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End of furlough means ‘more shocks ahead’ for UK families after biggest income hit since mid-1970s, report warns

End of furlough means ‘more shocks ahead’ for UK families after biggest income hit since mid-1970s, report warns

The think tank has called on the Government to extend current support measures like the job retention scheme (PA)

3 min read

UK households face yet more shocks to their earnings, a leading think tank has warned, after 2020 saw the biggest drop in average incomes in decades.

A new report by the Resolution Foundation found that the coronavirus crisis has seen typical working-age household incomes tumble by 4.5% between the pre-crisis period and May this year, in spite of a raft of government help that has "cushioned the shock".

It said household pay had already been stagnant prior to the coronavirus pandemic, having seen no growth between 2016-17 and 2018-19. 

And while the report commends the Government’s temporary £9 billion social security boost, which it says prevented incomes falling for the poorest fifth of households at the start of the outbreak, it warns of further threats to living standards as lockdown restrictions are eased and government measures are lifted.

The Foundation warns that over one million furloughed workers are at risk of losing their jobs completely once the Coronavirus Job Retention Scheme (JRS) ends this October.

It comes as recent data from the Office for National Statistics showed that the number of workers on UK payrolls tumbled by 649,000 between March and June.

There are now 2.6 million people claiming work-related benefits, including the unemployed, the figures show.

The Resolution Foundation's Adam Corlett said that, although the Government’s “unprecedented” policy response had played a “critical role” in protecting the poorest households, “the threat of further income falls looms large”.

He added: “The phasing out of the Job Retention Scheme means much larger rises in unemployment are ahead of us, and these are likely to be concentrated among lower-income households. 

“And withdrawing increases in Universal Credit next April, when this crisis will be far from over, will leave over six million households facing a further income loss of over £1,000.

“This initial phase of the crisis has shown us the importance of bold job support and a stronger social security safety net. The Government should keep both those lessons front of mind as it navigates the next phase of the crisis.”

Calls to extend the scheme were welcomed by the GMB Union, with its research and policy officer Laurence Turner saying: “This new study confirms what we already know – working households are really struggling to make ends meet.  

“This is an exceptionally difficult time for millions of people, and the economic reality is that a real recovery will not be built on the back of reduced spending and incomes.  

He added: “GMB has worked constructively throughout the crisis to secure support for our members and a safe return to work.

"Demand is going to take longer to return in some sectors than others, and we urgently need tailored support packages for the hardest-hit industries or thousands more jobs will be lost.  

“We call on ministers to keep existing support schemes under careful review and extend them where necessary and enter into meaningful talks on a sector by sector basis to protect jobs and household incomes.”  

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