Economists say new UK furlough scheme will likely fail

Economists say new UK furlough scheme will likely fail

Threatened by the possibility of prolonged recession and growing national debt, Britain faces another obstacle again as over one million workers are at risk of losing their jobs despite the U. K’s new furlough scheme.

Chancellor Rishi Sunak has recently unveiled a new furlough scheme aim to help hardest-hit businesses. Per the Chancellor, he expects the program to help an estimated 3 million workers who are currently laid off to return to work part-time.

However, in a report first published by The Guardian, leading economists claimed that Chancellor Sunak’s multibillion-pound subsidy is not enough to keep more than one million workers from being laid off.

Furlough scheme not enough

The consultancy firm Capital Economics explained that the unemployment rate would likely climb as much as seven percent by the end of the year, which means more than one million workers could lose their jobs.

A senior economist from the said firm also added the inevitable consequences of the recent implementation of tighter coronavirus measures could significantly impact and will “outweigh any downward impact on unemployment scheme from [Sunak’s] fiscal package.”

“That is why we expect the unemployment rate to rise further, to at least 7% by the middle of next year,” Ruth Gregory told The Guardian.

Economists also warned that those at the bottom of the income scale, as well as young workers, are among that will be hit the hardest.

Pickering: more subsidy for employers

Meanwhile, an economist at Berenberg suggested that employers would need a “more generous” subsidy to avoid further furlough. Economists from Deutsche Bank, on the other hand, said that they anticipate fewer employers to take up the furlough scheme.

But the former seems impossible as it means more money is needed. Recently, the Office for National Statistics reported U.K.’s national debt reached a record high of £2.24 trillion.

The debt is the highest since data-tracking began in 1993.

A looming prolonged recession threatens the country’s economic activities too. According to Bank of America’s (BoA) analysts, Britain’s gross domestic product (GDP) is likely to stall in the fourth quarter of 2020 and will continue through the first three months of 2021.

The recession—which likely could trigger the unemployment rate to rise further—will be heavily influenced by the reintroduction of tougher coronavirus restrictions, including the nationwide 10:00 PM curfew and stay-at-home measures.

“We struggle to see how the economy can grow in the fourth quarter with escalating lockdown measures, fading stimulus and Brexit risks,” a U.K. economist from BoA said, per The Guardian.

Featured image courtesy of Chris McAndrew/Wikimedia Commons

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