Ending furlough – time to get back to work

More than two million people in Britain are still being paid by their employers to sit on their sofa supported by the government’s furlough scheme which ends in September. 

Yet there are hundreds of thousands of job vacancies across all industries: 657,000 to be precise, twice as many as a year ago.

Some sectors have been harder hit than others: the UK has a shortage of up to 60,000 lorry and delivery drivers while pubs and restaurants, hoping to open up properly over the next few weeks, are crying out for workers. 

UKHospitality reckons there are 50,000 job vacancies in the industry although other estimates suggest the figure could be as high as 180,000. Although the number of those furloughed in hospitality is sharply down since the latest re-openings, one in five workers are still on furlough, prompting calls from employers for the government to end the scheme early because of the acute shortages.  

As the latest ONS data shows, 21 per cent of workers in accommodation and food services were still on furlough on at least 80 per cent pay between 17 and 31 May – despite the reopening at the start of that period. Entertainment is also struggling, with a quarter of all employees on furlough despite there being 8,000 jobs available. 

According to many restaurateurs and pub owners, the mismatch between demand and supply has been aggravated by workers happy to stay at home being paid rather than seek new jobs.  

And who can blame them? Being paid to sit on the sofa or sunbathe on nearly full pay in this glorious weather can’t be bad. But it is bad for the economy, acting as a brake on re-opening the country as we move into the recovery stage. 

How best, then, to get them off the sofa? As usual, Andy Haldane, the Bank of England’s chief economist, has the answer and it’s no brain-teaser: pay them more. 

In an interview yesterday with LBC radio, Haldane said encouraging people back to work “might require a few pay rises… that should encourage people out of their front rooms and off their sofas and back into the world of work”.

While he described the British economy as going “gangbusters” and growing at a rate of knots, he warned the biggest hurdle facing the recovery is how to keep up the momentum and encourage people back into the jobs market. 

While furlough has been a life-saver for so many workers through this pandemic, it’s now clear that it is distorting the labour market in a couple of ways. First, many of those purportedly sitting on the sofa have actually found second jobs.  

At the same time, there are many workers who are on furlough but whose employers are on life-support and may be forced to close when the scheme ends in September. 

So what’s to be done? Should the government end the furlough scheme early, risking a tsunami of job losses from businesses that are not ready yet to fully open? Or should employers pay more for their staff, particularly in those sectors hardest hit by lockdown such as the hospitality, retail and entertainment industries.

UKHospitality disagrees with the latest calls by industry bosses to end the scheme early, fearing a bloodbath of job losses. Far better to keep the scheme in place, hoping that by September the country will be out of the crisis and allowing more businesses time to get back on their feet. The trade organisation is right to take this view as it would be unfair for the government to withdraw the scheme now having made the commitment. And it’s also right that those SMEs tottering on the edge should be given the time to patch together their businesses and make new plans.

It’s also right for businesses to pay more for their labour, particularly in the most acutely hit industries which are also the lowest paid, such as hospitality, retail and entertainment. These are also industries that have suffered from wage compression over the last decade because of the inflow of cheaper workers from the EU and will now be forced to adjust to the new conditions. Labour supporters should be pleased: one of the fiercest  arguments from those on the left who campaigned for Brexit was that the influx of cheaper EU labour was holding down domestic pay. 

Some Cornish restaurants and hotels are already paying bonuses to encourage staff to take up work. But there is so much more hospitality employers – for too long the Cinderella of British industry – could do to tempt people into new careers by offering apprenticeships and help with new skills and training. 

What is sure is that this national labour crisis can’t be blamed entirely on Brexit. While many workers returned to the EU after the UK left, it’s the pandemic that has ensured many others have gone back home to the continent and have stayed because of travel restrictions. 

The problem is compounded because there are many other workers – EU and non-EU nationals – who are being paid furlough despite having returned to their home countries, creating another blockage. 

Hospitality – and entertainment generally – have been poorly treated over the last year. Despite solid evidence that pubs and restaurants – or indeed theatres – are not places where the virus has spread, the on-off lockdowns and some pretty stupid restrictions on what you can and can’t eat to petty social-distancing rules have devastated the industry. 

How ironic that at a time of peak demand for holidays in the UK which could turn out to be a renaissance for our domestic travel industry, many hotels and holiday parks can’t find enough staff to cater for them.