JPMorgan predicts 2 million jobs to be lost if furlough scheme ends in October and urges Rishi Sunak to extend it

Economists at banking giant JPMorgan today urged chancellor Rishi Sunak not to end the state-subsidised furlough scheme in October to save nearly 2 million jobs and a worsening recession.

Sunak has ruled out extending the the scheme but experts at the world's most powerful bank said continuing it would be "inexpensive" and remove a major risk to the economy in the latter part of year.

The report will add further to mounting pressure on Sunak to U-turn on his pledge to end the scheme.

JPMorgan economist Allan Monk calculated that a near 5% fall in the UK economy later this year forecast by the Bank of England would result in 1.8 million fewer jobs and push the unemployment rate up from 3.9% to 9% if the scheme is not extended to protect those workers.

Current estimates suggest 3.6 million workers were on the furlough scheme in late July - around 14% of the entire UK workforce.

While that was down from 9 million at the height of the pandemic, it is still marks a major proportion of the population being protected from unemployment.

Sunak has said he will begin making the furlough scheme less generous next month, covering 70% rather than the original 80% of staff wages.

That will drop to 60% before ending altogether at the end of that month.

Extending the scheme further to allow more time for the economy to heal would be inexpensive compared with the other fiscal support packages Sunak has already got in place, JPMorgan said.

The bank said ending the scheme would only make sense economically if the jobs involved were no longer viable due to permanent loss of demand in those industry sectors and taxpayers' money was better spent retraining those workers for other industries.

However, this was not yet the case, with even the worst hit sectors - arts, entertainment and recreation - potentially set to bounce back over the next year if a vaccine is found.