The Financial Sector predicts over 2 million jobs to be lost, if the furlough scheme ends in October. Many companies are urging Rishi Sunak to extend it. Many of the financial and banking giants have been analysing the ongoing crisis and modelling data on the impact to the UK economy. JP Morgan have recently advised that delaying the end of the wage subsidy scheme would be inexpensive and protect the economy.
The economists at JPMorgan have begun to urge the chancellor Rishi Sunak not to end the government subsidised furlough scheme in October. By extending the scheme it will save many millions of jobs and also weaken the worsening recession. Although Rishi Sunak has initially ruled out extending the furlough scheme further. It has become quite clear that the industries within the UK disagree with this decision.
Is Now The Right Time To End The Furlough Scheme?
Throughout the summer months it has been quite notable how quickly the UK can adapt to the situations that 2020 has thrown at its population. However with so many people still remaining reliant on the furlough scheme to pay the bills and provide for their families. Many will ask is now the right time to cut off this much needed support.
Experts within JP Morgan which remains the world’s most powerful bank have also reviewed the long term cost of the furlough scheme. They have concluded that the relative cost of the scheme would be inexpensive, when compared with the financial strength of the UK economy in the longer term.
The report from JP Morgan will add further weight to the increasing amount of pressure on Chancellor Sunak to extend the furlough scheme. This would be a proactive approach and protect millions of jobs and livelihoods for UK families. Rather than a humiliating U-turn on his pledge to end the scheme, similar to the A level U-turn that impacted so many students.
JPMorgan economist Allan Monk also advised that a calculated 5% fall in the UK economy later into 2020 forecasted by the Bank of England. Would result in 1.8 million fewer jobs and push the unemployment rate up from 3.9% to 9%. If the furlough scheme is not extended to protect those workers.
Many Families Still Need The Scheme
The Current estimates suggest that approximately 3.6 million workers were on the furlough scheme in late July. Which accounts for 14% of the entire workforce for the UK, although this is a huge reduction from 9 million at the peak of the pandemic. It still shows that much of the UKs work force are unable to return to work, either due to working conditions, on-going medical conditions or other issues caused by coronavirus.
Rishi Sunak had advised that he will begin making the furlough scheme less generous in September. Maintaining 70% of wages rather than the original 80% of staff wages. This will subsequently drop to 60% before ending the scheme in October. However this does not take into account the surge in localised medical needs going into the winter months.
The Cost Of Keeping The Furlough Scheme
JP Morgan also advised that the scheme would only make sense economically. If the jobs involved were no longer viable due to permanent loss of demand. In those industry sectors and taxpayers’ money was better spent retraining those workers for other industries.
“Maintaining a partial subsidy beyond October would likely add just a small fraction to the scheme’s fiscal cost. Which is expected to reach almost 3% of GDP,” Monks said. He also provided an insight into the coming months by looking at a wider extension. Which would cost “only” around £2 billion a month, or 0.1% of GDP, he said.
The report from JP Morgan concluded: “Over time a clear picture of the new normal will emerge. But with the extent of economic normalisation hard to gauge at the moment, closing the scheme this year looks premature.”
Make Your Voice Heard
Although it remains uncertain what the long term costs of coronavirus, both financially and medically. At Life Insurance Cover we will always provide as much information as we can to our visitors and customers. We would like to gauge your views on if the furlough scheme has helped and if you think it should be extended.
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