Wave of unemployment expected in the UK as furlough scheme ends, according to leading macroeconomic influencers

21 August 2020 (Last Updated August 21st, 2020 07:21)

Wave of unemployment expected in the UK as furlough scheme ends, according to leading macroeconomic influencers

The UK has managed to keep its unemployment rate low with the help of the furlough scheme. However, the unemployment rate is expected surge once the furlough scheme comes to an end, with many companies already announcing redundancies. Macroeconomic influencers share their views on the Covid -19 impact.

Duncan Weldon

Duncan Weldon, Britain economics correspondent for The Economist, shared an article on the expected increase in unemployment in the UK. The unemployment rate in June was 3.9%, which is very low compared to the US at 11.1%. The low unemployment rate is attributed to the furlough scheme, which involved the government paying 80% of the wages of the employees.

As the furlough scheme comes to an end in October, companies have to start contributing to the cost of their furloughed employees. As a result, a number of redundancies have been announced or planned to be announced by various companies. Marks & Spencer, for example, announced its plans to cut 7,000 jobs.

The Bank of England estimates that the unemployment could peak between 7.5% and 12% once the furlough scheme ends. Further, the lack of active labour market policies in the UK may lead to mass unemployment rates not seen in decades.

Daniel Lacalle

Daniel Lacalle, chief economist at Tressis SV, tweeted on the unemployment rates in the UK and Europe. He noted that as the furlough scheme ends, some furloughed jobs will be lost.

Lacalle added that adequate supply-side measures are essential for new and small companies to enable job creation.

Lisa D. Cook

Lisa D. Cook, an academic economist, shared an article on how per capita GDP can be 0.6% to 4.4% higher through greater participation from women and minorities in innovative processes. The article notes that adopting policies to increase participation of these minorities from the science, technology, engineering, and mathematics fields will help in improving innovation.

Further, equal access to tools for all such minorities and addressing problems related to workplace climate are some of the other ways, in which innovation can be improved.

Philipp Heimberger

Philipp Heimberger, an economist, shared an article on the impact of the Covid-19 pandemic on Italy’s GDP. He noted that the pandemic has drastically affected Italy’s economic activity causing the country’s GDP to fall to levels last seen in 1993.

Heimberger noted that the pandemic has led to the loss of 27 years of progress made by Italy. He added that fiscal austerity and market-liberal reforms may not help as the country was on the verge of a permanent crisis and triple dip recession for several years.

BLackSUnrise

BLackSUnrise, an economist, shared an article on Bank of Japan’s (BoJ) innovative strategies to counter deflation in the country. BoJ is incentivising banks to lend more by offering them bonuses.

The bonus scheme is designed to offer bonuses to those banks extending credit to people particularly in the rural areas who were already suffering long before the pandemic hit. As a result, lending has increased by 7.8% in July.