Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
Marks and Spencer has become the latest big name to announce redundancies with 7,000 jobs set to go across all parts of the business. Elsewhere on the high street John Lewis and Debenhams are set to cut thousands of jobs between them. But it’s not all in retail. British Airways has those 12,000 roles earmarked for redundancy, Centrica, the UK’s biggest energy supplier Centrica, has already said large numbers of office-based roles must go as part of wider job losses and consultancy firm Accenture, is set to reduce its UK workforce by around 8% with the loss of 900 jobs, as its clients put big projects on hold.
The pandemic has caused Britain’s deepest recession and that is fast becoming a jobs crisis. From the high street to the skies, job losses are mounting as companies do everything they can to ride out the storm.
For some sectors, such as retail, the pandemic has hastened what was already inevitable. For others, the impact of worldwide lockdowns and the very idea that day-to-day life could be shut down was unthinkable and has had an immediate effect.
The official figures show that the number of people claiming unemployment benefits in the UK surged to 2.7 million between March and July. The number of employees on UK payrolls fell by 730,000, with younger people, older workers and less skilled workers the worst affected. Worryingly, even for those in work average earnings fell, and the average number of hours people worked dropped by a record amount to an average of 25.8 hours a week, according to figures for April to June.
Unemployment though is notoriously difficult to measure precisely and the picture now is very complex.
The latest figures show 7.5 million temporarily away from their jobs in June, while the Office for National Statistics has identified around half a million workers, such as freelancers and gig economy workers, who say they have a job but are not working or being paid.
And when the furlough scheme ends completely in October, we could find there are many more people out of work if employers decide they cannot afford to keep them after all. That could lead to a big wave of unemployment in the autumn.
However, it is not all bad news. There are some signs that things are bouncing back. Hours worked in retailing, hospitality and construction rose once lockdown started to ease. And there was a 10% rise in job vacancies, largely as small businesses took on staff to help meet coronavirus guidelines. However, experts say job vacancies are still far fewer than they were, even at the darkest depths of the last recession.
When it comes to how long and how deep the jobs rout could go, scenarios published by the government's spending watchdog, the Office for Budget Responsibility, range from an ‘optimistic’ 9.7% unemployed, to 13.2% and four million people out of work.
So far, UK unemployment figures have remained stable since a surge at the start of the pandemic. That’s down to the fact that the government is supporting the jobs of more than 9 million people. However, couple that with the fact that companies are clearly putting off recruiting new staff, with vacancies at a record low, and you can see how the picture could so easily worsen.
When recruitment company Hays (HAS) posts full-year figures on Thursday, everyone will be looking for news on just how bad the anticipated downturn in the summer months has already proven to be.
Hays, which has itself reduced its global headcount by 9%, triggering around 1,000 job losses, gave a trading update, back at the start of July, warning that fee income was down. It said that fees earned from placing staff in roles within companies, had fallen by more than a third, and said it expected to generate a loss over the summer months. It saw a 42% fall in the second quarter in the UK & Ireland, with private sector fees down 68% and public fees 30% lower. That meant that overall group fees fell by 34% in the three months to the end of June as business slumped across the company’s markets. And prompted the warning that: “Cost increases and continued tough market conditions mean that we anticipate being modestly loss-making over the summer months.”
Looking ahead, the company said that while activity had improved, there were “no signs yet” of a sustained change for the better there. As a result, its full-year pre-tax operating profit before exceptional items is expected to come in between £130 million and £135 million. That compares to £248.8 million in 2019.
Hays is not solely dependent on the UK jobs market, or on any particular sector of the jobs market. It operates in 33 countries covering sectors from IT to construction, but it has been hardest hit in Europe and the UK, where fees have dropped by more than 40%. In the US, Asia and Australia and New Zealand, it has seen a fall of around 30%.
Chief executive Paul Venables pulled no punches, describing these as “without a doubt…. the toughest trading conditions that we’ve faced in 14 years”. And lockdowns are at the root of the problem. With winter coming and the threat of a second wave constantly raising its head in the UK and Europe, the double whammy of that and the end of the furlough scheme could make for even bleaker jobless figures than we have already seen.
Hays’ trading update prompted price target downgrades from brokers. Citigroup reiterated its hold investment rating on Hays but cut its price target from 130p to 125p. And Liberum Capital did precisely the same.
Hays’ shares are currently trading around 120p.
More on Hays
Important information: Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.
A secret tax grab - and how to beat it with your pension
Will you be caught by the income tax band freeze?
What’s wobbling stock markets - and what to do about it?
This week, we’re digesting the market’s volatile movements in response to a h…