Hundreds of thousands of furloughed workers could lose their jobs when taxpayer support is withdrawn as businesses shrink and collapse in the depressed post-coronavirus economy.
A huge proportion of the more than six million workers on state-funded temporary leave will be made redundant once lockdown is lifted as businesses adapt to a world of tight social distancing rules and fearful consumers, economists fear.
In retail alone, as many as 150,000 shop-floor workers could be hit.
It suggests the Jobs Retention Scheme (JRS) – which pays up to 80pc of employees' wages using public money, and has already cost the Treasury £8bn – may do little to protect jobs during a long, slow recovery from the pandemic.
Leisure and entertainment companies face a bleak future as reopening begins, while swathes of the retail industry will struggle to turnaround March's sales nadir due to social distancing and weak consumer spending.
Helen Miller, of the Institute for Fiscal Studies, said: “The harsh reality is there will be people whose jobs have been preserved by the JRS but who effectively, when the JRS unwinds, won’t have jobs to go back to, so they are unemployed."
Retail staff can expect to be hit particularly hard as the high street was already struggling before the virus struck.
Richard Lim, chief executive of Retail Economics, already expected the industry to lose 20pc of store staff – about 150,000 people – and a chunk of head office employees over the next decade.
This will now be accelerated by the pandemic, with empty high streets and shopping centres struggling to attract customers back in after the outbreak. Pubs, restaurants and cinemas will likely to be among the last to reopen, prolonging the agony as many run perilously low on cash.
Mr Lim said: “Government support allows retailers to take time to look at a fundamental restructuring of their businesses to make it fit for purpose post-Covid.
“They will review store portfolios and look at which they can close – the unprofitable stores – with repercussions for their business models and the composition of the workforce. With fewer stores they will not need as many shop floor workers.”
The few firms that can expand are likely to seek to improve their online operations, with a focus on hiring tech staff over more traditional retail employees.
It effectively means the Government has to decide when to make people unemployed, leaving Chancellor Rishi Sunak facing difficult decisions on how to wind down the scheme. Sources on Tuesday told the Evening Standard that he was considering a gradual wind-down, with the subsidy first reduced from 80pc to 60pc.
Speaking at a web conference organised by the Confederation of British Industry, Ms Miller said: “On the one hand you don't want to remove support too quickly, because some of those jobs that are on JRS are completely viable, they will come back when the economy comes back and you don't want to lead to more unemployment than is necessary.
“On the other hand, you don’t want to keep the scheme going so long that the scheme itself ends up hampering the recovery.”
It might be better for workers to go back part time as the economy gets back on track, she said, but currently they are better off staying away on furlough.
Rain Newton-Smith, chief economist at the CBI, said a flexible or part-time furlough scheme may be the answer.
Mr Sunak has said there will not be a sharp "cliff edge" closure of the scheme, indicating a gradual process is planned.
As well as cutting payments from 80pc of wages, other options could include allowing part-time furloughing or extending the scheme for varying lengths for different industries, reflecting the range of challenges they face.
It is not only a problem in the UK. Across Europe’s largest six economies more than 40 million workers are now being paid under furlough schemes, according to Bloomberg.