A New Challenge to the UK Recovery

Source THE REC

Written by Atanas Nikolaev Research Manager

The Coronavirus Job Retention Scheme (CJRS) was introduced in late March 2020 as a vital support measure for employers and their employees during the COVID-19 pandemic. The latest figures show the number of people on furlough has fallen from a peak of 5.1 million in January to 1.9 million at the end of June 2021.  

From 1 August until the scheme ends on 30 September, employers will have to contribute another 10% of employees’ wages. With the latest increase, The Institute for Fiscal Studies estimates that the cost for employers will rise from £155 to £489 per month to keep an employee previously earning £20,000 per year. New research by the British Chamber of Commerce indicates that 20% of companies are considering redundancies as the next phase of the scheme begins at the start of August.  

Despite this, British employers remain overly positive about the economy. Data from REC’s latest JobsOutlook survey shows a further increase in April-June 2021. The barometer rose by six percentage points to net: +17, sitting in positive territory for the second month in a row.  Employers’ confidence in making new hires and investing in their business (net: +33) was at the highest level since the survey began in mid-2016.  

Importantly, we’ve also seen this increased confidence being translated into a real-world hiring activity with more jobs being created and advertised online. The REC’s latest Jobs Recovery Tracker indicated there were a total of 1.57 million active job adverts in the UK in the week 12-18 July.   In the same week there were 194,000 new job adverts. Demand for workers has remained stable since early June 2021.  

The Office of National Statistics’ Labour Market Overview data for July provided further evidence of this increased demand as restrictions were lifted. The number of job vacancies in the three months to June 2021 was 9.9% (77,500) above its pre-pandemic level. This was the first time it has surpassed this level in 15 months. Another notable increase was in the number of payrolled employees. In June 2021, there were 356,000 more employees than in May 2021, adding to a total of 28.9 million – although this is still 206,000 below the pre-pandemic level.    

With all new jobs being created, recruitment activity continues to rise sharply at the start of the third quarter as indicated by the KPMG and REC, UK report on Jobs. As economic activity continued to pick up, permanent staff appointments and temp billings both rose at near-record rates, while demand for staff hit a record high.  

But despite all this good news, a new issue threatens to slow down the recovery further in the UK. The so-called ‘pingdemic’ has proven to be a major challenge for essential industries like public transport, logistics and retail. Employers who endured during the pandemic now struggle to keep their operations open as more of their staff are pinged by the NHS Test and Trace app. Many organisations, including the REC, are calling for the government to act and resolve this issue to prevent the recovery from cooling off and undoing the successes of the past few months.  

Added to this problem is actually finding the right candidates, with the right skills in the first place. Despite increased confidence in the market, actually being able to fill the positions continues to be a problem in virtually every industry. The pingdemic, coupled with the new immigration system, is merely the latest challenge, exacerbating an already existing problem. The REC is leading a campaign on labour shortages in which we’re ensuring the concerns of our members are heard and understood by those making the decisions. We want to share our expertise and work with the government to find a solution to this long-standing issue. If the UK is truly to recover from the pandemic, then we have to get this right. We will only be able to ‘build back better’ if we’ve got a diverse, skilled, and resilient workforce to support it.   

Recruiters have been working flat out to fill positions in what could be the tightest labour market since the time of the global financial crisis. According to the REC’s Recruitment and Recovery report, the industry supports £86 billion in GVA across the economy, the equivalent of 4.3% of GDP. 

Throughout the pandemic, the recruitment industry has helped keep vital services running. As the CJRS comes to an end in September, the industry is likely to play a key role in helping displaced workers find new jobs, helping companies adapt to shifts such as the rise of remote working, and helping build a more diverse and inclusive labour market.