Covid redundancies will exceed anything seen in ‘at least a generation’, study suggests

IES warns job cuts could be double the last recession’s peak, as experts say new ‘rule of six’ restrictions may push unemployment even higher than previous predictions

The number of redundancies planned in the UK will exceed anything seen in “at least a generation”, according to a study that warns employers plan to make twice as many job cuts as they did at the height of the last recession.

New analysis of official data obtained by a freedom of information request found employers notified the government of nearly 380,000 staff at risk of redundancy between May and July 2020. This is double the peak reached during the last recession, when 180,000 staff were at risk of being made redundant between January and March 2009.

The Institute for Employment Studies (IES), which published the research, estimated that the UK was likely to see around 450,000 redundancies this autumn alone. It warned this figure could exceed 735,000 if redundancy notifications continued to rise. 

Tony Wilson, director of the IES, said the data “[laid] bare the scale of the jobs crisis” the UK was facing in the coming months. He added it was a “sad reality” that redundancies could not be avoided entirely, but employers and the government could do more to minimise job losses.

“Our top priority must be to support those facing the prospect of losing their jobs to find new, secure and good-quality work as quickly as possible,” Wilson said. “At the same time, we are in the midst now of a significant recession, and we need urgent action to support employment demand.”

Although some job cuts were unavoidable, employers must not “accept that all of these redundancies [are] inevitable”, he said. He explained there were still many parts of the economy where “perfectly viable businesses” could not bring people back from furlough because of ongoing disruption caused by the pandemic. 

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As such, Wilson and the IES called on the government to offer targeted support for firms facing this disruption but still viable in the long term. The IES also called for the government to guarantee “rapid response” services to provide employment and training support to those facing redundancy, delivered in partnership by Jobcentre Plus, training providers and recruiters.

The IES’s calls follow the TUC urging the government to extend the furlough scheme to prevent "a tsunami of job losses". In its second report on the economic effects of the pandemic, the Treasury select committee also called for an extension of the scheme. But it said the government should strongly consider sector-specific extensions focusing on the challenges hard-hit industries would face as the UK entered its economic recovery phase. 

Additionally, the Institute for Public Policy Research has suggested the government replace the current coronavirus job retention scheme with a new coronavirus work-sharing scheme that would encourage firms to keep employees in work rather than putting them on furlough. 

The IES research was published as new restrictions to halt the spread of Covid-19 came into force in the UK. The ‘rule of six’ restrictions, which came into effect today (14 September), ban social gatherings of more than six people and apply both indoors and outdoors in England and Scotland, and indoors in Wales. 

Experts told The Mail on Sunday that the new restrictions could push unemployment levels even higher than those previously predicted. Before the new social distancing rules were announced last week, economists estimated 8.5 per cent of the working population in the UK would be jobless by the end of 2020, equating to nearly three million people. 

However, Trevor Williams, former chief economist at Lloyds Bank and a visiting professor at the University of Derby, estimated that unemployment in the UK could reach 13 per cent – equivalent to around 4.4 million people in the UK – because of the new rules. 

Gerwyn Davies, senior labour market adviser for the CIPD, said it was "highly likely" job losses would increase significantly in the coming months. Redundancies had been "low to date no doubt because of the job retention scheme”, he said.

"However, there is still a great deal of uncertainty over precisely how many more job losses there are to come," Davies said. "We also do not know what impact the government’s Plan for Jobs [announced in July and including its kickstart scheme and job retention bonus], which came after some of the HR1 redundancy intention notifications, will have on minimising or avoiding job losses in some cases.”

Andy Davies, senior vice president at MHR, told People Management it was no surprise there would be a steep rise in the number of planned redundancies this autumn “simply because the coronavirus job retention scheme is coming to an end”. He said, for many employers, the furlough scheme was “kicking the can down the road” in terms of delaying redundancies. 

“Now we’re at the point of seeing those steep rises in numbers, and I don’t see that as a surprise at all,” Davies said. “Some businesses are now starting to realise what the impact of Covid restrictions and the changing workplace and business environment is, and the knock-on effect is incredibly severe to people.” 

Davies said the sector-specific support IES and others had called for was an “interesting package of measures”. 

Regardless of what other government support was eventually launched, however, employers should still consider the alternatives, he added. These included reductions in working time, withdrawing job offers so existing workers could be redeployed within the business, and staff taking unpaid leave.