The ONS says the number of redundancies over the three months to October was the highest recorded in data going back to 2005 © Bloomberg

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The UK unemployment rate rose to 4.9 per cent in the three months to October, with 370,000 people made redundant as the chancellor prevaricated over the future of the furlough scheme.

Official data published on Tuesday also showed the largest annual fall in employment for a decade, with the number of people in paid work 280,000 lower than a year earlier at 32.5m, taking the employment rate to 75.2 per cent.

The figures are for a three-month period during which most UK businesses had been able to reopen following the first coronavirus lockdown, but were anticipating the withdrawal of wage subsidies at the end of October. In the event, chancellor Rishi Sunak was forced to revisit his plans to phase out the furlough scheme, eventually extending it in close to its original form on the eve of its expiry.

The Office for National Statistics said that while the rate of job losses slowed slightly in October, the number of redundancies over the three months was the highest recorded in data going back to 2005. Experimental weekly figures show that the unemployment rate was above 5 per cent in the later part of October.

“That was when the clock was ticking down to the chancellor’s furlough cliff edge and he was chopping and changing on support for businesses,” said Anneliese Dodds, the shadow chancellor.

Many business groups blamed the chancellor for causing unnecessary job losses, and are now calling for him to commit to maintaining the current generosity of furlough after January, when he is due to review the level of wage support, as well as offering subsidies for hiring.

“The unwinding of the Job Retention Scheme pushed up redundancies as firms struggled amid Covid-19 restrictions. The subsequent extension of furloughing will provide a lifeline for many jobs over the difficult winter months, but the big question is what happens after,” said Tej Parikh, chief economist at the Institute of Directors business group, adding that companies’ hiring plans were “stuck in neutral”.

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Mr Sunak said after the figures’ release that “protecting lives and livelihoods is our number one priority”, and that measures to create new jobs, such as the Kickstart scheme for unemployed young people, were meant “to ensure nobody is left without hope or opportunity”.

Mims Davies, minister for employment, said increased jobcentre support and new retraining schemes were “helping people of all ages into work” across the UK.

Early estimates for November suggest the extension of the furlough scheme helped to limit the impact of the second lockdown on jobs. The ONS reported only a slight net change in the number of employees on companies’ payrolls — with big flows both into and out of jobs — and a slight rise in the number of benefits claimants.

Although stark, the rise in UK unemployment, from 4.8 per cent a month earlier, was smaller than the 5.1 per cent economists had expected.

Ruth Gregory, at the consultancy Capital Economics, said the figures gave “encouragement that there will be a steady trickle, rather than a tsunami, of job losses over the next few months”.

Falls in employment over the last quarter have been mostly young people, men and the self-employed. For women, employment has been flat overall, with falls in part-time and self-employed work offset by a big rise in full-time employment — possibly reflecting public sector recruitment to programmes such as Test and Trace.

Tony Wilson, director of the Institute for Employment Studies think-tank, noted that the recent rise in unemployment had been driven mainly by a drop in economic inactivity, as people who had stopped looking for work during the first lockdown returned to the labour market.

The ONS said hiring had picked up in the three months to October but was still well below pre-pandemic levels. There were 537,000 vacancies in the three months to November — 110,000 more than the previous quarter but still 251,000 fewer than a year ago.

“The labour market remained very fragile on the eve of the second lockdown,” Mr Wilson said. “While today’s figures could have been worse, they are unlikely to get better any time soon.”

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