Benefit claims made by unemployed and underemployed people in the U.K. rose more last month than at any time on record, with the pain spread throughout the country. Jobseeker’s Allowance and related Universal Credit claims jumped by 856,500 in April alone. For context, the worst month during the 2008-09 financial crisis saw claims increase by 143,000.
Britain’s official lockdown didn’t start until March 23, but storefronts were quickly shuttered and supply chains cut off as citizens were told to “stay home” to protect their neighbors and the stressed National Health Service. Revenue streams for many businesses began to dry up and workers took reduced hours, were furloughed or just let go.
Dig into the detail and the hardship being inflicted is clear. Some of those seeking benefits last month were still employed but had experienced a significant loss of income due to being put on temporary leave or forced to self isolate on statutory sick pay. There were around 25% fewer hours worked in the final week of March, while claims for Universal Credit welfare payments totaled over 550,000 in each of the two weeks following the lockdown. In a normal week, there are about 50,000.
Seeking Assistance
Claims jumped 221.9% in Westmorland and Lonsdale, where the economy is more dependent on retail and restaurantsLondon wasn’t hit as hard as other areas, but saw claims rise by 117K The tourism heavy South West region saw a 93% increase in claimsSource: Office of National Statistics
No sector has been hit harder than hospitality, so it is little surprise that regions reliant on tourism are seeing the biggest increase in benefit claims. East Devon in southwest England recorded over three times more jobless benefit claims than a year earlier. Even worse affected was Westmorland and Lonsdale, in northwest England’s scenic Lake District.
London recorded a near doubling of claims, with the construction, transport and arts and entertainment industries heavily impacted by furloughing. Birmingham, the second-largest city, fared better. The region posting the smallest increase was northeast England, possibly reflecting its above-average dependence on pubic-sector jobs, education and manufacturing.
In order to help companies and workers cope with the economic fallout from the pandemic, the Treasury has put together a relief package that the country’s fiscal watchdog reckons could cost 123 billion pounds ($150 billion). That includes extra funding for the NHS, but also expanding the pool of people who can claim Universal Credit, including those who are self-employed. Provisions for covering sick pay for small businesses would amount to 2 billion pounds and 500 million pounds would be distributed for hardship grants.
The Coronavirus Job Retention Scheme offers to pay 80% of furloughed employees wages up to a total of 2,500 pounds a month. Businesses can also take advantage of various grants, loans, and tax breaks to ease the pain of the lockdown and a potentially deep recession.
How Industries Are Coping
What percent of business are taking the following measuresPutting employees on furlough leaveUtilizing the Coronavirus Job Retention SchemeDecreasing employee working hoursLaying off employees in the short termApplying for government-funded small business grants or loans
Accommodation And Food Service Activities 50%
Arts, Entertainment And Recreation 47%
Construction 46%
Wholesale And Retail Trade; Repair Of Motor Vehicles And Motorcycles 34%
Administrative And Support Service Activities 34%
Transportation And Storage 31%
Water Supply, Sewerage, Waste Management And Remediation Activities 25%
Manufacturing 23%
Professional, Scientific And Technical Activities 19%
Education13%
Information And Communication 11%
The U.K. government is paying the wages for about 10 million jobs, most of them employee roles. That’s limiting the damage to the labor market, though the signs are ominous. Vacancies have collapsed and data based on tax records suggest the number of employees fell by over 450,000 in April, a drop of almost 2%. The unemployment rate, which dipped to 3.9% between January and March, could surge to 7% or higher this quarter, according to Bloomberg Economics.
Despite still seeing thousands of new confirmed Covid-19 cases every day, the U.K. is attempting to catch up with other European nations that are emerging from their isolation and starting to reopen their economies—a delicate balancing act of trying to control the virus while keeping people gainfully employed.
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