End of furlough could spark debt chaos due to 'jobs mismatch' once scheme ends

MILLIONS of workers could be plunged into debt problems once the government's furlough job support scheme ends this month.

Furlough payments are set to end on September 30 but there are questions about how Brits will cope if their employers can't take them back and if they can't find a suitable alternative job.

Chancellor Rishi Sunak launched the furlough scheme at the start of the pandemic last year to stem job losses as many businesses were forced to close temporarily or operate with restrictions.

It supported millions of workers during the pandemic by paying them 80% of their wages – up to £2,500 a month.

The Government initially covered the whole bill for the cost of the help.

But in July companies started chipping in 10% to the cost of paying furloughed workers, and this increased to 20% in August.

Firms will continue to pay 20% of the wages of furloughed staff until the scheme closes at the end of September.

The latest figures show that 1.9million were still furloughed at the end of June.

No extensions are expected and while unemployment rates have dropped and job vacancies have increased to a record high, there are warnings that the end of the furlough scheme could cause issues.

Banking trade body UK Finance has warned that there could be uncertainty in the labour market once furlough closes due to the "mismatch
between sectors with large numbers still on furlough and those likely to continue recruiting."

For example, the latest government data shows there were 337,800 furloughed jobs in the accommodation and food services sector at the end of June.

But the latest Office for National Statistics vacancy survey shows there were just 117,000 jobs available in this sector between May and July.

This means there wouldn't be enough accommodation or food-related jobs to apply for if all the furloughed workers in this sector lose their current roles.

UK Finance's latest household finance review said that while fewer people are having problems paying their mortgage, those who don't return to full employment after furlough may find it hard to meet credit commitments.

This could mean they fall behind with mortgage, loan or credit card payments and are pushed into debt.

Research by Hargreaves Lansdown shows 54% of people are concerned their income will fall as the pandemic continues to unfold.

Sarah Coles, personal finance analyst for Hargreaves Lansdown, said: "Hundreds of thousands of people could be left high and dry when the furlough scheme comes to an end, and those who are carrying debts could find themselves in serious difficulty.

"There’s a real mismatch between the sectors people are on furlough from and the sectors that are recruiting. Not every sales assistant wants to take a pay cut to move into care or retrain as a delivery driver."

The NIESR has forecast that the end of the furlough scheme and lack of suitable jobs could push the UK unemployment rate up from 4.8% to 5.4% by the end of this year.

Where to get help if you are worried about losing your job

The furlough scheme was designed to keep workers employed but unfortunately it doesn't stop your boss from making you redundant.

Talk to your boss about your job and coming back to work so you can be prepared.

Speak to Citizens Advice to get information on your workplace rights so you know where you stand if your job is under threat.

If you do lose your job and struggle to find a new one, you can apply for state support in the form of Universal Credit.

Universal Credit payments can vary between £344 and £596.58. 

However, Universal Credit is based on your current income so if you apply while you’re still receiving furlough you wil be assessed as if that income will continue.

It might, therefore, be worth waiting until the scheme stops otherwise.

Turn2Us has a handy Grants Search tool to help you find out which charities you can apply to and a Benefits Calculator you can use to find out what you can get.

Losing your job may also make it harder to pay your bills such as mortgages and credit cards.

Covid payment holidays have been stopped but lenders have been told to be sympathetic and flexible with borrowers so it is worth chatting with your provider before you fall behind.

More than 160,000 Brits who have lost their job due to the Covid crisis were entitled to a bumper package of support.

Your household costs could also increase due to a £20 a week cut to Universal Credit this month and a rise in energy bills going this winter.

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