Unemployment edged higher to 5.1% in December as the government’s furlough scheme continued to prevent a steep rise in job losses in the run-up to Christmas.
With much of economy still in enforced hibernation, the unemployment rate in the three months to December increased from 5% in November and was up by 1.5 percentage points from a year earlier according to the Office for National Statistics.
More recent figures from HM Revenue & Customs for January showed that there were 726,000 fewer people on company payrolls in January compared with February 2020, before the pandemic.
But the same assessment by HMRC also found that despite the onset of the third lockdown, firms brought back some employees into full-time employment for the second consecutive month.
About 83,000 more people were put back on to company payrolls compared with December 2020, HMRC said.
The recent rise in payrolls is believed to be the result of companies bringing back staff from furlough, though millions of workers remain on the government subsidy scheme while their jobs are mothballed.
More than 1 million self-employed people are also understood to be without work, many of them not eligible for state support.
A report by the London School of Economics last month found that one in seven businesses – employing 2.5 million people – might be forced to close by the spring without further support from the Treasury.
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Rishi Sunak is expected to extend much of the support on offer to workers affected by the pandemic, but is unlikely to expand the scope of benefits to include all self-employed people.
Tej Parikh, the chief economist at the Institute of Directors, said: “As the pandemic lingers, jobs losses have continued to tick upward.
“Tight restrictions over the winter months will have eaten into many businesses’ reserves, forcing them into difficult decisions on their staff. Meanwhile, cash-strapped firms have relied on the furlough scheme to help retain employees, and without it unemployment would be significantly higher.”
