UK faces ‘major employment crisis’ as vacancies see record drop

16 Jun 2020 By Francis Churchill

Experts warn the private sector will be ‘unable to create enough jobs’ as the government prepares to scale back coronavirus support

The number of employees on payroll in May this year was down 600,000 on the previous year, official figures have shown, while vacancies have seen a record fall and the number of people claiming universal credit continues to rise.

The Office for National Statistics (ONS) said it had seen weakening employment rates in the three months to the end of April, with the largest change seen in the number of people temporarily away from work. This includes the number of furloughed workers, which rose to six million by the end of March.

The figures have raised concerns that the UK could see a massive spike in unemployment when the government starts to wind down its coronavirus support.

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“What we’re seeing may just be the tip of the iceberg,” said James Reed, chairman of recruitment firm Reed, who warned that there was a real possibility unemployment could surpass 15 per cent. “As the clock continues to tick on the government’s generous job retention scheme, jobseekers and businesses face an unforgiving employment landscape.”

The ONS figures released today showed that while the estimated employment rate for the three months to April fell by just 0.1 percentage points on the last quarter to 76.4 per cent – and was actually up 0.3 percentage points on the same quarter last year – the total number of weekly hours in the three months to April dropped a record 8.9 per cent on the previous year.

Job vacancies in May also fell to approximately 60 per cent of their levels in March, causing the largest quarterly drop on record. There were an estimated 476,000 vacancies in the three months to May: 342,000 fewer than the previous quarter.

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The number of people claiming universal credit increased to 2.8 million (including both the unemployed and those employed but on low income or hours) – although part of this rise was attributed to the government’s expansion of eligibility during the coronavirus outbreak.

Gerwyn Davies, senior labour market adviser at the CIPD, said a lower than expected fall in unemployment showed the government’s furlough scheme was working. But he warned that the UK was still “clearly entering a major employment crisis”, with the record fall in vacancies the most worrying statistic.

“The private sector is unable to create enough jobs owing to a lack of demand for products and services, which bodes ill for the remainder of the year as the job retention scheme unwinds, unless business conditions improve very significantly over the rest of the summer,” he said. Jobseekers “face an increasingly uphill task in finding work”, Davies added, and called for policy interventions to help young unemployed people into work and support upskilling and reskilling.

At the end of last month, chancellor Rishi Sunak announced plans to wind down the furlough scheme by the end of October. From August, employers will be expected to start paying the national insurance and pension contributions of furloughed workers. From September, employers will have to contribute 10 per cent of wages for furloughed workers, increasing to 20 per cent in October – the final month of the scheme. 

However, not everyone was negative about the prospects of the UK labour market. Neil Carberry, CEO of the Recruitment & Employment Confederation, said that as lockdown begins to ease hiring should pick up again. “The scale of the growth in unemployment through the rest of the year will depend on consumer confidence and how employers react to the winding down of the furlough scheme,” he said.

“The good news is that the number of job adverts active in the UK has been slowly increasing, with more new job ads being posted every week.” 

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