By Ian Henry, President, Northern Ireland Chamber of Commerce and Industry
Labour market figures published by the Northern Ireland Statistics and Research Agency (NISRA) earlier this month revealed a concerning decline in the number of employees on payrolls, with almost 2,000 proposed redundancies in July, following a record high of 2,500 in June. There is no doubt that these alarming figures provide further evidence of the damage being done to the labour market by the Coronavirus pandemic.
In the initial stages of the crisis, the government moved decisively to deliver a significant package of support for businesses which has helped ease the economic pain to date. However as we approach the gradual ending of many forms of support, most notably the Coronavirus Job Retention Scheme (furlough), which has been successful in preserving thousands of jobs here, there is a strong concern that this will lead to further significant redundancies. In fact, alarmingly, just over half of our members recently told us that they will be reducing staff numbers post COVID-19.
Recent figures from HMRC show that 249,600 employees here were put on furlough. Whilst we accept that there needs to be a switch in economic support, which cannot and should not be open-ended, we are concerned that it will end before the economy is ready and without further support in place. This comes as businesses continue to face increased costs, reduced demand and diminished cash reserves.
Despite the gradual reopening of the economy and more firms seeing a rise in revenue, over a third of businesses tell us that they have three months or less worth of cash in reserves. Of those reporting an increase in their cash reserves, a significant number of businesses cited government support schemes as a driver of this, including the furlough scheme, as well as the various loans and grants available.
However with these schemes set to wind down in the coming weeks, and with the potential reintroduction of lockdowns – it remains unclear what further support, if any, firms will receive when schemes end. To help businesses recruit and retain staff, more needs to be done to reduce the overall cost of employment and prevent substantial redundancies. Slashing the jobs tax by taking steps to reduce the burden of employers’ National Insurance contributions is one such action that could be taken to help businesses now.
More than half of the 33,000 extra unemployment claimants recorded in Northern Ireland since the COVID-19 lockdown in March were under the age of 35. It is therefore vital that government also moves quickly to put in place new training and reskilling programmes for the unemployed and our young people.
In addition to the fall-out from COVID-19, we must not forget that businesses are also becoming increasingly concerned about the impact of Brexit as we move closer to 1 January 2021. The Trader Support Service (TSS), announced by the UK government during Michael Gove’s recent visit to Northern Ireland, has been met with a warm welcome from businesses, as a free service for any company who would like to bring in goods from Great Britain or the rest of the world. We have commented however that although there may be no cost in terms of money for firms, it will still cost them significantly in terms of time – filling in paperwork and providing instructions to intermediaries for example. There is also more to be done including resolving SPS issues, VAT and legislating to protect Northern Ireland’s position in the UK’s internal market.
With so much uncertainty for businesses at the moment, both with the pandemic and with Brexit looming, a successful restart of the economy demands bolder and more ambitious action. We face a difficult winter ahead – even without a resurgence of the virus itself. If the Government wishes to avoid mass unemployment, significant levels of business failure, and long term economic scarring, it must act now.