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UK graduate labour market update: 7 July

July 2020

Prospects' head of higher education intelligence, Charlie Ball, provides his regular update on the impact of the COVID-19 lockdown on the graduate labour market 

What we're hearing:

  • As lockdown eases things seem to be improving reasonably rapidly in those sectors that are getting back to work, but we're a long way from getting the jobs market back to where it was pre-lockdown.
  • This is an international issue though - there is no sanctuary country with a largely-unaffected graduate labour market.
  • Consultations may be underway in many sectors that will need to lay staff off when the furlough scheme ends, which is why we've seen a lot of announcements of significant job losses in sectors like retail.
  • The graduate labour market has suffered significant damage, particularly in the arts, but things are far worse for non-graduates. Many key graduate employment sectors - in health, social care, IT, business services - have been much less affected than many other areas of the economy.
  • Things are also looking difficult for the self-employed, partly because many of them work in sectors, such as the arts, that have been badly affected and partly due to sheer lack of cash reserves.
  • Many SMEs are short of cash but may reconsider their options if they can get back to business.
  • It is now very clear that there is a significantly greater interest in postgraduate study than usual and students may be willing to accept some virtual delivery if they're assured it is only temporary.
  • The outlook for international student recruitment is very tough but many of our key international competitors have their own issues and many, possibly most, prospective international students still seem to be at least considering study.
  • Many employers are yet to make firm decisions about recruitment for the rest of 2020, but the decision point is rapidly approaching. Don't assume that the graduate labour market will remain this subdued all year.
  • Salaries are likely to remain stagnant or even fall.
  • Decisions made about recruitment and business strength this year will also affect next year's recruitment round (at least).
  • The collapse in employment in retail and services is likely to affect term-time jobs for students in the future and thus the ability for students from less advantaged backgrounds to support themselves at university.
  • There are also worries about student deferral, not merely because of the reduced financing for 2020 that will follow, but also because of the likely much larger 2021 entry cohort (undergraduate and postgraduate, home and international) that results, and the ability of institutions (which are likely to have much less resources available) to cope with that.
  • A 'V' shaped economic recovery now looks rather less likely than something showing an early initial surge to a lower level than before followed by a much slower, shallower recovery.

People Management have a liveblog on employer actions in the pandemic.

The Institute of Student Employers have issued a plan to stimulate youth employment post COVID-19. Their suggestions include:

  • Cut national insurance contributions for all staff under 24 for a year.
  • Cover the costs of the 20% off-the-job (study) time for all new apprentices under 24.
  • Free employers up to spend their apprenticeship levy on the real costs of apprenticeships.
  • Provide a small incentive (£50 a week) for employers who offer placements, internships, and other forms of work experience.
  • Appoint an independent labour market monitor.
  • Offer an opportunity guarantee for all young people who have been unemployed for six months or more.
  • Target additional support to areas and industries that are particularly hard hit by the crisis.
  • Support educators by providing resources for tutoring and support.
  • Review the fairness of the examination system given the disruption by Covid-19.
  • Provide access to career guidance and wider employment support.
  • Invest in vocational education and provide young people with a maintenance allowance if they choose to pursue this route.
  • Provide funding and support for young entrepreneurs.

Pay pressure has fallen sharply, as companies have deferred pay deals, cut pay or reduced working hours.

The Bank of England reported its quarterly Agent's summary of business conditions on 18 June, this for Q2. In business and finance, activity weakened further overall, but developments across sectors were mixed. 

Activity held up in corporate restructuring, audit, debt management, employment and probate law, IT and telecommunications. Insurance activity was also maintained and demand for banking and financial services remained strong as companies sought finance to bridge the lockdown. But discretionary spending cuts have led to weakening in marketing, advertising and recruitment services.

In the professional services sector, many employees have been able to work from home during lockdown and that has led to reduced disruption. A number of companies said they don't expect to return even to limited onsite working until the autumn. Some have been able to improve productivity during lockdown, reducing their need for staff.

Manufacturers are resuming production, though many are operating well below full capacity due to social distancing measures, and a high proportion of workers remain on furlough or reduced hours. Social distancing and weak demand are expected to constrain output for several months, with a consensus of production being down 20% by the end of the year. The aerospace, automotive, heavy engineering and oil and gas industries have been most severely affected, leading to redundancies with more expected as the furlough scheme unwinds.

Food producers have also been hit by loss of food service business and a drop in demand for pre-packaged food, which has been only partially offset by higher demand from supermarkets. The industry estimates it could take two to three years for food service demand to return to pre-pandemic levels. By contrast, producers of chemicals, technology and healthcare and personal protective equipment (PPE) have reported strong demand. Supply chains were generally stable, with only a few reports of shortages.

Construction activity resumed on a phased basis in May and June, though mainly on sites where building had already started or was close to completion. Activity was being constrained by social distancing measures and by shortages of materials. Enquiries and orders for commercial work over the next two years have 'collapsed' and the industry is concerned that changes to working habits as a result of the pandemic could affect office developments. Redundancy consultations are reported to be underway at some employers.

However, public sector projects were holding up, and housebuilding activity was resuming slowly, though house builders expected output to remain well below normal levels for some time.

In the retail sector, while the majority of workers remain on furlough for the time being, permanent store closures, and therefore job losses are expected. Some smaller retailers are reluctant to take staff off furlough until there is more clarity over how demand will evolve.

In travel and tourism, major operators have already announced thousands of redundancies, and many smaller contacts in the sector also expect to cut jobs. Some leisure and fast food companies reported a small reduction in the use of furloughing as outlets begin to reopen.

The data for employment intentions over the next six months is unequivocal - we expect to see significant redundancies.

Pay pressure has fallen sharply, as companies have deferred pay deals, cut pay or reduced working hours. There are also reports of sharp declines in bonus and commission payments.

The biggest losses will likely stem from falls in international student enrolments and increases in the deficits of university-sponsored pension schemes.

The Institute for Fiscal Studies has released a report on the financial situation of UK universities and the projected losses due to pandemic. The headlines have been eye catching but the IFS are far more measured and are upfront that the levels on uncertainty involved are very significant (and this makes planning difficult). The IFS estimate that long-run losses could come in anywhere between £3billion and £19billion, or between 7.5% and nearly half of the sector's overall income in one year.

Their central estimate of total long-run losses is £11billion or more than a quarter of income in one year, which would mean an estimated 13 institutions in would end up with negative reserves and thus may not be viable in the long run without a government bailout or debt restructuring.

The biggest losses will likely stem from falls in international student enrolments (between £1.4billion and £4.3billion, with a central estimate of £2.8billion) and increases in the deficits of university-sponsored pension schemes, which universities will eventually need to cover (up to £7.6billion, with a central estimate of £3.8billion).

Job losses are being announced across the retail and aviation sectors in particular. The BBC has a rundown of some of the main announcements, including:

  • 1,000 job losses at Pret-a-Manger
  • up to 5,000 job cuts at Upper Crust owner SSP Group
  • up to 700 jobs at Harrods
  • about 600 workers at shirtmaker TM Lewin
  • up to 900 cuts at management consulting firm Accenture
  • 500 head office staff at Arcadia
  • 300 staff cuts across Virgin Money, Clydesdale Bank and Yorkshire Bank
  • 1,700 UK jobs at Airbus
  • 1,300 crew and 727 pilots at EasyJet.

John Lewis, WH Smith, Bensons for Beds, Wrights Pies, tableware-maker Steelite International, the Adelphi Hotel in Liverpool and Norwich Theatre Royal have also announced as-yet-undisclosed job losses.

This week's updates from the ONS are here - reporting to 2 July. According to the latest Business Impact of Coronavirus Survey (BICS) collected 15 to 28 June, 86% of businesses were trading. 23% of the workforce were on furlough, with 68% of those receiving wage top-ups from their employer in addition to the Coronavirus Job Retention Scheme.

According to the latest Opinions and Lifestyle Survey (collected 25 to 28 June), the proportion of working adults travelling to work increased to 49%, up from 44% the previous week. 40% of businesses had less than six months cash reserve and 4% had none. 67% of businesses in accommodation and food services reported less than six months or no cash reserves, followed by 58% of construction businesses. 42% of businesses continuing to trade said that capital expenditure had stopped or was lower than normal because of the coronavirus.

The House of Commons Library have again updated their briefing on the effects of pandemic on the labour market, this time to 3 July. Although it doesn't contain anything that has not been covered in these summaries, this remains probably the single best overview of the current state of play (outside of Luminate!) and is highly recommended.

British Chambers of Commerce issued the results of their Q2 Quarterly Economic Survey on 2 July. The survey polled 7,700 firms, employing over 580,000 people across the UK and found the balance of firms reporting an increase in domestic sales fell to its lowest level on record. 10% of respondents reported an increase in sales, 17% reported no change, and 73% reported a decrease.

The Centre for Cities have updated their High Street Recovery Tracker to 23 June. It looks at the average city centre footfall for the last week in June compared to pre-pandemic levels and while not easy to summarise for labour market updates is nevertheless worth a look.

The Resolution Foundation have issued a report on the challenges to the labour market caused by the crisis, entitled The Full Monty. The Foundation argues that the speed and nature of the labour market shock caused by pandemic gives the downturn an unusual character and that policy will need to reflect that. Young people, the low paid, people in atypical forms of work and parts of the country that rely on people travelling in to spend are all disproportionately - and thus very severely - affected. They also show evidence to suggest that hopes of a fast, 'V' shaped recovery may be very optimistic without the very early adoption of an effective vaccine, including YouGov data showing that a quarter of furloughed workers expect to lose their jobs. The Foundation suggests:

  • a wage subsidy scheme - a Coronavirus Job Protection Scheme (JPS) - to stem significant outflows of workers from the hardest-hit sectors who will struggle to find alternative work
  • using public investment to rapidly create jobs all over the country - two suggested areas are a significant expansion in public funding for social care, and retrofitting and carbon-saving measures in domestic housing
  • hiring subsidies for expanding firms
  • significant investment into better employment support services, including better job search support, improved IAG, and job guarantees delivered via wage subsidies, targeted at young people whose employment prospects have been worst affected by the crisis.

Apprentices are more likely to be furloughed or made redundant than the average worker.

The ESRC's Economics Observatory has updated with an examination of the impact of pandemic on apprenticeships. Apprentices are more likely to be furloughed or made redundant than the average worker. This is because apprentices (especially if recently hired) may lack the skills and experience to be temporarily redeployed in different roles: this is partly borne out by the Sutton Trust survey we reported in May where 29% of employers (potentially up to one in two of those who had to furlough apprentices) claimed that their apprentices could not be moved to other desirable roles because of lack of skills.

There is contrasting evidence from the Association of Employment and Learning Providers - on 16 April they reported that a survey of 150 providers found that 81% of their apprentices were still in active learning thanks to learning switching to online provision. But by the beginning of May the AELP were reporting that 60% of employers had stopped hiring apprentices entirely since the start of pandemic. The Observatory concludes that the government may need to step in as apprenticeships are more effective in helping young workers into the labour market than other vocational interventions.

As if on cue, Robert Halfon - long-time champion of apprenticeships and chair of the Education Select Committee - called for a significant expansion of degree apprenticeship provision, in a speech to the Edge vocational education charity. Halfon called for a 'recasting of our skills priorities to place apprenticeships front and centre - to create a new apprenticeship culture as the lifeblood of training and employment'.

The Social Market Foundation have issued a briefing paper on the medium-term economic impact of the pandemic. The SMF expect a sluggish, U-shaped recovery (or what US economists are calling 'a reversed square root sign' and use data to look at the groups, regions and industries they expect to see impacted over the medium term by economic changes post-pandemic.

Jobs in the £15,000 to £24,000 salary band saw the greatest fall in vacancies both in percentage terms and in absolute terms.

The IES have updated their ongoing analysis of Adzuna data on job vacancies from the government's 'Find A Job' site, to 28 June. In the week to 28 June,  there were 85,000 new vacancies notified, down from 112,000 the previous week and suggesting that the easing of lockdown has not yet led to any sustained rebound in hiring. The number of notified vacancies was 388,000, a marginal increase on the 386,000 the previous week.

Jobs in health and social care have held up over the last three months. IT jobs have seen a small recovery - the greatest percentage falls have been in hospitality, energy and sales. But sales and customer services have seen a slight recovery in June. Jobs in the £15,000 to £24,000 salary band saw the greatest fall in vacancies both in percentage terms (55%) and in absolute terms (165,000 vacancies). The £45,000 to £54,999 salary band had the highest proportionate increase between May and June.

Unfortunately, next week the IES will be ceasing these analyses, which have been some of the most useful and interesting of the pandemic period.

The Recruitment and Employment Confederation (REC) are back, along with EMSI, with the Jobs Recovery Tracker. This one goes to 28 June. In the week of 22 to 28 June, REC report 990,000 unique active job postings in the UK, up from 963,000 in the first week of June (this uses different data to the IES) but note that there were over 92,000 new job postings in the week of 22-28 June, down from the 112,000 new postings that were added between 1 and 7 June. Retail and hospitality showed modest recovery, as did construction and financial services.

Indeed have also analysed their own jobs postings, to 26 June, finding a recovery in jobs they describe as 'tepid'. Since the start of June, childcare jobs have been on the rise (as more parents go back to work (or need childcare while working from home). The medical technician and scientific research & development categories are also up over the month. Overall postings were down 59% on last year's trend at the 26 June. That was a further 1% improvement in trend over the week, following a similar increase the previous week, but does little to alter the picture of a sluggish recovery in hiring. 

LinkedIn also perceive an improvement in UK hiring. The hiring rate in the UK was down 31% on the previous year during the week of 15 June. Legal, software & IT services and corporate services have seen the strongest rebound in LinkedIn job ads. Media & communications, construction and manufacturing have seen more modest improvements. Hiring in Italy and France - which experienced steeper hiring declines - are now trending above the UK.

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