Line chart of Paid employees, million showing The pandemic has blighted the UK jobs market

UK sheds 650,000 jobs during coronavirus lockdown

The UK has shed more than half a million jobs during the coronavirus lockdown while employees worked fewer hours and earned less despite the government rolling out numerous measures to support the economy.

The number of UK payroll employees fell by 650,000 in June compared with March, a 2.2 per cent fall, according to figures from the Office for National Statistics based on tax data. The statistics body said, however, that the rate of decline in employment had slowed in June compared with May.

“There are now almost two-thirds of a million fewer employees on the payroll than before the lockdown, according to the latest tax data,” said Jonathan Athow, deputy national statistician for economic statistics at the ONS.

June’s ONS labour market statistics pointed to a deterioration across various measures despite a government programme that supports 9.4m jobs and 2.7m self-employed people. The jobs scheme is due to be phased out in October, prompting concern that Britain could face a further surge in unemployment in coming months.

This was reinforced by a British Chambers of Commerce survey also published on Thursday, which found that thousands of businesses plan to cut jobs in the coming months, and the British Fashion Council warning that as many as 240,000 jobs are expected to be lost in the UK fashion industry because of coronavirus over the next 18 months — about 27 per cent of the workforce.

In the three months to May, total weekly hours worked in the UK decreased by 16.7 per cent to 877.1m hours. This was the largest annual decrease since estimates began in 1971, with total hours worked dropping to the lowest level since May to July 1997.

The number of hours worked is considered a measure of the extent to which companies are re-employing furloughed workers. Experimental weekly statistics from the ONS showed only a marginal uptick in the last week of May for employees as activity remain depressed; there was a stronger improvement for the self-employed as the economy reopened.

However, over the three months to the end of May there were 178,000 fewer self-employed workers compared with the previous quarter.

Average weekly earnings in Great Britain dropped 0.3 per cent in the three months to May compared with the same period in 2019, from 2.9 per cent in the three months to February, marking the first contraction since 2014.

For both earnings and hours worked the hit was largest in the lowest-paying industries, in particular accommodation and food service activities.

According to the ONS there were about half a million people away from work in May across the UK because of the pandemic and receiving no pay. This number was slightly lower than in April as some lockdown restrictions were eased.

Depressed activity levels and the deterioration of the labour market prompted the government to announce last week further support for jobs, with employers promised £1,000 for each furloughed worker brought back and funds to create jobs for young people.

Line chart of Weekly hours worked showing Hours worked in the UK fell the most on record

Rishi Sunak, the chancellor, said after the data were published that “it’s clear that we’re in the middle of a severe economic downturn”. 

“I know people are anxious about losing their jobs and incomes,” he added. “We will never accept unemployment as an unavoidable outcome, which is why I set out our clear plan last week to protect, support and create jobs.”

Economists said the modest fall in employment compared with the contraction in output demonstrated the short-term success of the government schemes, but that a surge in unemployment was expected in the autumn.

Yael Selfin, chief economist at KPMG, the advisory firm, said government measures had shielded the labour market from the “worst of the immediate crisis”. “But as the job retention scheme unwinds in coming months, the full impact of the recession on unemployment is likely to be revealed,” she said.

Howard Archer, chief economic adviser at the consultancy EY Item Club, forecast that the unemployment rate “will get up to around 9 per cent late in the year”. However, he added there was “a very real risk that unemployment will rise more than this”.

Line chart of UK, 3-month to date, '000 showing The number of vacancies dropped to the lowest on record

So far the headline unemployment rate has remained stable at 3.9 per cent, as furloughed workers are not counted as unemployed.

The unemployment rate does also not include those who are not in work and are not actively looking. In the three months to May, there were 92,000 more UK inactive people than in the previous three months.

Those who lose their jobs when employers have to share the cost of the job retention scheme from August face stark employment prospects: vacancies in April to June 2020 were at the lowest level since records began in 2001, although they increased marginally in June.

The scale of the challenge to save jobs was highlighted by the BCC survey of 7,400 companies that showed almost a third planned to cut their workforce in the next three months.

The poll, the largest of its kind in the UK, also indicated that 28 per cent had already cut jobs in the second quarter as the lockdown forced businesses to close.

The work on the poll was done ahead of the chancellor’s summer statement last week.

Additional reporting by Daniel Thomas in London