The latest research from the National Institute of Economic and Social Research makes interesting reading with an expectation that economic activity will by year end have reached the level last seen at the end of 2019.
However, they do caution that there will be variations both geographically and by sector. Perhaps not surprisingly, London is expected to fare better than other parts of the country and the Midlands & Northern Ireland are looking the most vulnerable. Much has already been said about sectors such as hospitality and the arts who are expected to be some of the worst casualties and this research confirms that expectation.
They have downgraded their unemployment forecast due to the shortage of workers in some sectors and, whilst that is a pleasing headline, delve deeper into their numbers and they are still expecting to see 150,000 workers currently on furlough being made redundant by the end of this year.
The impact of reducing the workforce is obvious from the employees perspective but there are a number of implications from the company perspective. On the plus side, obviously the wage bill reduces but what impact does that have on productivity? If employee numbers are being cut to reduce overheads in line with falling sales then possibly the outcome for the company is ok, but what if the remaining workforce are unable to meet current production demand? Also, if the economy recovers as forecast then how will the business cope with meeting growing demand during the recovery period? Failure to do so may mean there are further issues for the company just as recovery is in sight. In our experience, a business is most at risk as the economy starts to recover and this is a crucial time to be seeking independent advice.