‘Hospitality will see a spike in redundancies once furlough ends’

By Nikkie Thatcher

- Last updated on GMT

Initiative close: the Coronavirus Job Retention Scheme (CJRS) ends at the end of October
Initiative close: the Coronavirus Job Retention Scheme (CJRS) ends at the end of October

Related tags: Employment, Training, Legislation

The hospitality sector will witness a rise in job losses once the Coronavirus Job Retention Scheme (CJRS) ends next month (October), a labour expert has warned.

This comes after trade body the British Beer & Pub Association (BBPA) urged the Government to provide further financial support for the sector to save pub jobs​.

Chartered Institute of Personnel and Development senior labour market adviser Gerwyn Davies told The Morning Advertiser​: “I wouldn't want to put a figure on it but it's clear there will be a spike in redundancies, which will be heavily concentrated in sectors that are more reliant on the CJRS and others and hospitality is one of those.

“One of the unfortunate aspects of this is it will fall disproportionately hard on young people and low paid workers, who make up vast swathes of that sector.

“It is very difficult to reabsorb those workers back into the economy because there are so many. I stress, there are many high skilled positions within those sectors but compared with other sectors, there is a higher proportion of low skilled, low paid workers in those sectors and the availability of substitute sectors for them to move into is very limited.

“This suggests we could see a return of the structural unemployment we saw in the 80s.”

However, Davies also outlined how employers have managed to avoid redundancies thanks to the furlough scheme.

Unwinding of furlough

“Employers of a certain size have to inform and consult with their staff before making redundancies, which is perhaps one of the reasons why we have not seen redundancies pick up as much as many people have expected," he added.

“That is going to change due to that factor but also, the bigger factor being the unwinding of the CJRS. One of the most pleasing aspects of the pandemic is the way in which employers have responded by avoiding or minimising redundancies.

“That is due to the CJRS, which has helped support people in jobs but it's also due to employers exploring other options such as recruitment freezes, wage flexibility such as pay cuts and pay freezes, redeployment.

“Together, that helps explain why redundancy activities has only ticked up modestly since the start of the pandemic, which is quite remarkable given the scale in the fall of output.”

Davies also stated how the hospitality sector is the biggest example of a beneficiary of the scheme

“The majority of employers are participants in the furlough scheme, which suggests the abrupt unwinding of it could spell very bad news for the sector and job losses in the sector," he said.

“Looking ahead, there's no way of knowing when or to what extend the pub trade will recover. As with other sectors, this could lead to a permanent shift in consumer trends, which could include staying away from the pub and having drinks at home.

“Who's to say that won't be a permanent feature of the post-pandemic world although that is unlikely.”

Labour impact

The impact of migration restrictions is also something that will hit the pub sector partcularly hard, Davies explained.

“In the event it recovers, hospitality sector is one of those that is exposed at the same time because of migration restrictions in parts. This will end low skill labour coming into the country," he said.

“The hospitality sector and the pub trade has in recent years, relied on new labour so we could be facing a double whammy of having got rid of staff, then if it recovers quickly, you need to find staff quickly but of course you have let go of staff you originally had and you've not got some of the labour you had relied on in recent years. It is in a tricky place at the moment.”

While an extension of the furlough scheme doesn’t look likely, Davies suggested the Government looks into a similar, sector-specific initiative.

“It does suggest the Government could look at some form of scheme albeit maybe a less generous one, specifically for those sectors that are not operating at full capacity and clearly the pub trade is one of those,” he added.

When it comes to redundancies, while it can help a save a business, it can also have a detrimental impact, according to Davies, who explained: “we are exploring our numbers to explore all the alternatives because what employers often underestimate is the reputation damage that is often the result of making large redundancies especially if done badly, which of course, some are.

“It can also lead to a loss in employee morale and above all, thinking ahead to when the economy recovers, you haven't got the skills and people in place to exploit the recovery fully.

“Either you hold on to your staff and explore all the options, so you have people who have the skills and qualifications and experience of the organisation, or you have to incur the recruitment costs and training and induction costs of individuals who you don't know which can lead to a figure of £10,000 onwards, per employee, according to our research.

“Then you've got the redundancy costs on top, which on some cases in minimal but in others, it's not. There are many compelling reasons why organisations need to do all they can to minimise redundancies but at the same time we recognise that if you've not got any revenue coming in, it's very difficult to square that with the wage bill.”

Related topics: Legislation

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