When the UK Government imposed a lockdown on the British economy on 23 March 2020 it had a seismic effect on employment. Whilst some sectors could continue to trade, trade became anything but normal for everyone.
Big shifts to working from home and remote selling (online) will never revert to the pre-lockdown status. This has found favour with many, and there are plenty of pros and cons to debate from this remarkable and unprecedented period.
This article focuses on a singular issue arising from lockdown: employment. (Business debt and broader economic debt from furlough and business rate grants are for other articles.)
Furloughing workers on 80% of their normal wage up to an equivalent of a £30,000 salary resulted in approximately 9.1 million people, from approximately 1.1 million businesses, being paid by the government to stay at home. It is worth looking at these numbers in context. Of Britain’s 5.7 million businesses over 75% (4.3M) are single-person entities, leaving a balance of 1.4 million that employ at least one person. We can deduce that the vast majority of businesses furloughed some staff.
Never has there been a more brutal test of one’s economic value. People who were not furloughed hold constant economic value. Even so, many of these had their wages cut.
In the return to work phase employers instinctively chose the next-most valuable employees to restart their businesses – they came back first. Those not back yet may never come back. Indeed, many businesses have evolved new working practices under the duress of lockdown which exposed prior inefficiencies that are now resolved resulting in bona-fide redundancies and leaner businesses.
At mid-June 2020, UK jobcentre claimants had risen 126% to 2.8 million since the start of the lockdown. The year-on-year increase is the most dramatic impact on the UK labour market for a century. It is by no means over. Some businesses are allowing furloughed workers to ‘stay employed’ on furlough terms – at the government’s cost – out of sympathy. The furlough scheme ends at 31 October 2020 which will reveal how many ‘actually unemployed’ people are presently concealed in the furlough scheme. The stepped reduction from 80%/£30,000 income may drive some people out of furlough sooner, hopefully into jobs.
Thousands of businesses have collapsed already. Many others have found efficiencies to reduce their staff and, with notable exceptions, many sectors are much depressed from pre-lockdown levels. Where are the job opportunities?
The sectors experiencing increased demand are not those with highly paid jobs. Businesses ‘gifted’ extra debt to ‘bounce back’ may be trying to expand (not least to meet the debt servicing costs heading their way in a year’s time) but will be extremely careful about hiring.
Finding work will be hard; by simple maths, a 126% increase in the unemployed means a 126% increase (more than double) the applicants for vacancies. A further grim thought is borne of the adage ‘more companies fail coming out of a recession than fail going into it’. Business growth – survival – relies on economic growth. Higher unemployment suppresses consumer demand. Employees are consumers.
For a lot of macro-economic and geopolitical reasons the world was heading for an [arguably overdue] recession before COVID-19. We are in recession now – the definition is merely two successive quarters of ‘negative growth’. In the two months of March and April 2020, eighteen years of economic growth was wiped out. Month to month GDP growth normally rattles ±2% (even into and through recessions); –20% in a single month (April 2020) is unheard of. One particular word has been so widely used since March that its impact has softened, but this truly is “unprecedented”.
Even those presently in jobs must review their economic value to employers as, still to come, are: the end of furlough (31 October 2020); the end of HMRC ‘time to pay’ (31 March 2021); and the start of CBILS/BBL interest payments (from March 2021). And this is without even considering the notion of a ‘second spike’ of COVID-19. And even if these factors and dates do not directly affect your business, they will affect your customers and their customers in some way.
If you would like to discuss the state your business has found itself in as a result of lockdown, please contact me. I will be pleased to help, and have some capacity set aside for pro bono work.