Planned redundancies drop 86 per cent from Covid peak, data shows

Experts highlight employers are no longer in ‘survival mode’ but raise concerns about ongoing skills shortages

Planned redundancies drop 86 per cent from Covid peak, data shows

The number of redundancies planned by businesses has dramatically decreased since the peak of the coronavirus crisis, official figures have shown.

Data from the Insolvency Service, acquired through a Freedom of Information request by GQ Littler, revealed there were 40,601 planned redundancies between July and September 2021.

This was down 86 per cent on the same period in 2020, when the number of planned redundancies peaked at 290,000.

Employers planning to make more than 20 redundancies are required to report their plans to the Insolvency Service at least 30 days before the first dismissal is made – increasing to 45 days for employers planning 99 or more redundancies.

Commenting on the data, Ian Moore, managing director of Lodge Court, noted that the figures were positive yet unsurprising. While many firms “acted quickly and decisively” in the first lockdown by reducing costs and headcount to enter “survival mode”, he said this approach has now changed. 

“We have seen some evidence of increased recruitment activity, but businesses remain cautious about taking on new staff too quickly, instead seeking to increase productivity wherever possible,” he told People Management

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Moore also observed that some of those who were furloughed found alternative employment and many never returned to their original role or career. 

“Our recommendation to HR is to continue to invest time in your workforce through training, incentives and culture – they are what is helping your business grow again,” he said. 

Tania Bowers, global public policy director at the Association of Professional Staffing Companies (APSCo), said that the decrease in planned redundancies suggests the furlough scheme achieved what it was initially introduced for. 

But the figures also come at a time when the country faces a significant shortage of skills, which “will no doubt be influencing resourcing decisions, including redundancies,” said Bowers. 

This was echoed by Jon Boys, labour market economist at the CIPD, who said voluntary turnover of staff could be “a bigger problem” for firms despite the recent focus on recruitment challenges.

Given the low number of redundancies being made, Boys stressed the importance of retaining staff, particularly by focusing on improving job quality and offering a range of flexible working options. Employers “should also be looking at things like pay and benefits, job design, and progression and development opportunities,” he added. 

Raoul Parekh, partner at GQ Littler, also cautioned that the rapid emergence of the Omicron variant had knocked the growing confidence of many employers, particularly in the retail and hospitality sectors.

He also warned that employers who opted to make employees redundant rather than make use of furlough could potentially find themselves facing unfair dismissal claims. “We’re just starting to see the first cases coming through, and the position is still not clear,” he said.