The Institute for Public Policy Research criticised the country's social safety net, as the proportion of working UK households dropped for the first time in nearly a decade.
This was down from 70 per cent the year before.
Across England, 58.7 per cent of households were classed as working in 2020, above the UK-wide average of 58.4 per cent.
The proportion of UK working households was down from 58.8 per cent in 2019 – the first annual fall since 2011.
The IPPR said the furlough scheme helped prevent further unemployment last year, but the number of workless households will almost certainly rise as it ends.
Henry Parkes, IPPR senior economist, said: “The social safety net is threadbare for workless families without other incomes.
“We have just seen the biggest overnight cut to the welfare state in its history, in the form of the end to the £20 uplift in universal credit.
“This has come at a time of spiralling food and fuel prices alongside chronic insecurity brought about by the coronavirus pandemic as we head into an uncertain winter.
“The end to furlough and other support schemes will not help matters.”
He called on the Government to restore the uplift, as well as helping people back to work in other ways, including supporting more freely available childcare.
The ONS figures showed there were 2.9 million workless households in the UK last year – containing about 1.3m children.
The Trades Union Congress said Universal Credit support for families who have lost work is not enough to meet basic costs and called for the recent cut to be reversed.
A Government spokesman said its Plan for Jobs is connecting jobseekers across the country to a record number of vacancies.
He said: “Universal Credit continues to deliver vital support and we have provided an additional £500m to help the most vulnerable with essential costs this winter.”