UK labour market remains under pressure; certain sectors will require further interventions to protect jobs

Jul 22, 2020

Analysis of furloughed workers by sector highlights the need for short-term support for at-risk workers as well as upskilling in the longer-term

The UK’s labour market continues to be under pressure with early estimates for June indicating that there were 649,000 fewer employees on the payroll compared to March 2020.

There are small signs of positive news, with monthly data hinting that the decline in job markets is slowing as economic activity picked up in May. Average weekly hours increased for employees and the self-employed, and May saw a decline in the number of people temporarily away from paid work, after an initially sharp rise in March and April.

Jing Teow, senior economist at PwC, comments:

“While employment and unemployment rates ostensibly remain at healthy levels, these mask the true effect of the Covid-19 crisis as workers who have been furloughed are captured as being employed. The record fall in weekly hours worked offers a truer picture of the impact of rising unemployment and furloughing. Vacancies in the three months to June also declined to an all-time low – at 333,000, it is nearly 60% fewer than last year.” 

Interventions and reskilling for furloughed workers 

The phased lifting of lockdown restrictions and the reopening of businesses has led to the gradual return of employees, including those currently on furlough, to work.

However, while the economy is expected to recover gradually over Q3 and Q4 of this year, the projected fall in output in 2020 is likely to have negative consequences for business demand for labour this year. PwC analysis shows that labour demand could fall by around 5% in 2020, which will have significant impacts on the 9.4m UK workers that are currently being furloughed. 

The risk is higher for furloughed workers in sectors such as accommodation and food services (hotels and restaurants), the arts, entertainment and recreation sector and education sector. 

Proportion of furloughed workers by sector at risk of redundancy by the end of 2020 Q2:

While the analysis suggests that furloughed workers may be exposed to job losses, in reality, businesses can mitigate this risk in a number of ways to retain workers, such as reducing pay or hours to reduce wage costs, meaning that fewer workers could be exposed to job losses. 

Jing Teow, senior economist at PwC, continues:

“Part of the success of the furlough scheme and other fiscal and liquidity support was that it relieved working capital pressures faced by businesses, reducing the need to lay-off workers to free up cash flow or prevent permanent business closures. However, the projected decline in demand for workers as a result of weaker economic activity means that in the absence of further support, not all furloughed workers will have jobs to return to when the furlough scheme ends.

“The fiscal stimulus announced by the Chancellor in early July has the right idea in easing the transition from the end of the current furlough scheme by encouraging businesses to bring back workers through the Job Retention Bonus, and also stimulating consumer demand to sustain business activity and jobs. 

“The pandemic has also accelerated long-term trends such as automation. For example, in sectors like retail, transport and manufacturing, business priorities to improve resilience and maintain social distancing are likely to increase the reliance on automation, meaning that workers will need to adapt more quickly to these changes than before. In the short-term, there should be a focus on supporting those workers most at risk from Covid-19, helping them adapt their skills to enable them to shift to sectors that are growing. In the long-term the focus should be on upskilling the workforce to meet the new needs of a digital economy and skills that are more difficult to automate, and create a more resilient workforce for a post-COVID future.”

Ends.

Notes to editors

  1. Jing Teow is available for interviews. Please contact ellie.raven@pwc.com

  2. For more details please refer to PwC’s full UK Economic Update report

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Ellie Raven

Ellie Raven

Senior Manager, media relations, PwC United Kingdom

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