What's Next for the UK Labour Market?

Andy Hart, Managing Director of Blue Arrow, reviews the latest statistics released by labour market analytics company Emsi and considers what lies ahead.

Released on October 1st, Emsi’s latest statistics1 reveal positive signs in places but cautions tough times still lay ahead.

156,000 redundancies have been recorded in the period since March of this year, with 695,000 fewer people now on PAYE. At the same time, unemployment claims have now hit 2.7 million, although this count includes people who may previously have been on Universal Credit before claiming for unemployment and people who applied previously but were subsequently furloughed, potentially introducing an element of double-counting.

Redundancies by Sector

redundancies by sector

The Government’s furlough intervention has clearly helped in keeping down unemployment. Affecting 25-30% of employees, furlough schemes have ‘frozen’ the jobs market, keeping people in work but economically inactive. Reaching 9.6 million at its peak, millions of employees remained on furlough by the end of September.

Furlough Patterns by Sector

Furlough patterns by sector

Source: Emsi analysis of HMRC CJRS Statistics

Uncertainty ahead

With the scheme ending this month, there are fears that more redundancies may be on the way, with employers facing tough decisions in an operating environment still heavily affected by COVID-19 restrictions. The next few months will be critical, with as many as 200,000 further redundancies potentially in the pipeline. A recent OBR forecast supports this view, forecasting a peak in unemployment of between 9.7% and 13.2%. This wide gap reflects the many variables influencing outcomes, from the as yet unknown potential for a second lockdown, to the introduction of a vaccine by next Summer and the effectiveness of the Government’s recently introduced replacement Job Support Scheme.

Sector Outlook

The COVID crisis brought disruption to every sector. Construction was quickly affected but has begun to recover, with social distancing made easier by open air working and a high proportion of self- employed workers. Manufacturing too, has shown signs of a faster recovery. As might be expected the hospitality, travel and high street retail sectors have been among the hardest hit, with closures during shutdown and restrictions still in place on opening hours, plus the high labour intensiveness of these occupations. In terms of geographical spread, those areas such as Central London, with a heavy concentration of consumer-facing businesses suffered most, not least because of the reduction in commuting during lockdown. Areas dependent on tourism also took a heavy knock.

Who has been affected most?

In terms of gender, the effects of COVID-19 on employment are relatively evenly spread, although women are more likely to be working in the worst-affected sectors. Younger people have been significantly affected. Nearly half the workers furloughed are under the age of 35. This age group are more likely to be working in the worst affected sectors, which includes the sports industry where over 65% of workers are under the age of 34 and up to 75% of businesses have closed down since the start of lockdown. Young people who are self-employed may also have struggled to access the Government’s self-employed scheme, without the relevant accounts to support their claims. People in the over 65 age group were also affected.

Age Related Job losses

Age Related Job Losses from January to August 2020

The shoots of recovery

While the statistics offer a cautious note of hope, with sectors like healthcare, food retailers and admin and support businesses hiring, there has been a 58% reduction in vacancies nationwide with on average 3.7 people unemployed per job vacancy. Our own experience at Blue Arrow has been a 44% uplift in applications during March to June, with many jobseekers expanding their job searches to geographical areas and industry sectors they have not previously worked in. Care workers and teachers with DBS clearance for example have transferred to the health sector permanently in some cases.

 Sector Hiring

Human health and scientific sectors are the most resilient, with key workers still dominating, while a number of sectors including Arts, Motors Trades, Utilities, Real Estate and Mining remain quiet.

sector hiring

Source: Emsi Analysis of ONS Job Vacancies data September 2020

The new normal - long term changes may be ahead 

With many people embracing the idea of home-working, changes in workforce patterns are predicted, with more flexible working patterns and a shift in office use away from 9-5 working to a focus on central facilities for collaboration as required. This in turn may lead to out of town relocation of places of work to be nearer relevant talent pools.

At the same time, there has been a rise in demand for temporary labour, as employers look to ‘borrow’ staff short-term and wait to hire new permanent staff in the face of the ongoing uncertainty that is likely to prevail for some time yet, although this pattern is highly variable across the sectors.

With the emphasis on health and wellbeing going forward, new business opportunities may arise as the health and leisure sectors adapt to survive in the new normal – for example the sports industry has the potential to expand online and to work with corporate employers in developing programmes to support the mental and physical health of their staff going forward.

Somewhat overlooked in the current crisis, BREXIT is also likely to play a role in the employment market shifts, with a range of occupations currently facing shortages across England, Scotland, Wales and Northern Ireland, according to a recently published Migration Advisory Committee report.2

Navigating the future

The recovery, influenced by multiple factors is hard to predict, with continuing changes month on month, while the success of initiatives such as the Job Support scheme has yet to be proven and specific Government support for struggling sectors as yet unclear.

From the point of view of HR specialists, this uncertainty also underlines the importance of the need for a deeper understanding and analysis of data to support strategic workforce planning and decision-making.

The Government’s Plan for Jobs scheme announced in July this year pledged investment amounting to several billions to cover a package of measures to support jobs in every part of the country, giving businesses the confidence to retain and hire, and provide people with the tools they need to get better jobs.

While this is welcome news, it is important that each sector and region gets the specific help they need. Employers need to use their voice through relevant forums and bodies such as the REC to ensure that this helps covers workers of all ages, especially those exposed to attrition through automation, to find new career paths through retraining. In this way we can ensure best value from the plan and work to minimise the long-term risks of high unemployment as we all come to terms with the new world of work.

References

  1. EMSI State of the Nation October 2020
  2. MAC (Migration Advisory Committee) – 29th Sept

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