UK unemployment rises to 5.1% in fourth quarter of 2020 as Rishi Sunak pledges more aid

Number of employees without jobs hits 1.74m in the period from October to December

Shoppers cross the road at Oxford Circus, in the centre of London's retail shopping area, amid the spread of the coronavirus disease (COVID-19) in London, Britain, October 16, 2020. REUTERS/Toby Melville
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Britain’s unemployment rate rose to 5.1 per cent in the fourth quarter of last year, its highest level in about five years as Finance Minister Rishi Sunak pledged more support.

The number of people without jobs in the period from October to December hit 1.74 million, up 454,000 from the same quarter in 2019, the Office for National Statistics said.

Mr Sunak said on Tuesday that he knew how “incredibly tough the past year has been for everyone, and every job lost is a personal tragedy”.

“At the budget next week I will set out the next stage of our Plan for Jobs, and the support we will provide through the remainder of the pandemic and our recovery,” he said.

Britain's unemployment level has been kept low by the government's Job Retention Scheme, which currently supports about one in five employees.

The furlough programme is Britain's most expensive Covid economic support measure and will cost an estimated £70 billion ($98.27bn) by its scheduled expiry date of April 30.

However, this figure could increase, with Mr Sunak expected to extend the programme until the summer when he delivers his budget on March 3 – at least for those sectors hit hardest by the crisis.

“The Job Retention Scheme continues to support people in work and limit the impact of coronavirus on the labour market. Employers will now be looking to the Chancellor to extend furlough, securing people’s jobs and livelihoods,” said Matthew Percival, director of people and skills at the Confederation of British Industry.

Figures based on tax data show the number of employees on business payrolls fell by 726,000 since February 2020 – equal to about 2 per cent of the workforce – with 425,000 of those job losses suffered by people under 25.

They show a large decrease in employment for people aged 16 to 24 years over the last year.


Ian Warwick, managing partner at Deepbridge Capital, said the unemployment data “does not reflect the full economic picture for the UK as the government furlough scheme continues to protect those businesses most affected by the pandemic”.

However, the ONS said there were “tentative early signs” that the labour market is stabilising, thanks to a slight increase in the number of employees paid through payroll over the past couple of months.

The number of employees on company payrolls in January rose by 83,000 from December, the second consecutive monthly increase and the biggest since January 2015.

“Our survey shows that the unemployment rate has had the biggest annual rise since the financial crisis,” ONS statistician Jonathan Athow said.

“However, the proportion of people who are neither working nor looking for work has stabilised after rising sharply at the start of the pandemic, with many people who lost their jobs early on having now started looking for work.”

The Bank of England has predicted that the unemployment rate will jump to about 8 per cent in the middle of this year when the furlough programme ends.

However, Prime Minister Boris Johnson's four-step roadmap to exit lockdown will influence how fast Treasury subsidies are withdrawn.

Thomas Pugh, UK economist at Capital Economics, expects the unemployment level to peak at 6.5 per cent by the end of the year.

“But if the government follows the road map that it laid out on Monday and eliminates most Covid-19 restrictions by June, then the jobless rate may be back at its pre-pandemic level of 4 per cent in 2023,” said Mr Pugh.

Meanwhile, wage growth was at its strongest since 2008, with total pay including bonuses up by 4.7 per cent in the fourth quarter compared with the same period in 2019.

The increase is distorted because figures reflect in part the job losses among lower-paid positions in areas such as hospitality.

The ONS said that were this taken into account, pay growth would likely be below 3 per cent.