Unemployment claims rise in Redcar & Cleveland as furlough scheme winds down

In the past year R&C unemployment credit claims have more than doubled from 2,411 in Aug 2019 to 5,202 in Aug 2020 in an area that already holds the highest unemployment rates in the country. The expectation is these figures will continue to rise with Covid-19 restrictions growing again, customer confidence at an all time low and winter fast approaching.

Those joining the benefit system because of a reduced demand on services, will also see their payments reduce by up to £1000 per year from April 2021. With disposable income being squeezed the knock on effect is expected to impact consumerism further while residents struggle to meet basic needs and a reasonable standard of living.

On the 31st July in Redcar & Cleveland 16,300 employments were furloughed and an additional 3,500 self-employed residents were claiming the Self Employment Income Support (SEISS). The furlough scheme as we know it is winding down to be replaced by the Job Support Scheme from November as announced by Chancellor of the Chequer, Rushi Sunak. This will provide state support for workers able to do a third or more of their normal hours.

To put things into context the furlough scheme ends in 5 weeks and the new government scheme hoped to save jobs, will also create a lottery for workers as it throws up difficult choices for employers expected to determine whether their staffs’ employment is “viable or not”. The government says it will subsidise up to a third of wages under the new scheme but that’s if employers also stump up and cover a third of wages.

The reality is businesses, particularly small independents, would have little reason to use a scheme where they still have to pay employees for hours they don’t work, even if that does carry support from the government. Arguably in certain scenarios it would be safer to pay one person full time, even with less work to do, than it is paying two people part time a third of the time and covering their lost hours. Safer because business owners risk losing their businesses as the lockdown restrictions cut deep.

The self employed will see an extension to SEISS but this benefit falls short and has again completely dismissed many, particularly those who do not have a working base who have been completely ignored. This equates to around 3 million livelihoods surviving on piecemeal work, savings or having to turn to the benefit system.

And while the Chancellor of the Exchequer, Rishi Sunak, receives plaudits for this latest intervention which has seen his popularity soar way ahead of Boris Johnson, the expectation over the next three months is of soaring redundancies, unemployment and increased Universal Credit claimants. This comes with the news that claimants will also lose out. The £20 per week increase will stop from March 2021, a loss of up to £1000 per year for all claimants. This has to be challenged in a culture where wage increases for members of parliament carry on regardless.

The Tees Valley Combined Authority recently published their Unemployment Update analysis for the entire Tees Valley and each of the five Local Authorities. The latest analysis for our borough below was provided by the Lead of Skills Research and Intelligence at Redcar & Cleveland. It reveals a sharp increase in unemployment following the impact of the CoronaVirus pandemic in this borough.

The North East already has the highest unemployment rate in the UK. From November 2019 to January 2020 it was at 6.2%, followed by Yorkshire and The Humber at 4.6%. This unenviable record has remained throughout 2020 and with unemployment already on the rise prior to the latest restrictions, the new Coronavirus Job Retention Scheme (CJRS) figures, due out soon, are expected to be heavy reading.

The latest figures published on the 21st September show 6.4% of the working population in Redcar & Cleveland were claiming Universal Credit and searching for work in August compared to 3.7% in February (7.2% in the Tees Valley as a whole 5.8% nationally).

Img: **Lead for YEI/Lead for ESF Community Grants/Skills Research and Intelligence**

The economic consequences of Covid-19 are having a tougher impact on our younger residents than any other group. The data received shows that there is a higher proportion of 20 to 24 year olds and 25 to 29 year olds claiming Universal Credit than the rest of the age bands. In fact 12.9% of the 20-24 year old age group are claiming UC compared to the average of 6.4% for all ages; and only 3.8% of 50 to 54 year olds.

Below are the latest Tees Valley figures with comparable data for your attention and comment. They show increases in unemployment benefit claims across all five boroughs has been worst hit in Middlesbrough but that the trend is mirrors across the region and nationally.

How will the Job Support Scheme work?

The government will subsidise the pay of employees who are working fewer than normal hours due to lower demand
It will apply to staff who can work at least a third of their usual hours
Employers will pay staff for the hours they work
For the hours employees can’t work, the government and the employer will each cover one third of the lost pay
The grant will be capped at £697.92 per month
All small and medium-sized businesses will be eligible
Larger business will be eligible if their turnover has fallen during the crisis
It will be open to employers across the UK even if they have not used the furlough scheme
It will run for six months starting in November