U.K. Job Cuts Hit a Record High as Sunak Delayed Aid Extension
U.K. Joblessness Spiked as Virus Uncertainty Reached Its Peak
(Bloomberg) -- U.K. job cuts jumped to the highest on record in the three months through October, raising more questions over Chancellor of the Exchequer Rishi Sunak’s refusal to extend job support programs until hours before they expired.
Redundancies increased by a record 217,000 in the period, the Office for National Statistics said Tuesday. The number of people on payrolls was 819,000 below pre-pandemic levels in November, with over a third of the fall coming from the hospitality sector.
The figures will amplify criticism that Sunak acted too late when he expanded programs to protect jobs and businesses hit by the worst downturn in 300 years. After insisting for months the payouts would be scaled back, the chancellor eventually extended furlough on Oct. 31 -- the day the program had been due to expire -- as the government announced a second lockdown.
The aid was eventually extended until March, but many firms had already taken the decision to ax jobs. U.K. unemployment increased by 241,000 in the three months through October, taking the jobless rate to 4.9%, the highest since 2016.
It followed an increase of 243,000 in the third quarter, a rise last seen in the financial crisis of 2009.
While the jobless rate in the latest three months was lower than economists predicted, for most of October it was above 5%, the ONS said. The government expects the rate to rise to 7.5%, or around 2.6 million people, and a potential no-deal exit from the European Union’s single market will make it even harder for the economy to bounce back.
A breakdown of payrolls lost during the pandemic shows that hospitality and retail accounted for more than half. Job losses probably continued during the second lockdown in November and restrictions in place across the country in December.
What Our Economists Say
“The deterioration in the U.K. labor market probably stemmed from a U-turn in government policy. Companies expected the furlough scheme to end in October and likely laid off staff in advance of that.”
-- Dan Hanson, Bloomberg Economics. Read the full REACT
Rolls-Royce Holdings Plc is cutting more than 5,000 jobs this year as reduced air travel hammers its aerospace engine business. Heathrow Airport, Britain’s busiest, says it’s trying to avoid reducing staff by implementing wage cuts, prompting more than 1,000 employees to go on strike earlier this month.
The Bank of England also added stimulus in November, increasing its bond-buying program by 150 billion pounds ($198 billion) and predicting contraction in the fourth quarter. Its next policy announcement is due Thursday.
Since October, the emergence of vaccines for the virus have raised hopes that the U.K. economy can start getting back to normal in 2021, albeit with new barriers to trade from Brexit.
Bloomberg Economics now sees unemployment peaking at 7% next year, instead of 7.3%. Nevertheless, the Confederation of British Industry doesn’t see output returning to pre-pandemic levels until the following year.
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