Foreign-born workers flee London as Covid-19 destroys jobs

Covid-19 has wreaked havoc in the London jobs market. Photo / Getty Images

The number of foreign-born workers employed in the UK fell by almost 600,000 in the past year as Covid laid waste to the jobs market and sparked an exodus of migrants.

There are now 765,000 fewer people of working age born abroad in Britain than there were a year ago, with a bigger fall in those from the EU than those from the rest of the world.

It comes as the unemployment rate rose to 4.8pc in September, its highest level in four years according to the Office for National Statistics.

Redundancies hit a record high as the pandemic wiped out jobs.

The fall in workers from the EU14 - nations such as France and Germany - in the UK is similar to the drop seen during the financial crisis.

However, a far greater share of those from the EU8, which covers more workers from Eastern European nations including Poland, have been affected.

EU workers have been hit hard by the pandemic. Image / Telegraph

"In the EU8, you have a large number of seasonal and contract workers, who lost their jobs and might not qualify for furlough. With no available work in the UK, they may have returned home," said economist Kallum Pickering at Berenberg Bank.

"In the countries where you have the highest proportion of such workers in the UK, the stringency of restrictions over the summer was much lower than in the UK. Some migrant workers probably returned home, where living costs may be cheaper and virus restrictions were less harsh."

The UK's reliance on foreign employees acts as a "safety valve", said Martin Beck at Oxford Economics, sucking in workers when the economy is doing well, and shedding them again in downturns.

"It keeps the unemployment rate down - people are losing their jobs but are not adding to the unemployment rolls. It is a stabilising force for the jobs market. It is bad to lose those jobs, but the fiscal cost is not being borne by the UK taxpayer," he said.

It means unemployment is unlikely to rise as high as 7pc by the end of the year, or to meet the gloomier predictions of 10pc or more in 2021, he said, because the fall in foreign-born workers over the past year has already reduced the workforce by as much as 2pc.

"I would expect those people to come back if things do recover quickly and get back to normal, Brexit permitting," said Mr Beck.

Overall, firms laid off 181,000 people between July and September, pushing the total to 314,000. Experimental figures also suggested an extra 33,000 employees shed from company payrolls in October, signalling 782,000 fewer people in work compared to pre-pandemic March.

Chancellor Rishi Sunak said the figures "underline the scale of the challenge we're facing".

The labour market weakness also emphasises the hopes hanging on the rapid distribution of the vaccine announced by Pfizer on Monday.

The ONS warned an estimated 1.62m people were unemployed over the quarter, up 243,000 since the end of June. This represents the biggest quarterly increase since May 2009 in the aftermath of the financial crisis.

Both men and women have been affected by the impact of the pandemic. Image / Telegraph

Mr Sunak has already extended the furlough scheme until March next year to stave off the impact of a tough winter and a second national lockdown, as well as increasing loan support for businesses.

However, the actual unemployment rate is likely to be much higher than the official figures suggest because the ONS said there were still 3.9m temporarily away from work in September - of which 210,000 were receiving no pay.

Although down from the 7.9m peak in April the figures are still well above the average 2m to 2.5m typically temporarily away from work before the virus struck.

Economists said the data was likely to reflect the Government's previous winding-up of the original furlough scheme before the U-turn in October.

Paul Dales of Capital Economics, said: "In response to the Government asking firms to shoulder a greater burden of the cost of their furloughed employees, firms reduced their staffing levels at a sharp pace in September."

More timely figures from the ONS also suggested the unemployment rate in September alone was actually 5pc and in the final week of the month 5.1pc - signalling potentially 100,000 more people out of work than the headline figure of 4.8pc.

Younger workers are bearing the biggest brunt of the pain so with 174,000 fewer 16 to 24-year-olds in work over the quarter, taking numbers to a record low of 3.52m.

Vacancies continued to recover, jumping by 146,000 to 525,000 in the quarter to October, led by a small business hiring spree. But job openings overall remain more than a third below their pre-pandemic peak of 796,000 in the quarter to March.

Some 2.6m people are still claiming universal credit - more than double the level seen in March - although eligibility for the benefit has been expanded.

Official forecasters also expect more pain to come. The Bank of England raised its own estimates for unemployment to 7.75pc in response to the new lockdown that began last week and the prospect of regional restrictions in place until March.

It forecasts about 5.5m workers will be placed in the furlough this month, receiving 80pc of wages from the state.

The British Chambers of Commerce's chief economist Suren Thiru called the figures "further evidence that the damage being done to the UK jobs market by the coronavirus pandemic is intensifying".

He warned: "While there was a rise in the number of job vacancies, this is more likely to reflect a temporary bounce as the economy reopened before recent restrictions were reintroduced, rather than a meaningful upturn in demand for labour."

Tuesday's figures also underlined the vastly different regional impact of the pandemic on the UK's jobs market so far. While employment remains highest in the South East at 78.3pc, the North East has the highest unemployment rate at 6.7pc. London follows closely behind at 6pc due to its bigger share of services sector jobs hit by Covid.

Matthew Percival, the CBI's people and skills director, said: "These figures show a toxic mix of a devastating rise in redundancies and very few people able to find alternative jobs, even before entering a second national lockdown. The recent extensions of the Job Retention Scheme and increased support through Universal Credit are important steps that recognise this difficult reality."