Furlough scheme is likely hiding suppressed unemployment, warns expert

12 February 2021, 18:59 | Updated: 12 February 2021, 19:45

By Sam Sholli

The furlough scheme is likely to be concealing "suppressed unemployment" and it is unclear how many jobs will still be viable when it ends, an economic expert has told LBC.

Stephanie Flanders, the Head of Bloomberg Economics, made the remark in response to news the UK economy shrank by a record 9.9% last year.

As it stands, Rishi Sunak has extended the furlough scheme until the end of April 2021 - with the government paying employees up to 80% of their wages.

Speaking of the state of the economy, Ms Flanders told LBC's Matt Frei "there's hidden suppressed unemployment that we know is probably sitting there on furlough at the moment".

She added: "[It's] sitting in jobs that have been sort of preserved by the Chancellor and when that support goes we genuinely don't know how many of those jobs are still viable".

Meanwhile, the Bank of England's chief economist has said the economy is ready to bounce back "like a coiled spring" after the slump caused by the pandemic.

Ms Flanders told Matt she estimates "people who didn't lose their jobs last year but couldn't do anything with their money" have together amassed "around £150bn of extra savings".

She then predicted that if economic activity increases as the UK emerges from lockdown, the UK's economy "might grow 6% or 7% in the middle of this year".

Last year's contraction was the fastest the UK has seen since the 1920s, but it's likely to avoid its first double-dip recession since the 1970s after GDP grew by 1 per cent in the fourth quarter.