Almost three-quarters of UK manufacturers are preparing to cut jobs in the next six months, according to new figures that will heap further pressure on the government to protect employment ahead of an economic stimulus package expected next week.
More than 10,000 jobs have already been put at risk in the past week across industries such as retail and aviation. Now, manufacturers are also warning of widespread redundancies as the government’s furlough scheme begins to wind down.
More than 40 per cent of manufacturers said they would make job cuts before the end of the year, according to a survey of members by Make UK, which represents the sector. A further third said redundancies were possible.
Next week, the chancellor is expected to reveal a package of measures to boost the economy, from tax cuts to investment pledges, with companies calling for the immediate extension of financial support to help them stay afloat.
But executives said they were already shifting from using the furlough scheme to pay their workers to starting redundancy programmes given worries that demand will remain subdued for some time.
On Thursday, a survey of 2,800 chief financial officers conducted by the Bank of England showed that UK businesses expected sales to be 26 per cent below normal levels in the next three months.
The decline is an improvement from a 38 per cent estimated contraction in the second quarter, but points to job losses as businesses struggle with low revenues.
The survey, conducted from June 5-19, showed that all sectors expect sales to fall significantly in the third quarter, despite the reopening of the economy, with accommodation and food services forecasting only half their usual turnover. Manufacturers expect sales to be down one quarter.
As a result, the labour market is set to deteriorate as the government job retention scheme unwinds and revenues fail to recover to pre-virus levels. CFOs expect the share of people looking for a job to peak at the end of this year at more than 11 per cent, from 3.6 per cent.
“With the unemployment rate likely to remain above its pre-pandemic rate of around 4 per cent until 2023, the labour market will remain a constraint on the pace of the economic recovery for some time yet,” said Ruth Gregory, senior UK economist at consultancy Capital Economics.
Business investment, which supports future growth and fosters advances in productivity and competitiveness, is projected to remain more than a third lower from what it would otherwise have been without the pandemic. In the first quarter of next year, CFOs see investment remaining at around 20 per cent of normal levels.
However, the UK consumer confidence index, published by the research company GfK, posted an improvement to net minus 27 in the week to June 26, rising nearly 10 points from a historic low of minus 36 in the second half of May.
The index is calculated as the difference between those reporting positive and negative views on a variety of questions, including their propensity to make major purchases. This sub-index increased sharply to minus 25 from minus 41 last month.
“Consumers appear to be slightly more confident as lockdown loosens across parts of the UK,” said Joe Staton, GfK’s client strategy director.
More positive consumers could translate into higher spending, fostering economic growth, while pessimism could prompt consumers to save instead.
Last week, Rishi Sunak, the chancellor, said additional government measures would depend on how consumers reacted to the reopening of services.