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The Office for National Statistics (ONS) has published an analysis that shows that we are now in recession. The UK economy shrank 20.4% between April and June when compared with the first three months of 2020. The UK is officially now in recession for the first time in 11 years as result of the reduced household spending and factory/construction output in the pandemic lockdown. Technically, to be in recession means that there have been two quarters of economic decline.  The economy did grow by 8.7% in June and 1.8% in May but the growth in June is still a sixth below the level before the pandemic, in February.

Effects of the pandemic are felt in all sectors with the closure of shops, hotels, restaurants, schools and car repair shops.  In the UK the services sector accounts for 4/5ths of the economy and it had the largest decline on record for the last quarter.  Preliminary estimates show the UK’s slump is one of the biggest among advanced economies. The 22.7% decline in Spain is larger, but our reduction is twice the size of the contractions in Germany and the US. See BBC Article for more information.

Effects on jobs

The Chancellor has said the economic slump will lead to more job losses in the coming months.  As the financial support available from the Coronavirus Job Retention Scheme reduces, employers will be making stark choices about how to survive.

In a BBC interview the Chancellor acknowledged that not “absolutely everybody can and will be able to go back to the job they had”.  He did say that there would be support for creating jobs in new areas, but the details are not yet clear.  The number of people in work fell by 220,000 between April and June according to official figures released on 11th August.

The way ahead

The Confederation of British Industry say that companies are often struggling to pay their bills on time, and the Institute of Directors (IoD) are concerned that mounting debts are making it difficult for businesses to fulfill spending plans. The Chief Economist has also commented that the end of the CJRS scheme may well leave UK business in a difficult state.

There are calls for cuts to employers’ national insurance contributions and other government initiatives to kick start the economy. But the Bank of England is not expecting the economy to claw back to pre-pandemic proportions until the end of 2021.

 

For employers, times are tough and decisions extremely difficult.  For employees these times are very uncertain.  As some employers struggle to make plans for the future, employment law issues may arise.  It is worth remembering that even in these unusual times the employment law remains the same for unfair dismissal and discrimination.  Contact us for advice on employment law issues when making restructuring plans.  

 

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