believes people are more likely to stay inside following lockdown measures being lifted.
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This is not only due to fear concerning a second wave of COVID-19, but also in an effort to save more money in a continuous time of financial uncertainty.
He highlighted that the longer lockdown periods last, the greater the instability for many firms – who have suffered income collapses, but are still bearing the brunt of costs.
Mr Sunak unveiled a series of measures to help workers during the coronavirus crisis at the end of March.
The CJRS – which covers 80 percent of salaries up to £2,500 per month – is just one of the ways the government aims to help workers.
At the time of unveiling the scheme, Mr Sunak said: “The economic intervention that I’m announcing today is unprecedented in the history of the British state.
“Combined with our previous announcements on public services and business support, our planned economic response will be one of the most comprehensive in the world.
“The actions I have taken today represent an unprecedented economic intervention to support the jobs and incomes of the British people.
“A new, comprehensive job retention scheme. And a significantly strengthened safety net. Unprecedented measures, for unprecedented times.”
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