Tuesday 23 February 2021 7:40 am

Unemployment hikes to 5.1 per cent in biggest leap in a decade

The UK unemployment rate marked its highest increase in 2020 in more than a decade, according to the latest official statistics, as the labour market continues to feel the weight of months of closures during the pandemic.

The annual increase in the unemployment rate last year was the largest jump since the wake of the financial crash in the winter of 2009, data from the Office for National Statistics (ONS) showed.

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The estimated UK unemployment rate jumped 0.4 per cent between October and December 2020 to 5.1 per cent, marking a 1.3 per cent jump compared to the same period in 2019.

An estimated 1.74m people were unemployed over the Christmas period — up 454,000 on the same period the previous year and up 121,000 on the quarter. Unemployment currently stands at its highest level since summer 2015.

Economists praised the government’s decision to extend furlough into April at an additional cost of £70bn, saying it prevented a sharp spike in unemployment at the end of last year.

Samuel Tombs, UK economist at Pantheon Macroeconomics, said: “The labour market has stopped worsening, thanks to the extension of the Coronavirus Job Retention Scheme until the end of April, on near-costless terms for firms.”

However, real unemployment figures are likely to be masked by the furlough scheme, with more than 9.9m people still on furlough in mid-December.

“We’re not seeing the underlying picture here because there’s an awful lot of people furloughed — when we talk about a few hundred thousand people still on the payroll, we’re talking about a lot of people who are actually away from work,” said Jonathan Athow, deputy national statistician at the ONS.

“We’re continuing to see some sectors increasingly affected such as hospitality, so even if the overall picture isn’t too bad there will be groups of people who are much more affected,” Athow told the BBC.

He noted that young people have borne the brunt of a hammered labour market, with the employment rate among 16-to-24-year-olds slumping by 3.8 per cent last year to 14.4 per cent.

(Source: The Office for National Statistics)

The number of redundancies across the UK also hiked last year to surpass 2008 levels. The redundancy rate increased by 8.4 per thousand in 2020 to 12.3 per thousand, with businesses across the country crippled by months of closure.

The number of people reporting redundancy saw a slight decline over the Christmas period but remains above normal levels.

Commenting on the figures, chancellor Rishi Sunak promised he would outline further support measures in his spring Budget on 3 March next week.

“I know how incredibly tough the past year has been for everyone, and every job lost is a personal tragedy. That’s why throughout the crisis, my focus has been on doing everything we can to protect jobs and livelihoods,” he said.

“At the Budget next week I will set out the next stage of our plan for jobs, and the support we’ll provide through the remainder of the pandemic and our recovery.”

Tej Parikh, chief economist at the Institute of Directors, said: “As the pandemic lingers, jobs losses have continued to tick upward. Tight restrictions over the winter months will have eaten into many businesses’ reserves, forcing them into difficult decisions on their staff. 

“Meanwhile, cash-strapped firms have relied on the furlough scheme to help retain employees, and without it unemployment would be significantly higher.”

Parikh added that the UK’s largest ever vaccination programme, which has so far seen more than 17.5m people receive their first jab, “should help put a ceiling on job losses”.

Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said further redundancies would continue to linger on the horizon if the chancellor fails to extend financial support packages.

“While the furlough scheme is limiting job losses, the rise in unemployment and decline in employment levels are further evidence that coronavirus continues to weaken the UK labour market,” he said.

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“With firms facing a renewed cash crisis amid the current lockdown and the prospect of several more months of diminished demand and revenue before many can fully reopen, substantial job losses maybe inevitable if the support schemes wind down as planned.”