With news of a further lockdown but with no plans to extend furlough, many SMEs fear for their workers’ job security and their own business survival. New Office for National Statistics (ONS) data reveals that the UK jobs market is on its way up. We hear from business owners on how the lack of clarity on the future of the furlough scheme may be masking a looming economic crisis for workers.

Jeremy Thompson-Cook, Chief Economist at Equals Money believes that recovery from the darker days of the pandemic was always going to be a double-edged sword and while tills may be ringing, and pub gardens full, government support and subsidies will start to reduce in the coming weeks, increasing the financial burden on UK SMEs.

”Rents are due, evictions become legal again and those companies that have furloughed the 3 million people still on the scheme will have to start contributing to those wage payments,” he says.

”This is the tide rolling out and we will see who was swimming naked; insolvencies and redundancies will rise, and further government support will be needed to bring those 3 million people back into work or training to prevent further longer-term damage from this virus.”

“With further pulls on their cash flow, control of costs and knowledge of pricing has never been more important for the SMEs that drive the UK industry.” 

ONS data: The highlights

  • The number of payrolled employees has increased for the sixth consecutive month, up by 197,000 in May 2021 to 28.5 million. It is however 553,000 below levels seen before the coronavirus (COVID-19) pandemic. Since February 2020, the largest falls in payrolled employment have been in the accommodation and food services sector, people aged under 25 years, and people living in London.
  • Between February and April 2021, there was a quarterly increase in the employment rate of 0.2 percentage points to 75.2% and a quarterly decrease in the unemployment rate of 0.3 percentage points to 4.7%. The economic inactivity rate was largely unchanged on the previous quarter at 21.0%.
  • The number of job vacancies in March to May 2021 was 758,000, only 27,000 below the level before the coronavirus (COVID-19) pandemic in January to March 2020; most industries have recovered to show vacancies above pre-pandemic levels.

SMEs react

Lee Marples, founder and Strategic Director at Think3, runs a creative agency in the East Midlands. He says that despite the pandemic, the company has continued to increase headcount to meet client demands. “The biggest challenge in the jobs market right now, across multiple sectors, is finding technically skilled people that are willing to change roles in a pandemic.”

“People are very nervous about changing roles given the uncertainty of a new job and probation period and in the current climate,” he says. ”Either way, if you are the right employer, new staff will come, but the package has to be right and the blend of working arrangements must suit a new style of long-term working.”

“Employers will need to take things into their own hands and adapt their own models to ensure that they are prepared for the future.” 

Lee Marples, Think3

The boom in demand for marketing services sets his company apart. Similar, Debbie Porter, managing director at Destination Digital says the pandemic has helped her business too. “The furlough scheme has been holding much of the working population’s heads above water and, though welcome, hides the true state of the economy,” she says.

“There have been winners and losers during the past 15 months, with a company’s fate often being decided by the industry it is in. We are seeing an enforced economic revolution, where businesses and industries that are no longer viable slowly disappear.”

Businesses that have been unable to adapt their operations to the new post-Covid world will suddenly be forced to start letting people go and unemployment figures will rise, she explains.

“Sadly, many people who are currently furloughed will soon join the unemployment figures and switch from a company-organised government subsidy to a straightforward government subsidy.”

Debbie Porter, Destination Digital

“We are taking on new staff due to the fortune of our particular industry, but we aren’t complacent. These wider effects on the economy will be felt in all areas and so as a business owner I definitely have to keep a keen watching eye on developments to help judge our every move.”

The real estate market has also remained resilient during the pandemic. “In the property industry at present, there is enough demand and an overwhelming workload that expanding our team has been a consideration for months,” says Matt Housley, director at Amber Homes. ”However, with uncertain reports across many industries we’ve explored other productivity options with manageable monthly payments and ‘easy out’ options.”

Robert Payne, director at Langley House Mortgages believes that Covid has created an extraordinary economic divide, between industries that have flourished and those that have suffered, making the lack of clarity around the extension of the furlough scheme worrying for most. “Fortunately for us, the property market has boomed and we are seeing the largest monthly activity statistics in decades. We have hired during this period but we must be conscious of whether this demand will continue,” he says. “Other industries are still licking their wounds and will be nervous to recruit.”

”I think there will soon come a time where we are able to coexist with Covid and employers will rebuild their workforces. They will be able to choose from a large selection of talented candidates who will sadly be left unemployed when the furlough scheme ends.”

Robert Payne, Langley House Mortgages

Rhys Schofield, managing director at Peak Mortgages and Protection, sees the end of furlough as a positive for the economy as staff move from” Zombie firms to those that have adapted to the brave new world and are ready to grow”.

”The end of furlough will release people into a labour market crying out for new recruits,” he says. “For us, an independent mortgage broker, business is booming. We’ve grown from two staff to 15 since the start of COVID and plan on keeping that up. The challenge now is finding suitable staff as it’s proving incredibly difficult.”

Jessica Ross, founder at Jessica Ross Marketing, agrees with the sentiment that the candidate pool will be ripe with talent looking for a new role. “I’m planning to hire team members for the very first time. The recruitment industry is bouncing back, with many people returning from furlough and part-time roles to their full-time jobs,” she says.

The Bournemouth-based marketer lost her job and launched a business at the height of the pandemic. For Jessica, sharing her success story is a mixed bag. She is already earning three times more than she was before the pandemic struck but she feels guilty talking about it given the hardship so many others have had to endure. 

Her bet was that businesses needed marketing more than ever as a result of the pandemic, but that they were not prepared to take on the fixed cost overhead of an in-house marketer. “I suspected that many businesses still wanted their marketing activities to continue, but that they just didn’t have the budget, or confidence, to keep a team member on full-time. My business model enables businesses to utilise my time to keep their campaigns running, without loss of continuity and without that frightening fixed cost each month,” she says.

Offering copywriting and social media support services, Jessica’s business has supported local and global businesses alike. In addition to this, local charities have been receiving free support from her over the past 12 months as her way of giving back to the local community.

Jessica is already looking to take on additional team members to support the business. Her income has even grown enough that she can now get a mortgage to purchase her first house. “On the one hand, I want to shout from the rooftops that I’ve managed to launch a business during a pandemic that has become incredibly successful and has actually made my quality of life so much better. On the other hand, so many people are facing such terrible hardships and tragedies that it’s difficult to not feel like you’re rubbing their faces in it. It’s a really delicate balancing act.”

Hiring at this time has its benefits, especially for businesses looking to take on young talent via the Government’s Kickstart scheme.

For Keisha Shah, founder-director at Teddo Play, the Kickstart scheme gives 16 to 24 year-olds great work experience at a time when businesses need them the most. “The teacher in me is always looking for young people I can share my knowledge and experience with and give them a head-start. I am very ambitious about my business and have plans of rapid growth to take our award-winning educational resources to children far and wide,” she says. ”This also means that there’s only so much I can do on my own and now, being in year two of trading, I am very much looking forward to taking advantage of the Government’s Kickstart Scheme.”

Chris Ramsbottom, owner-director at Coventry-based The Amethyst Centre is on the lookout for similar support. “I want to employ someone, but as yet I don’t have the working capital to spend on recruitment and training, let alone paying their wages until they become productive enough to be covering their salary.

“I have a position available for a Kickstarter employee. I’ve only had one application and that was from someone who wasn’t suitable for the position. I’m not sure whether this is because people aren’t looking properly until the restrictions are lifted, or if people don’t want to come off furlough yet. Hopefully I can get someone over the summer.” 

Finding the right experience for the roles that are available continues to be a challenge. Samantha Actor, director at Domestic Angels has been working hard the past few weeks to attract new good quality candidates with several vacancies needing to be filled. ”We usually find and secure candidates much faster,” she says. “There appears to be a combination of factors at play including reluctance to leave the home for work, continuing furlough across hospitality sectors and, of course, the idea of being in somebody else’s home. In short, the work is available and will continue to be so.”

While work may be available for those who look hard enough to find it, Craig Bunting, co-founder of independent coffee company BEAR, says the threat of losing another job without the safety net of being re-furloughed may make a lot of jobseekers wary. “The big question is whether the furlough scheme is masking mass unemployment, but one thing we know for sure, it’s causing a stagnant labour market.”

”Who’d risk moving from job to job at a time of such uncertainty, when the ability to be ‘re-furloughed’ is gone?”

Craig Bunting, BEAR

This is echoed by a number of other businesses in the hospitality sector where niche experience is crucial. Oliver Bryant, co-owner and restauranteur at Tokyo Nights, says skilled labour in unrelated fields abounds. But what about his sector? “I’ve been trying to find full-time staff with hospitality experience for ages now, but with no response. They’re as rare as hens’ teeth,” he says. ”Plenty of marketing and engineering graduates applying, though, which is a sign of the times.”

It’s hard to even tell if this will all pan out, says Kim Rix, owner at Gemstone Detective. “The whole economic climate has become so artificial because of the Government’s furlough scheme. It’s impossible to predict what the jobs market will look like when the scheme ends. My gut feeling says it will be sheer pandemonium.”

For Adam Bamford, CEO at corporate gifting business Colleague Box, the uncertainty of the furlough scheme has set his business back by weeks. “As a growing business we are desperate to employ more colleagues but the uncertainty of businesses going back to the office has a ripple effect on corporate gifting,” he says. ”We have backdated orders that are at risk of being pushed back so we have to pause our recruitment decisions. While we support the Government using data to support decisions, we certainly feel this could be done far earlier to allow businesses time to adjust and plan accordingly.” 

Natalie Dawson, co-founder at DawsonWard Creative, has also had to postpone growth plans because of the ever-changing rules, restrictions and support schemes available during the pandemic. “As live entertainment consultants and producers, we have put together plans to employ up to three people within the next 12 months. Because we can see no clear, credible or believable Government plan to support business right now we are holding off as long as possible.”

The end of the furlough scheme could also see canny job seekers turn to contract work to secure their finances. ”As a business that supports a number of companies with employees still on furlough, the end of the Government’s support scheme is the elephant in the room that some businesses are not yet ready to face,” says Karen Watkins, founder at recruitment firm, Rowan Consulting. “Faced with such uncertainty, the traditional permanent full-time contract will likely become a thing of the past for many businesses, instead being replaced with a much more flexible employment relationship.”

Ultimately, mental health and wellbeing will win out as the British public copes with uncertainty.

Emily Alexander, founder at Redundancy Support UK says that the job market may be in better shape now than it was a year ago, but so many people have seen their world crumble before their very eyes, true recovery will need to factor in employee wellbeing. This is where businesses have a role to play. “The jobs market is certainly picking back up but the quality of the roles and pay/benefits on offer are behind pre-COVID conditions so many people are reluctant to go back to work.” she says. “Wellbeing must now be part of the employee value proposition and forefront in all business owners’ minds.”