By the autumn, as state subsidies are withdrawn, the true scale of the unemployment scheme will become clearer. The furlough scheme will be gradually wound down over the Autumn – what then?
Will this mean a resurgence in welfare to work schemes to support the unemployed again? Our specialist Senior Recruitment Consultant in employment related services, Lesley Clydesdale discusses more:
A lot of people are very concerned about their jobs when furlough ends, and they are right to be concerned as the Bank of England warns “UK unemployment to double and economy to shrink by 14%.”
The Bank outlines the scale of Covid-19 shock in 2020 with forecast for the deepest recession in 300 years.
A very worrying forecast indeed and uncertain times for thousands of people who are set to lose their jobs post lockdown or have sadly lost them already.
The UK unemployment rate just months ago was one of the lowest it has been but since the pandemic, it’s a whole different story.
According to a recent parliamentary report, in the first three months of 2020, the UK employment rate reached its joint highest level on record, with 76.6% of 16 to 64-year olds in work. Since then the labour market has been rapidly transformed by the Covid-19 pandemic. Between 1 March and 26 May, over three million individuals made a new claim for Universal Credit and by the start of June, 8.7 million jobs had been furloughed under the Government’s Job Retention Scheme.
Tony Wilson, Director at the Institute for Employment Studies, said:
“The impact on the labour market has been huge. Everything is unprecedented in this crisis, but the data released yesterday showed that we have seen the fastest increase in claimant unemployment since the winter of 1947, and the increase month on month was five times greater than we saw in the 2008–09 recession”.
The Department for Work and Pensions holds overall responsibility for many areas of the UK’s labour market policy. DWP has had the best part of a decade to plan for a large increase in unemployment, as well as the relatively recent opportunity to learn lessons from the biggest economic downturn for generations following the 2008 financial crisis. Even with well-planned and timely action, the threat to jobs today is potentially greater still.
UK vacancies halved in April 2020
Today’s preliminary labour market data shows there were roughly 350,000 unfilled positions across the economy last month (20th May 2020). That’s down from 750,000 in March, and even lower than during the depths of the financial crisis of 2008.
Nye Cominetti, Senior Economist at the Resolution Foundation, says Britain faces its worst unemployment crisis this century:
“Today’s figures highlight the speed and scale of Britain’s job crisis. Employee numbers have fallen by nearly half a million in just one month, while the number of vacancies has halved.
“These shocking figures would be far worse were it not the Job Retention Scheme, which has so far protected 8.7 million jobs.
“But even despite widespread furloughing, Britain could still be facing the highest unemployment levels it has had in over a quarter of a century.”
In the early stages of the economic shock following the Covid-19 pandemic, there were already clear signs of a major fall in economic activity. The Office for Budget Responsibility’s latest scenario assessing the potential impact of coronavirus on the economy shows a 12.8% fall in GDP for 2020 and an unemployment rate of 7.3% for the year, compared to 3.8% in 2019. In an April 2020 report, the Institute for Employment Studies said that it expected that employment had fallen by around 1.5 to 2 million in the first month of the crisis alone.
So unsurprisingly the pandemic has not only tragically killed thousands, it’s effects will continue to be felt for years in the economy. Mass unemployment is the next biggest problem.
Having worked in Welfare to Work recruitment now for 15 years I have seen the benefits of government funded programmes that support the long term unemployed back into work but I have often thought it would be easier to try and prevent long term unemployment in the first place as the longer people remain unemployed the more detached people become from the labour market.
Maybe that is a little naïve of me as nothing is ever that simple and so many socio-economic factors are often simultaneously at play.
I don’t think anyone can say the Government has not done it’s level best to prevent unemployment and Rishi Sunak said when announcing a £12bn Covid-19 package in the budget that further steps might be needed, and recent events have intensified the pressure for additional spending. Industries, such as the airline business, have said financial help is needed to prevent a mass loss of jobs.
I have read the paper written by the Prime Minister dated May 2020 “Our Plan to Rebuild” which outlines the Government’s recovery strategy and it does go into some detail about how they will continue to support the economy and jobs but with Brexit as well to contend with and European funding already coming to an end, the Government will need to turn its attention to the looming unemployment crisis as the systems already in place to retain jobs in the short term will inevitably start to fail.
The Institute for Fiscal Studies noted that:
Many jobs will not be available again immediately, or perhaps ever. Demand for some goods and services, most notably hospitality, tourism, and travel, will remain low for some time, and innovations to how work is organised may permanently reduce demand for certain occupations (while increasing demand for others).
There is a lot of pressure to look particularly at youth unemployment and apprenticeships.
Youth unemployment in the UK could rise by 640,000 this year - taking the total above one million, a report from the Resolution Foundation think tank found.
Young people have historically been one of the groups most affected by unemployment during a downturn. Sam Windett, Director of Policy at Impetus, a foundation supporting young people from disadvantaged backgrounds, said there were three reasons why this is the case:
a) Young people are falling out of the labour market and are twice as likely to be working in “shut-down sectors”
b) A lot of young people are trying to enter the labour market for the first time.
c)There were already more than 750,000 young people who were not in education, employment, or training (NEET) before the crisis started.
A report from Impetus found that 75% of young people who were NEET for three months had also been NEET for 12 months. Being NEET is often a long-term situation, which can be linked to poorer health and employment outcomes decades later. A Trades Union Congress report found that being unemployed for more than six months can “scar” young people’s prospects and experiences in the labour market, leading to a long-term impact on their likelihood of finding employment and their future earning potential.
In 2009, when the threat of similarly high youth unemployment loomed, the government created the Future Jobs Fund, which paid employers a wage subsidy to take on young people.
That's better than paying benefits not to work - and studies later found participants were much more likely than others to be in unsubsidised employment.
As the Resolution Foundation points out, something similar needs to happen now, urgently, to ensure this current crisis doesn't blight hundreds of thousands of young lives.
Without question, all age groups will be affected by the economic uncertainty around their job and possible unemployment in the coming months. The Government will have to balance their support between investment in job retention schemes and job creation schemes, supporting people back into work after they have become unemployed.
The Department for Work and Pensions faces a major challenge as it prepares to support a significant increase in unemployed people after years of record employment levels. A one-size-fits-all approach is not likely to be effective at getting people quickly into meaningful work. The Department will need to work particularly hard to engage those choosing not to claim benefits or rely on other forms of Government support.
As reported by the Financial Times on 29th May 2020, Rishi Sunak is looking to rebuild the economy with plans for a big job creation scheme.
Ministers have told the Financial Times that Mr. Sunak and Prime Minister Boris Johnson are planning a big job stimulus package, expected to be announced before the summer, amid warnings that Britain’s jobless rate may soon hit 10 percent of the workforce and continue to increase with no intervention.
It is envisaged that Gavin Williamson, Education Secretary is drawing up a skills package to retrain workers whilst Rishi Sunak has been referring to two emergency job support schemes.
The Prime Minister told the Chair at the Liaison Committee that he hoped the Government would be very fast in dealing with economic issues on the spot. He also said:
"I can assure you that the Chancellor and I and everybody are looking at this stuff very closely and will be wanting to come forward in June or early July with much more about how we get employment going again and how we get the economy restarted, but for now, we must focus on defeating this virus".
Watch this space.
If you are a Provider looking to engage with a specialist recruitment team of consultants, then please do get in touch. With over 15 years of experience working on W2W programmes supporting unemployed people of all age groups locally and nationally we have the expertise to help you source and employ the best talent.
Please contact Lesley Clydesdale on 07976 589529 or call the office to speak to Dan Barfoot on 01225 805080