Waiting for economic data to emerge over the past few weeks has been rather like anticipating a root canal – you know it’s going to be unpleasant, but just how painful remains to be seen until the day arrives. Now that we have begun to get figures for the lockdown period, we can start to see the enormity of the problem.
Before anyone had heard of Covid-19, the labour market was buoyant with unemployment at the lowest since 1975 and there were more people in employment than ever before (32.2 million). Britain’s top three employing industries going into the crisis were wholesale and retail trade (4.8 million jobs); human health and social work activities (4.2 million); and professional, scientific and technical activities (2.8 million).
Contraction in All Sectors and Areas
Upon contact with Covid-19, that tight labour market unravelled in short order. According to the Office for National Statistics, GDP fell by 20.4% in April alone. Unsurprisingly, with pubs, restaurants and hotels shuttered in the lockdown, accommodation and food service activities were hit hardest: a 40.9% fall in GDP on the basis of the last three months. There were also seven other sectors which saw double-digit contractions ranging across manufacturing, construction and a range of services, whilst only public administration has grown, and even then only just 0.2%.
Our own job postings data (see Figure 1) shows employer demand falling by double digit percentages across all industries bar three, with accommodation and food service activities hit particularly hard (44% decline), and wholesale and retail trade not far behind (40%). We are already seeing escalating job losses, with the Claimant Count rising by 1.56 million in two months, while another 8.7 million employees are furloughed with government support.
Surviving after Furlough
Furlough has been successful in mitigating immediate job loss, but there remains significant uncertainty in just how many will return to work, and how many have only seen job loss delayed. While furlough and other supports will have helped, many of our smaller and medium-sized businesses will be unlikely to survive, especially in those sectors facing the largest contractions, and especially where lockdown conditions remain in force for longer.
Three-fifths of businesses with 100 or fewer employees have furloughed at least some of their staff – and for the 241,000 wholesale and retail trade small and medium-sized businesses, the 176,000 in construction or the 135,000 in accommodation and food service activities, all facing double-digit declines in GDP, survival is by no means a given. According to a YouGov survey, when asked whether they expect to lay off workers after furlough comes to an end, 48% of small businesses (up to 50 employees), and 65% of medium (50-249 employees) replied that they would.
Although size can help manage risks, large businesses (250 or more employees) face the same challenges: 48% of large businesses in YouGov’s survey expected to lay off some of their workforce after furlough. While there are only around 10,000 large businesses, they employ more than half of the UK’s workforce.
Issues for Post-16 Policy Makers & 3 Areas for Action:
The data we have so far has given us a few initial clues as to how this crisis might unfold, though it’s still early days. Businesses of all sizes are likely to lay people off, but with medium ones expecting to be hardest hit. Emsi suggests that post-16 policy makers consider three areas for action.
1. How the situation is unfolding at regional and local level
First, amidst such fluidity, there is a need to understand how the situation is unfolding, and particularly at regional and local level. The surge in unemployment is likely to continue, but different industries and different places will experience it differently, and recovery will come in equally different forms.
Already, the initial Claimant Count increases were led by tourist areas such as Devon and Cornwall, but May has seen a wider spread, with some of the biggest rises in the South East, particularly Surrey and Hampshire. Effective response depends on understanding the factors behind these differences in pace and scale.
2. Retraining & Reskilling
Second, thinking in terms of skills and their different applications becomes central. While much of the economy is negatively disrupted, other parts – key worker functions – are positively disrupted, with new demands emerging. Workers laid off from contracting sectors may be able to adapt their existing skills quickly to meet the increased demands for key workers. In our research into the impacts of the shutdown of restaurants, pubs and cafes, we highlighted certain areas of the country – mainly tourist areas – which have a disproportionate number of people employed in these sectors (Emsi, 2020).
In such areas, colleges will need to be aware of the skills of those being laid off, how they relate to occupations in other sectors, and which roles are seeing increased demand. This understanding can then be used to introduce modules and short courses aimed at retraining people, so they can get back into work as soon as possible.
3. Greater Coordination
Third, the sector will need to co-ordinate closely with local employers and LEPs. This is not a time for colleges to try to go it alone, or to be left guessing which sectors are falling and rising.
Colleges, employers and LEPs will need to work in partnership, with localised employment and skills data being central to discussions around effective response and recovery plans.
Duncan Brown, Emsi
In the immediate aftermath of the Covid-19 pandemic, it is easy to forget that there were wider revolutionary forces at work on the UK’s economy before the virus outbreak.
With issues such as Brexit, the rise of automation in the workplace, longer working lives, and poor UK productivity brought into even sharper focus, education and skills organisations, NCFE and Campaign for Learning (CfL), jointly commissioned the ‘Revolutionary Forces’ discussion paper.
Published on 6 July 2020, the collection of articles, penned by experts from the FE sector, as well as labour market economics, employment and mental health, urges Government to ensure that the plans outlined in the forthcoming post-16 white paper are sufficiently flexible to meet the immense changes faced by the UK economy throughout the 2020s. The authors explore some of the key challenges facing the nation throughout the 2020s which the DfE needs to take into consideration when writing their recommendations:
The authors are:
- Rt Hon. David Laws, Executive Chairman, Education Policy Institute - Covid-19: Mending the Economy, Repairing the Public Finances
- Paul Nowak, TUC - The Covid-19 Inheritance: Building a Fairer and Greener Britain
- Ewart Keep, Oxford University - Covid-19 and Brexit: The Impact on Industry, Jobs and Skills
- Duncan Brown, Emsi, Declining Sectors and Growing Sectors Post Covid-19