UK Braces itself for a wave of redundancies as furlough payments cease

COVID-19 pushes retailers towards tech for a solution

As the pandemic continues we are now seeing empirical data that shows companies are adopting tech as a coping mechanism.

With the worldwide pandemic appearing to be taking hold in many of the major economies of the world, there are worrying signs that the UK economy is about to experience unemployment that hasn’t been seen since the 1980s.

In a ground-breaking response to the pandemic, UK chancellor Rishi Sunak unveiled a furlough support scheme that saw the government pick up the tab for up to 80% of employees’ wages.

The ‘Coronavirus Job Retention Scheme’, which debuted in March 2020 covered salaries where employees were unable to work due to lockdown restrictions.

However, the government-sponsored payments come to an end in October and there are concerning signals that unemployment may be set to rise rapidly at the worst time of the year.

Official statistics confirm dramatic workforce changes

In data released early October, the UK Office for National Statistics(ONS) shows that the current picture remains uncertain.

The data covers the period up to September and highlights a massive reduction in the number of employed people in the UK of 673,000 since March.

The reduction in employed people is split across sectors with hospitality, transport and retail feeling the effects in particular.

Whilst the picture since March looks bleak the ONS does point out that the majority of job losses occurred in the early months of the pandemic.

In contrast with the longer-term picture, recent figures have shown a small uptick with 20,000 more people in employment in September over August and a corresponding increase in the number of job vacancies available.

However many commentators have said that this is simply the calm before the storm and with the end of the job retention scheme there will inevitably be a fresh wave of redundancies.

The major impact may be mitigated by an increase in seasonal employment, but given the almost wholesale switch to online shopping, it remains to be seen whether the customary increase in holiday vacancies actually materialises.

UK redundancies

Moving from High Street to online - will we see a permanent switch?

With more data becoming available regarding business and consumer behaviour during the COVID lockdown it is now clear that many companies have moved towards technical solutions to cope.

The digitization of services has increased apace with consumers preferring online shopping during the pandemic and cosmetics, food and entertainment being the big winners.

Whilst this is good news for online retailers and companies who have invested heavily in the switch to the net, it often means the loss of traditional retailing and ancillary industry jobs in previously bustling locations.

In a recent UN report, the majority of consumers stated that they fully expected to continue with online shopping at the same or similar level to their lockdown activity which suggests that for many shopping malls and high streets the difficulties aren’t yet over.

From accounting software to POS - businesses speed up tech adoption

In a recent report, consulting firm McKinsey highlighted the startling increase in the speed of adoption of digital systems such as new accounting software, POS systems and online shopping solutions.

McKinsey estimate that the urgency with which firms have had to adapt to new ways of working has brought forward digitization of the supply chain by around seven years, an unprecedented speed of change in modern times.

Whilst the adoption of technical solutions is good from the point of view of efficiency and output, there is the worry that many companies have learned simply to do without members of staff who were considered essential before the pandemic.

Although in general terms automation and the adoption of AI solutions has meant that a change was coming to the workplace anyway, the rapid escalation of transformation projects has led to many more people hitting the labor market all at the same time.

Could small businesses provide a lifeline?

One of the most striking features of the UK economy is how much employment is provided by micro and small enterprises with 99.9% of all British businesses in the 0-249 employee range.

Whilst larger enterprises hit the headlines with wholesale redundancies it is clear that there is a significant opportunity for economic stabilisation through SMEs.

Small business trade association the Federation of Small Business carries out a quarterly survey of its members and one of the striking points in their Q2 release was the speed with which smaller enterprises are bouncing back.

As is to be expected sentiment nosedived during Q1 as COVID restrictions began to bite but by the end of Q2 business owners were seeing much greater prospects of recovery with the survey showing almost a return to pre-covid responses.

The question then is whether stimulating the small business economy may provide the boost to jobs that the country needs to counter increasing redundancies.

Certainly, The Chancellor has made as start by providing short-term relief packages for smaller companies in an effort to stimulate the economy.

Whether this will be enough remains to be seen and with Brexit being just around the corner, small business owners could be forgiven for thinking that they will need much more help to provide jobs in the medium term.

Can the UK stave off widespread redundancies?

The UK labour market appears to be entering a time where it faces a perfect storm of COVID effects, job losses through automation and a shift towards automated online shopping.

The unknown effects of Brexit also feature heavily in business thinking and companies could be forgiven for thinking that there is no end to their troubles.

However, there are signs that the economy is beginning to heal with business sentiment showing a significant uptick and increasing vacancies appearing to be green shoots of recovery.

Only time will tell whether the UK economy is going to suffer large scale redundancies or whether the natural agility of the small business sector can stem the tide.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes