UK government in dilemma as job losses mount to 700,000 after COVID-19 hit

London: Britain’s labor market took a turn for the worse in July even as the economy gradually reopened, taking total job losses under the pandemic to almost 700,000 and raising pressure on the government to extend support programmes.

Employment fell by 102,000, the first decline since April, the Office for National Statistics said Tuesday. The single-month unemployment figure reached 4.4 per cent – the highest since 2018. While restaurants and pubs started to reopen after coronavirus lockdowns, the figures are a reminder that the upturn in spending masks deeper fragilities.

The number of employees on payrolls in August is down 695,000 from March, compared with 659,000 in July. The number of people claiming for jobless benefits has risen to 2.7 million, an increase of 121 per cent since March.

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That’s left the government facing mounting calls to extend its furlough programmes – as other European nations have done – after the worst economic contraction in centuries. The UK faces a triple-whammy of a spike in unemployment as aid ends, new restrictions on activity as infections mount, and a turbulent Brexit at the end of the year.

Most economists predict the heightened uncertainties will prompt the Bank of England to increase its monetary stimulus later this year. Policymakers may lay the groundwork for that when they meet this week.

Chancellor Rishi Sunak has so far insisted that the furlough programmes must be allowed to expire so that the economy can adjust to the post-COVID-19 reality. Yet companies are already notifying authorities about layoffs to come, putting the UK on course for twice as may job losses as in the global financial crisis of 2008-09.

British Airways, Virgin Atlantic and London City Airport are among high-profile examples of companies announcing massive job cuts. Sandwich chain Pret a Manger is also shedding staff as fewer people commute to city centers.