Third of employers planning redundancies this year, report finds

CIPD warns of ‘long and hard winter’ ahead for businesses despite recruitment plans picking up for some 

Almost a third of employers plan to make redundancies this year, as experts warn of a difficult winter ahead despite the furlough scheme’s extension.

A poll of 1,006 employers, undertaken before the introduction of new lockdown measures in England and the subsequent extension of the coronavirus job retention scheme, found 30 per cent of firms intended to make redundancies in the three months to December 2020 – a marginal reduction from 33 per cent who said the same between July and September.

The research, part of the latest Labour Market Outlook by the CIPD and Adecco Group, also found a slight uptick in hiring intentions. Its net employment intentions figure – which measures the difference between the proportion of employers that expect to increase staffing levels and those that expect to decrease them – rose to -1 per cent, an improvement on the record low of -8 recorded in the last quarter.

Additionally, more than half (53 per cent) of businesses planned to recruit staff before the end of 2020, a modest increase from the 49 per cent that said the same in the summer. But this was still far below the 69 per cent of employers that said they planned to hire employees in the same period last year.

Gerwyn Davies, senior labour market adviser for the CIPD, said that, even with the extension of the job retention scheme, the UK should expect a “long and hard winter”. He warned that employment looked set to keep falling and demand for labour remained relatively weak.

“Despite the furlough scheme recently being extended, more employers might look to reassess staffing levels early in the new year as they plan for what their workforce will look like medium to long term,” Davies said. “To help minimise the jobs fallout as restrictions continue, the government should expand its training and employability support.”

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The survey found 41 per cent of employers had used temporary lay-offs and the furlough scheme to minimise redundancies. Additionally, more than a third (37 per cent) had redeployed staff, while a similar number implemented recruitment freezes (32 per cent). More than a quarter (27 per cent) cut temporary or agency worker contracts.

But there remained significant uncertainty around redundancy intentions, with 17 per cent of businesses saying they could not predict whether they would be making redundancies in the next three months.

Kate Shoesmith, deputy CEO of the Recruitment & Employment Confederation, said the decision to extend the government's furlough scheme was a "step in the right direction", but businesses needed a programme to incentivise job creation "not just mitigate against job losses". 

"This can be done by reducing employers’ national insurance contributions, the biggest business tax, which would help businesses struggling to maintain their wage bill while also encouraging hiring," Shoesmith said. "We also need to think about how we can help people who have lost work to get the training they need to transition into growing sectors." 

Alex Fleming, country head and president of staffing and solutions at Adecco Group UK and Ireland, said it was now more important than ever that support continued to be provided by the government and organisations.

“Providing upskilling and reskilling opportunities is a key way to do this, as it will not only help to boost redeployment efforts, but also help career starters who are looking to enter into the workforce for the first time against a backdrop of increased labour supply,” Fleming said.

The survey also found recruitment in the private sector lagged behind the public sector. Half (49 per cent) of private sector employers said they intended to recruit in the final months of 2020, compared to 68 per cent in the public sector. Almost two-thirds (64 per cent) of respondents in the third sector reported plans to hire in the same period. 

Recruitment intentions were lowest among organisations in manufacturing (35 per cent), hospitality (37 per cent) and business services (45 per cent). They were highest in healthcare (72 per cent) and public administration (66 per cent). 

Lee Biggins, CEO and founder of CV-Library, said many businesses showed signs of recovery throughout October – particularly those benefiting from the Eat Out to Help Out scheme – and were restarting their hiring efforts after the summer. But as England entered a second lockdown, the economy was in a much more fragile position than in March, he warned.

"As a result, it's likely that many businesses across the UK will slam the breaks on their hiring plans," Biggins said.