Pay furloughed staff MORE to get them ‘off the sofa’, says BofE chief economist


Wages must rise to encourage Britons to get ‘out of their front rooms’ and back into work to help support the UK’s recovery, the Bank of England’s top economist said today as more than two million people remained on furlough.

Andy Haldane said the UK’s recovery was going ‘gangbusters’, but that businesses on pause need to reopen and furloughed or unemployed workers must get back to jobs to keep up the momentum. 

The Bank’s outgoing chief economist at told LBC radio that spending in the economy needs to be boosted to support employment, but that better-paid jobs also need to be created to get people off furlough support.

Mr Haldane, who is leaving the Bank at the end of this month, said: ‘It might require a few pay rises… that should encourage people out of their front rooms and off their sofas and back into the world of work.’ He added it was about ‘creating the jobs and creating enough well-paid jobs to encourage people back to work’.

He warned that as UK growth recovers at a ‘rate of knots’, there is the risk that inflation – already at 1.5 per cent, and set to go above the Bank’s 2 per cent target – may rocket. He said the UK was already seeing some ‘pretty punchy pressure on prices’, with wages starting to rise and increased costs of petrol, diesel, timber and cement.

He added that ‘inflation on the high street isn’t far behind’ and that the Bank may look to trim its vast quantitative easing (QE) money printing programme to keep price rises under control. ‘We could start tightening the tap on that, slowing down the amount of money we’re printing and ultimately perhaps even to turn that around,’ he said.

Mr Haldane’s comments come as shops, hauliers and hospitality firms in Britain continue to struggle to get hold of qualified staff despite 2.1million people still being on furlough, as bosses called for the scheme to end.

At least one in five workers in the arts and hospitality industries were still on furlough last month despite Covid-19 restrictions being eased and the economy roaring back to life following the third national lockdown.

Some 26 per cent of people in the arts, entertainment and recreation sector were still furloughed between May 17 and 31, which was a drop from 34 per cent between May 3 to 16 after restrictions on gatherings were eased.

But the accommodation and food service industry was the biggest bounceback sector in that period, after its proportion of furloughed workers fell from 31 per cent between May 3 to 16, to 21 per cent from May 17 to 31.

However, latest Office for National Statistics data on vacancies in this industry show they are up 27 per cent quarter-on-quarter, but down 47 per cent year-on-year to April. This rise in vacancies suggests there are people staying on furlough and not applying for jobs in other companies within the same industry.

Across the UK there are 700,000 job vacancies across all industries, including 188,000 in hospitality. Bosses at some firms have said some staff would rather stay at home on 80 per cent of their full salary than get a new job. 

The mismatch between furloughed staff and vacancies has led to calls for the furlough scheme to be brought to a close early, before it is set to end in September. Dermot King, boss of Oakman Group which operates 35 pubs and employs 1,200 people, said: ‘I think furlough has done its job. There is certainly a case to be made that it’s stopping people coming back to work, particularly European employees who aren’t coming back to the UK.’ 

But hospitality groups have said the scheme must remain in place until restrictions are lifted, and demand returns, to avoid a tsunami of job losses. 

The proportion of furloughed workers in ‘other service industries’ – such as the repair of computers and personal services – was at 26 per cent, and the transportation and storage industry at 12 per cent, according to the ONS.

Following behind those were the administration and support service sector at 12 per cent and education at 6 per cent, before wholesale, retail trade and vehicle repair services also at 6 per cent, and manufacturing at 5 per cent.

In contrast, the least furloughed industries were health and social work, where it was 0 per cent, followed by 2 per cent in a trio of construction; the scientific and technical sector; and water supply and sewerage management.

Latest data on vacancies in the arts shows they are down 7 per cent quarter-on-quarter and 67 per cent year-on-year to April, and in wholesale and retail trade they are up 3 per cent quarterly but down 38 per cent annually.

Meanwhile in ‘other services’ they are up 2 per cent quarterly but down 31 per cent annually; and in water supply they are up 28 per cent quarterly and up 17 per cent annually. 

Separate ONS data revealed yesterday that more half of pub and bar workers were still on furlough at the start of May – despite a third of bars warning they did not have enough staff to cope with the easing of lockdown. 

Mr King told MailOnline: ‘Hospitality generally has been treated like a rag doll. It’s been the first one to shut down, the last one to reopen. It’s shameful the way hospitality has been castigated for contributing towards the spread of the virus where there is absolutely no evidence whatsoever that hospitality has contributed in any way.

‘Against all that background you have a furlough scheme where people are earning 80 per cent of base salary. In reality it’s about 60 per cent of what you were earning before that. If you’re on that pay, there is a small cohort of people who will say I’m quite relaxed on that pay, there’s no reason to go back to work. I’d say hospitality in the UK is no better than hospitality in the rest of Europe – hospitality in those countries had been badly hit. 

‘The reason for them not coming back to the UK is nothing to do with the availability of jobs here, as there are no more than there are in Europe. The reason is there’s no incentive for them to come back because the Government is continuing to pay them on furlough and there is uncertainty when they do come back there won’t be a job for them to come back to. All of that together is creating a blockage.’

This Office for National Statistics graphic shows the workforce still on furlough leave in late May in the arts, entertainment and recreation industry (26%), the other service activities industry (26%) and accommodation and food service industry (21%)

This Office for National Statistics graphic shows the workforce still on furlough leave in late May in the arts, entertainment and recreation industry (26%), the other service activities industry (26%) and accommodation and food service industry (21%)

The most recent ONS data on vacancies shows  February 2021 to April 2021 compared to a) November 2020 to January 2021 (in dark blue) and b) January 2020 to March 2020 (in light blue). Vacancies in the arts are down 7 per cent quarter-on-quarter and 67 per cent year-on-year; while in the accommodation sector they are up 27 per cent quarter-on-quarter, but down 47 per cent year-on-year. In wholesale and retail trade they are up 3 per cent quarter-on-quarter, but down 38 per cent year-on-year

The most recent ONS data on vacancies shows  February 2021 to April 2021 compared to a) November 2020 to January 2021 (in dark blue) and b) January 2020 to March 2020 (in light blue). Vacancies in the arts are down 7 per cent quarter-on-quarter and 67 per cent year-on-year; while in the accommodation sector they are up 27 per cent quarter-on-quarter, but down 47 per cent year-on-year. In wholesale and retail trade they are up 3 per cent quarter-on-quarter, but down 38 per cent year-on-year 

Consumers could face higher costs or even empty shelves as the impact of the pandemic collides with post-Brexit problems over visas. Across the UK, bosses are looking to fill 700,000 vacancies, twice as many as a year ago, despite there still being two million workers on furlough.

The reopening of the High Street last month has led to a scramble to fill vacancies. A third of large retailers have struggled to find qualified staff, according to software firm Fourth, and 47 per cent have said they plan to hire more people this year.

Working arrangements at UK businesses in late May 2021 split by industry (%)
INDUSTRY  WORKING AT NORMAL PLACE OF WORK WORKING REMOTELY INSTEAD OF AT WORK ON PARTIAL OR FULL FURLOUGH LEAVE
Arts entertainment and recreation 52.7 15.1 25.8
Other service activities 56.4 17.6 25.8
Accommodation and food service activities 70.8 5.6 21.1
Transportation and storage 69.7 16.4 12.3
Administrative and support service activities 60.5 24.1 11.5
Education 46.9 45 5.7
Wholesale and retail trade; repair of motor vehicles and motorcycles 65.8 25.9 5.5
Manufacturing 72.4 21.4 4.8
Real estate activities 47.5 47.2 4.8
Information and communication 15.9 80.4 2.5
Water supply; sewerage waste management and remediation activities 74 22.9 2
Professional scientific and technical activities 28.4 66.5 1.8
Construction 68.8 28.3 1.5
Human health and social work activities 79 18.4 0
ALL INDUSTRIES 59.9 29.4 8.1
Industries will not sum to 100% because of rounding 

Shops at attractions, including zoos, theme parks and museums, are finding it hardest to hire, followed by chains selling clothing and cars.

Panic has already swept through parts of the hospitality sector as punters return in their droves to splash lockdown savings.

Nine in ten bosses said they expected to face staff shortages this year, according to survey data from consultancy CGA, which said there were ‘widespread concerns about a crisis’ in recruitment.

Some have been forced to offer bonuses of up to £1,000 to encourage staff to take up jobs over the summer to meet staycation demand.

At the same time, hauliers delivering to high street businesses have reported losing dozens of European staff because their staff do not meet skills thresholds for work visas.

Owens Group, in Carmarthenshire, said it had lost 50 drivers who were EU citizens in the ‘perfect storm’ caused by the pandemic and Brexit.

The Road Haulage Association (RHA) estimated that there were between 60,000 and 70,000 unfilled driver jobs.

Many European drivers have lost their right to work in the UK, and tens of thousands of driving tests were cancelled during the lockdown. The shortages have pushed wages up by a fifth in some cases.

The RHA’s chief executive, Richard Burnett, said: ‘The reopening of non-essential retail outlets and parts of the hospitality sector is making the situation even worse.’

He added that Government ‘hostility’ was ‘unhelpful’, and called on ministers to designate drivers as skilled workers.

Some 55 per cent of hospitality staff were on furlough at the start of last month. That is well down on the 91 per cent during the November 2020 lockdown peak, but it is still far higher than furlough levels in the wider economy.

However it appears to be at odds with complaints from industry leaders last month that there was a six-figure shortage of staff.

Before the latest lockdown easing on May 17, a third of pubs reported begin under-staffed, amid an exodus of foreign workers back to their home countries during the pandemic.

The ONS said confidence in the pub industry has increased in recent months as draconian rules have been eased to allow customers to return. 

But a third of landlords have seen profits fall by in excess of 50 per cent, according to new research. It also found 33 per cent of landlords still suffered ‘significant profit losses’ last month. 

This represents an improvement after heightened restrictions around Christmas resulted in ‘huge losses in trade’ at the end of 2020. However, current levels remain significantly worse than across other areas of UK industry, with only 9 per cent of all UK businesses reporting similar losses.

The ONS said in its ‘Economies Of Ale’ report that by mid-December 2020 more than 80 per cent of pubs and bars said their profits were more than 50 per cent below what they would normally expect for the time of year, hitting 100 per cent by the end of the month.

By late January pubs were still reporting a larger loss of profits than all other businesses. The ONS said those losses have recently started to shrink, with approximately 33 per cent of pubs recording ‘significant profit losses’ at the start of May.

Separate Office for National Statistics data showed 55 per cent of hospitality staff were on furlough at the start of last month

Separate Office for National Statistics data showed 55 per cent of hospitality staff were on furlough at the start of last month

The report suggested that the coronavirus crisis continues to impact optimism around the future of the hospitality sector.

Andy Haldane, Bank of England chief economist, said the UK's recovery was going 'gangbusters', but that businesses on pause need to reopen and furloughed or unemployed workers need to get back to jobs to keep up the momentum

Andy Haldane, Bank of England chief economist, said the UK’s recovery was going ‘gangbusters’, but that businesses on pause need to reopen and furloughed or unemployed workers need to get back to jobs to keep up the momentum

Just over a fifth (24 per cent) of pub businesses had high confidence of surviving the next three months, compared with around 44 per cent for all types of businesses.

Nevertheless, the ONS said this reflected a recovery in optimism, with only one per cent of pub owners saying they were highly confident about their future in early February.

The research also revealed that 55 per cent of all pub staff were still on furlough in early May, compared with around eight per cent of the UK’s wider workforce.

During the November 2020 lockdown some 91 per cent of pub and bar staff were on furlough.

The ONS said: ‘We can increasingly see a downward trend of pub and bar staff on furlough since restrictions were lifted on beer gardens.

‘Despite this, the percentage of staff that were on furlough has remained high. This suggests that where pubs and bars have been open, they have been operating with minimal staff.’

Furlough support is set to reduce from next month with further cuts until it is axed completely at the end of September.

The ONS also said that the total proportion of workers on furlough fell to 8 per cent in mid-May, which was comparable with the lowest recorded proportion in October 2020 since the scheme began. 

And it reported that the percentage of businesses currently trading has increased to 87 per cent – the highest proportion since June 2020.

It also found that the percentage of businesses currently trading in accommodation and food services rose from 61 per cent to 83 per cent during May 2021, as indoor dining was allowed to reopen three weeks ago on May 17.

Diners talk to a waitress at Loxleys restaurant in Stratford, Warwickshire, after indoor hospitality reopened on May 17

Diners talk to a waitress at Loxleys restaurant in Stratford, Warwickshire, after indoor hospitality reopened on May 17

Two members of theatre staff applaud from in front of a curtain at the London Palladium as workers are taken off furlough

Two members of theatre staff applaud from in front of a curtain at the London Palladium as workers are taken off furlough

Meanwhile Bank of England chief economist Andy Haldane said today that uncertainty about the prospects for the labour market remained high even though employment and vacancies had bounced back quickly from the crisis.

He said: ‘We’ve still got more than three million workers on furlough across the UK, and that means that uncertainties about the future jobs market remain pretty acute.’

Government figures last week showed 3.4million jobs were on furlough at the end of April, but more timely survey data from the ONS suggested the number had dropped to 2.1million by mid-May. 

Mr Haldane also said the rise of working from home after the pandemic could have important implications for labour market, productivity and inequality.

And he claimed Britain’s housing market is ‘on fire’ thanks to government incentives for buyers, more demand from households with higher savings after lockdowns and a lack of homes for sale.



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