Pandemic continues to take its toll on jobs

What can be done to reduce the overall cost of employment and prevent substantial redundancies? Experts from the Confederation of British Industry, British Chambers of Commerce and TheCityUK weigh in.

Map of UK illustrating rising unemployment levels

David Sapsted

12 August 2020

With unemployment in the US at an all-time high and with the rate in the European Union soaring, the news on Tuesday of a sharp increase in the jobless figure in the UK came as little surprise.Most economists believe the deleterious effects of the coronavirus pandemic on economies around the globe still have a way to run, especially as government job support schemes are curtailed as lockdown restrictions ease.Data from the Office for National Statistics (ONS) on Tuesday showed that about 730,000 UK workers had been removed from the payrolls since the coronavirus lockdown began in March. Another 81,000 jobs were removed from payrolls last month, resulting in the number in employment falling to 28.3 million.However, the official unemployment rate has held steady at 3.95, mainly because many workers who have lost jobs are not actively seeking a new job - something that is required to be included in the ONS figures.Encouraging news from the ONS was the fact that, last month, the number of vacancies rose by 10% from their low in May, and the number of hours worked in July after a record drop in the second quarter.

Plan for Jobs: how the UK government will boost job creation

Minister for Employment Mims Davies said, “Today’s figures show more of the impact the virus is having on both our economy and labour market meaning many people will be understandably concerned about the future – which is why we’ve set out our Plan for Jobs, to protect, create and support jobs as we build back our economy.“We’ve already protected more than 9.5 million jobs throughout this period with the furlough scheme, supported more than two million self-employed people and paid out billions in loans and grants to thousands of businesses. Our Eat Out to Help Out scheme is supporting thousands of jobs in the hospitality sector and helping boost confidence, and the key cut to stamp duty has led to a surge in house sales and a welcome boost to the economy.“Looking to the future, next month we’re launching the £2 billion Kickstart scheme to create thousands of new, high quality jobs for young people, increasing access to tailored job support by doubling the number of work coaches across the UK and we are boosting the DWP (Department of Work and Pensions) Flexible Support Fund by £150 million to provide vital localised employment support. We are determined to build back stronger and support people as we move into recovery.”

Local lockdowns: support will need to evolve

Matthew Percival, director for people and skills at the Confederation of British Industry (CBI), said the ONS data showed the "devastating mark left on the labour market" by the pandemic and that a fall in employment and in the hours worked were only to be expected.“More positively, there was a small rise in vacancies, particularly in the hospitality sector as restrictions were relaxed," he added.“As local lockdowns become more common, the nature of support for businesses and people will need to evolve. Stepping up test-and-trace efforts will also be essential to minimise disruption in affected areas.”

What can be done to reduce the overall cost of employment and prevent substantial redundancies?

Suren Thiru, head of economics at the British Chambers of Commerce, agreed that the decline in the number of employees on payrolls and the fall in hours worked came as further evidence of the damage being done to the UK labour market by the coronavirus pandemic.“The furlough scheme has been successful in preserving millions of jobs. However, with firms continuing to face a perfect storm of increased costs, reduced demand, and diminished cash reserves, unemployment is likely to surge as the government support schemes wind down, unless action is taken," he said.“A significant spike in job losses would be a major drag on any recovery, stifling consumer spending and reducing the productive capacity of the UK economy.“To help businesses recruit and retain staff, more needs to be done to reduce the overall cost of employment and prevent substantial redundancies. This could include significant expansion of the Employment Allowance and a cut in employer National Insurance Contributions.”

TheCityUK: high job losses still in the offing unless action is taken

TheCityUK - the advocacy group for the UK's financial and related professional services industry - warned that high job losses were still in the offing "unless urgent action is taken to convert, restructure and repay the high levels of unsustainable debt SMEs have built up in the wake of this crisis".The organisation pointed to a recent report it had produced in conjunction with EY, showing that up to 780,000 SMEs were at risk unless a solution could be found to the projected £35 billion of unsustainable debt from Covid-19 loans.Marcus Scott, chief operations officer at TheCityUK, said, "The government’s support for businesses and employees has been essential in preventing the scale of job losses and economic scarring we have seen in other economies."While this has been essential for their survival, the pressure on SMEs in particular to repay the loans will be intense. Without support to restructure this debt, many more jobs will be lost, and the financial prospects of small business owners left in tatters.“This is not a problem which can be left to fester. In many cases, firms’ cash reserves are already largely depleted and urgent action is needed within months. TheCityUK and EY have put forward recommendations to convert, restructure and repay the high levels of unsustainable debt SMEs have built up in the wake of this crisis."We urge the government to take forward the recommendations to help hundreds of thousands of SMEs get back on their feet, save millions of jobs, protect billions of pounds of taxpayer money and help power the UK’s economic recovery.”