A cloudy outlook for businesses…
Two of our primary reporting sources have revealed less-than-rosy economic reports recently:
1. The Office of National Statistics (ONS)
The ONS has reported that the number of UK businesses closing in the second quarter of 2021 was the highest since 2017. The closures reported were 105,455, compared to 98,880 in Q2 of 2017.
The largest numbers of closures came in Transport and Storage at a 91% increase, with Professional, Scientific and Technical industries facing an increase in closures of 35%. In total all 16 of the major industrial groups showed an increase in closures in Q2 2021 compared to 2020.
Whilst it’s thought the impact of the pandemic is starting to work through to business closures, causing a significant increase in closures, it’s also possible that Q2 2020 wasn’t an entirely realistic benchmark. It was the first full quarter of the pandemic, and consequently the statistics are likely to have been artificially low.
When you compare the same quarter over the previous three years as well though, you can see that the numbers are indeed far higher.
The statistics also show that the businesses that were closing in the period were smaller, with an average of 2.1 employees. This was around 15% smaller than businesses closing in 2017.
More positive news!
The same report shows there were more business creations in Q2 2021, which was roughly equal to those for the same period in 2018 and 2019. Q1 2021 showed a significant increase over earlier years.
2. The British Chambers of Commerce (BCC)
The BCC has warned that one in five companies is considering redundancies as we move closer to the closure of the Furlough Scheme at the end of September 2021.
Of 250 businesses with staff still on furlough, 18% said staff would be made redundant, and 24% said they would reduce hours and move staff to part-time. Of those surveyed, 13% said they would reduce recruitment, while 39% said the end of furlough would have a negligible impact.
The report called for an extension in the Kickstart programme. Introduced in September 2020 to encourage recruitment of young people, Kickstart aims to provide them with usable skills and increase their chances of finding suitable jobs. Given the recent reports that many workers who remain on the furlough scheme are older workers, the BCC has called for the Kickstart scheme to be enlarged to reskill these older workers, to fill the current skills gap.
Jane Gratton, head of People Policy at the British Chambers of Commerce, said: ‘The changes to the furlough scheme will likely result in many thousands of people being released back into the labour market, as employers who are still struggling to recover from the recession are forced to make redundancies and cuts to working hours.’
‘With widespread skills shortages across the economy, some will find new jobs where their skills are in demand, while others will need to retrain for opportunities in a different sector.’
‘Whether furloughed workers are returning to the workplace or the wider labour market, it is crucial that employers and the government give them the support and training they need to be re-engaged and productive.’