I think we can all agree that even baby steps towards normality are welcome after the last four months, says Tim O’Connor, Corporate Services Partner. Sending e-mails without genuine concern for the recipient’s health and saying ‘unprecedented’ more than is healthy will be happily consigned to history.
However, the storm clouds are gathering around the end of the availability of the job retention scheme, and the redundancies that may bring. Whilst the economic slump has been sudden and deep, the actions taken by the Government have made it gentler than it may otherwise have been.
Once the government grant is removed it seems likely that, even if jobs are not lost as a result of business failure, there will be a rationalisation of costs with wages, usually being one of the most significant incurred, forming a major part of the process.
Our first silver lining is that the Bank of England still suggest that a recovery is likely to also be quick and steep, which is positive. It is hard to see that there will not be significant economic casualties as a result of the pandemic. We are already seeing the impact in the travel and hospitality sectors and it is probably not unexpected. Our High Streets, that had gradually been losing the battle to online retailers, have been replacing shops with chain restaurants for a while.
It already felt as though this had got to a point that was unsustainable and the financial pressures of the lockdown have led to an inevitable thinning of the pack. It would be nice to think that another silver lining may be the opportunity for independent and family owned restaurants to fill a little of the void left by the loss of parts of these chains. I think we have all learned to appreciate local a little more.
Returning to jobs, since the 2008 financial crisis, economists have been talking about the productivity puzzle. Despite being at full employment in economic terms, the country’s rate of productivity was stubbornly refusing to rise. One of the reasons given for this was employers reluctance to lay people off due to the skills shortage and the difficulty in recruiting quality new staff.
This meant that businesses were willing to accept a slight overcapacity in order to avoid the costly and risky recruitment process. The much-vaunted rise of AI has not yet had the impact anticipated so the employment market has continued to favour the employee rather than the employer.
I suspect the drastic nature of the current crisis on the back of the painfully slow recovery from 2008 will mean that the reduction in jobs will be more significant and lead to levels of unemployment that we have not had to suffer for some time.
The danger is that this management of staff costs is focused on the short term, by removing trainee positions and the recruitment of less experienced staff. This risks two large black clouds, firstly a forgotten generation who have had a disrupted education experience with an impossible employment market to follow. The second being that businesses that rely on steady progression of staff ending up with a hole in that process, which when full activity returns is impossible to fill as this lack of recruitment spreads across the sector.
It is important that we feel confident enough to avoid our decisions being made on too much of a short-term basis to ensure that the medium-term position is preserved. We have all spent four months understandably focusing on the immediate problems but now we must broaden our planning again to the medium term and beyond.
I think a more balanced market between employees and employers will be one of the outcomes of the crisis and that is no bad thing. Any model where demand exceeds supply pushes up prices to the point where it becomes unsustainable and any correction then tends to be significant.
I have great hope that the most significant silver lining coming out of the current situation is the increase in that most precious of characteristics. It is something all employers look for, a quality that we all like to think we have, it is virtually impossible to train and something that enables us to come smiling through the most difficult of times. That magical trait is of course resilience.
So, from adversity let’s hope that we as individuals, as businesses and as communities show our resilience and move the storm clouds away.