Benefit applications have exceeded a normal UK level by 10 times as people are losing jobs under coronavirus lockdown.
Around 950,000 people in the UK have applied for Universal Credit benefits in the two weeks since Prime Minister Boris Johnson asked people to stay home to limit the spread of coronavirus. Not all employers decide to apply for temporary 80% wage reimbursement under the Coronavirus Job Retention Scheme after many businesses, shops, restaurants and bars were forced to close due to imposed lockdown.
Universal Credit has a waiting period of at least five weeks.
There are normally around 100,000 applicants per two-week period. The scale of the coming surge in UK unemployment as a result of the coronavirus outbreak was laid bare in parliament last week as officials revealed almost half a million people had registered in the first nine days after the lockdown to claim the main welfare benefit. 105,000 benefit applicants registered last Tuesday alone.
The government has moved 10,000 staff to process the increased claims and is recruiting more. “With such a huge increase in claims there are pressures on our services, but the system is standing up well to these and our dedicated staff are working flat-out to get people the support they need,” said the Department of Work and Pensions (DWP).
The number of Universal Credit claimants is not a proxy for unemployment figures as it is possible to apply while still in work, the DWP said. Some of the claims were from people who are still working but on lower pay and some from people furloughed from their companies and ready to start work immediately once the health crisis is over.
However, a YouGov survey on March 24 found that one in 20 people in Britain had already lost their job due to coronavirus. According to the estimates by the Financial Times, if every claim represented someone made redundant, the unemployment rate would have risen to 6.7%, compared with 3.9% at start of year.
Last week, the number of Americans filing for unemployment benefit reached a record high of 3.3m in the week ending March 21, dwarfing the previous peak of 665,000 in a week in 1982. Norway has seen its unemployment rate soar from 2.3% to 10.4% in March, the highest level since the second world war.
With such a sharp rise in claims at the very beginning of the coronavirus pandemic, the current economic crisis can be forcing people out of work much faster than in the global financial crisis of 2008-09. Paul Dales, UK economist at Capital Economics, said that if the rate of increase continued at this pace, the UK unemployment rate could exceed 10% by mid-April, a rate not seen in the UK for 26 years.
Different options were considered by Chancellor of the Exchequer Rishi Sunak to improve the UK’s safety net to help people withstand the negative consequences of the economic crisis: making statutory sick pay and welfare system more generous, channelling wage subsidies to employers based on the existing model of statutory maternity pay, and even cash handouts as a version of a “universal basic income”. So far, the government has announced a number of measures to save businesses and self-employed, but no decision was made to compensate dismissed people their lost income to an extent similar to 80% wage reimbursement capped at £2,500 for furloughed employees or the self-employed.
Millions of jobs are at risk in sectors exposed to the UK’s shutdown of social activities with more than 200,000 people working in the leisure and hospitality sectors having been laid off since mid-February. About a quarter of the UK’s workforce is employed in sectors where demand has shrunk due to the government instructions to minimise social contact because of coronavirus. About 5m people work in retail, 2.5m in accommodation and food services, and more than 1m in arts, entertainment and recreation, with another 1m in other service activities, many consumer-facing.
“Our analysis suggests in excess of 1m jobs are now on the line,” said Kate Nicholls, chief executive of trade body UKHospitality last month. “Job cuts are extraordinarily deep and they are happening now. What the sector urgently needs is a package of support and funding to keep people in employment.”