• Tatiana Kasujja

How will the UK labour market look in the coming year?

Updated: Sep 10

It is no secret that with the economically unstable and unpredictable year that the business sector has had to face along with the rest of society, the labour market has taken quite a hit – particularly in the retail and hospitality industries which are heavily dependent on the physical presence of consumers to generate sales. Some struggling business have had to push employees into furlough or unemployment, while others have relied on quickly adapting to changes in consumer habits to minimise such risks. The question of (un)employment, coupled with the ability for those hardest hit to bounce back as the gradual easing of restrictions unfolds will therefore be central in assessing the outlook of the UK labour market over the coming year.

This article uses insights of the current problems facing the labour market to briefly outline and explain how such challenges provide reason to be cautious in assuming that the roadmap out of lockdown will lead to an entirely positive outlook for the labour market.

The state of the labour market now – A brief overview

Since February 2020, the number of payroll employees has fallen over 700,000, although the last two months have seen a slight increase in the number of payroll employees being recorded according to the Office for National Statistics (ONS). With non-essential retail, high streets and the hospitality sector being among those whose economic inactivity have seen them the hardest by the pandemic and lockdown restrictions, young people have borne the brunt of unemployment, accounting for 60% (ONS) of the fall in employment statistics.

Such disruption within the labour market has seen the number of people claiming unemployment benefits increase by 1.4million between March 2020 and Feb 2021, alongside a 7.2 per thousand a year increase in the redundancy rate according to GOV.UK statistics.

So, what will the coming year going to look like?

Undoubtedly, such figures have raised many doubts, concerns and questions surrounding the prospects facing the UK Labour Market over the coming year as different industries have experienced loss to varying degrees – those with a strong focus on IT & technology have even benefitted from increasing rates of online consumerism and dependency on tech to adapt to working from home. With Boris’ roadmap out of lockdown still very much in its early stages, seeing a return to the use of outdoor sports facilities from 29th March followed by non-essential retail on the tentative date of 12th April, this should see various retail, hospitality and leisure industries begin the process of getting back onto their feet. However, it is expected that retail employment growth won’t return to pre-covid levels due to the structural changes that technology and changing consumer patterns throughout the lockdown period have brought to business, leading to concern as to what this could mean for employment prospects within the labour market, particularly for young people who are more likely to work in these sectors that have been hardest hit.

The vaccine rollout has also been expected to play a key role in determining the outlook of the labour market in the coming year. With over 29 million people in the UK having received at least their first dose of the vaccine and the PM stating that the roadmap for easing England’s coronavirus lockdown is still on track, it has been expected that newly reopened businesses will begin recruitment processes and other industry sectors will start to re-extend working hours from part-time to full-time, creating some hope for opportunities facing those within the labour market.

However with a third wave of infections arriving in Europe and German authorities warning that it could push intensive care units to “breaking point,” there is the need to be cautious in assuming that the rollout of vaccines in the UK and the roadmap out of lockdown will paint an entirely positive picture for the labour market. News of a third wave reaching Europe could potentially mean further delay and uncertainty for UK industries that were depending on cross-border travel, the tourism and aviation industries being among them. Government announcements last week that “anyone who travels abroad without good reason could be fined £5,000” has dampened hopes of cross-border activity re-igniting economic activity in industry sectors that heavily depend on such activity.

The prospects facing the UK labour market over the coming year therefore remain uncertain and inconsistent: although we can expect to see an improvement in employment opportunities among businesses that will see a return to local movement and activity, the limited impact of such a positive outcome makes it difficult to make any conclusive claims as to the outlook the UK labour market faces as a whole. This is furthered by the fact that the drop in unemployment figures is likely to be limited by the termination of the furlough scheme come September, as businesses that are barely able to hang on with the help of government support they are receiving will be forced to let more employees go once it comes to an end.

It is therefore not until government support measures and schemes end, and businesses are left to stand on their own two feet that we will be able to develop a more accurate picture and make more conclusive claims about what the labour market will look like in the coming year. Until then, for now it remains clear that…

  • With many young people working in sectors that have been hardest hit, the unemployed segment of the labour market in the coming year is likely to be disproportionately young

  • The acceleration of e-commerce is likely to limit employment opportunities facing those within labour market

  • Threat of a third wave arriving from Europe and restricted cross-border travel means further delays in a ‘return to normal’ for those hospitality, leisure and tourism sectors heavily dependent on cross-border travel, resulting in an expanding labour market with limited opportunities as more people come of working age

Tatiana Kasujja