UK destined to employ iron fist in a velvet glove with companies

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Policy makers need to have the means to help the newly unemployed, given the expected scale of joblessness

The pandemic has asked many difficult questions of Europe’s governments, from whether to close down schools to which companies to bail out.

Europe’s labour markets are in a very precarious state. Take the UK: the country’s headline unemployment rate stayed at 3.9% in the second quarter of 2020, as companies kept workers on their payrolls because of the government’s generous furlough scheme, and people without a job couldn’t actively search for a new one . However, the picture was more troubling when you looked at how many Brits actually have jobs.

And yet, this slow return to normality is forcing politicians, including UK chancellor of the exchequer Rishi Sunak, to rethink the extraordinary support they’ve provided in the first half of this year. As well as the extreme cost of furloughing, politicians also worry that it provides the wrong incentives to companies and workers, by propping up zombie firms and encouraging shirkers.

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