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London facing ‘furlough cliff-edge’ with four out of five areas most reliant on furlough in the capital

Publications featured in include: City AM.

The London borough of Newham has 18% of its working population on furlough and is second out of 369 ranked county or district authorities in the UK. Haringey, Brent, and Hounslow are joint third with 17% of their respective working populations furloughed. All have been severely impacted by the closure of hospitality and retail businesses over the past year, where home working is impossible.

The data has also revealed that other London areas are highly dependent upon furlough, with an average rate of 14% of London’s working population on furlough, compared with 12% nationwide.

Since 1 July 2021, the Government has dropped its contribution to furloughed employees salaries to 70% of their pre-Coronavirus total. On 1 August 2021, this contribution drops further to 60% of the employee’s salary, with employers required to contribute 20% (up to £625 per month). With the scheme set to end entirely on 30 September 2021, many London workers will be put at risk of redundancy.

London is likely to be worst hit by a rise in unemployment, particularly for younger people, who are overrepresented in retail. 

The data also raises concerns that the poorest will suffer most from the end of the furlough scheme. The four London boroughs named as some of the most dependent on furlough are also some of the most deprived areas in the country. In Haringey, 34% of the population was said to be living in poverty in 2018/19.

This research suggests that these areas could fall even further behind if these financial assistance measures for local businesses are not extended beyond the end of September 2021.

Martin Jones, Partner at our London office says: “Younger and lower-income people in London have already been hit hardest by the economic effects of the pandemic. That’s only going to get worse when we hit the furlough cliff-edge.

It is ironic that even though hospitality is currently struggling to fill vacancies, many furloughed staff are worried about their job security. The Government needs to ensure that sectors that have been impacted most by lockdown receive the financial support they need. Without this support, the jobs of many workers are on the line and it’s likely that workers in the poorest areas will be the ones most impacted.

The Government may even need to extend the furlough scheme deadline until the end of the year in order to protect the hundreds and thousands of jobs on the line."

In March 2021, the Government extended the furlough scheme to September 2021 due to a third national lockdown and concerns that an end to the scheme would result in large scale unemployment. Calls for another extension are likely to grow in volume as the end of September quickly approaches.

Furlough in London

* Source: HMRC

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