12 August 2020
So it’s official. The UK is in recession. But what does that mean?
Data released today by the Office of National Statistics show that we have had two successive quarters of falling gross domestic product (GDP), the definition of a recession. Output fell 20.4% compared with the first three months of the year, following a 2.2% drop in Q1.
This is hardly surprising. The economy was effectively shut down during lockdown and by June, 9 million workers were being supported by the government’s furlough scheme.
The main economic damage was done in March and April. The economy actually grew back by 8.7% in June, and as Q3 will almost certainly improve on the second quarter, some analysts can envisage a bizarre situation where successive quarterly improvements (but from a very low base) fulfil the technical definition of a recovery.
These are odd days indeed.
One of the reasons for starting this blog was to monitor the impact of such changes on hire. And for the time being at least, the economic new normal shows volatility and uncertainty.
Underneath the numbers and statistics lie several factors that are yet to have an effect. One is the gradual unwinding of the Job Retention Scheme from September, when employers must contribute more to top up furloughed workers’ wages and contributions.
The scheme ends completely at the end of October and, according to a report from the Chartered Institute of Personnel and Development (CIPD) one third of companies plan to lay off staff.
Economic pressures, physical distancing in offices, interest in home working and use of new technologies will all influence employment patterns and the structure of the economy. Retail, hospitality and airlines have all been hit hard. Certain areas of construction appear to be performing well, as evidenced by stories on this blog, but what impact might high and long-term unemployment levels have on overall demand?
In the news, on social media and anecdotally there are stories of good people being made redundant as companies adapt. How will they fare? There will be those who can bounce back and find new posts, and some may be able to retrain or relocate. But others may have factors like family ties and caring responsibilities to consider, which their prevous job accommodated.
In writing this blog, I’ve been buoyed by companies showing resilience and growth. Some hirers have reported record monthly turnover figures and suppliers continue to develop new products. However, I have to remind myself that there are uncertainties ahead and behind the statistics there are many human stories.
Official recession or not, I still believe there are reasons to be positive and that the economic noise should not interfere with trusting your own judgement and experience, identifying and steering towards the opportunities for growth. And it’s as important as ever that we all work together and look out for one another.
This has been a somewhat reflective post, but the blog wouldn’t be fulfilling its purpose if it didn’t try to evaluate different aspects of these unprecedented times.
Focusing on the future, I still have many more positive stories to bring you. So look out for them.
(Photo: Rudy and Peter Skitterians / Pixabay)