Dramatic rise in number of job losses

Major job losses continued in the UK during January and February 2009. Most notably, mass redundancies were announced at the steel producer Corus, as well as Barclays Bank and Bank of America. New statistics also revealed that the rate of unemployment is sharply rising, and experts expect that unemployment will top three million in 2009. These developments could also push UK economic and social regulation in a more interventionist direction.

From 12 January to 11 February 2009, the UK was again hit by very high levels of announced job losses. In this period, the European Restructuring Monitor (ERM) recorded 25,244 announced job losses in the UK, making it the EU Member State most affected by job losses during this period. In the equivalent periods in 2008 and 2007, ERM respectively recorded 2,540 and 8,148 job loss announcements in the UK. The ERM data suggest that the UK is currently being struck by a wave of industrial restructuring on a scale unlike anything seen in the country in recent years.

Sectors affected by restructuring

The job losses seem to be distributed relatively evenly between economic sectors, with no sector being affected by more than 20% of the job loss announcements. However, two sectors in particular were badly affected by the recent restructuring:

• the metal and machinery sector accounted for 4,827 (19.12%) of the announced job losses in the period. Most notably, the multinational steel producer Corus announced on 26 January 2009 (see ERM factsheet) that it would cut 2,500 jobs across the UK, with sites in the south Wales region being particularly affected by the job losses. The company blamed the restructuring on the global economic recession and on the subsequent decline in global demand for steel;

• the financial services sector accounted for 4,000 (15.85%) of the recorded job losses. The two companies that made up the majority of these announced job losses were Barclays, where 2,100 job losses were announced on 14 January (see ERM factsheet), and Bank of America, where 1,900 job losses were announced on 13 January (see ERM factsheet). Both banks attributed their restructuring to the global economic crisis.

Other sectors that were struck by significant redundancies included the commerce sector, where 3,806 (15.08%) job loss announcements were made, and the transport and storage sector, where 3,125 (12.38%) job losses were announced.

Other large individual cases of restructuring include those of Shop Direct (1,150 job losses announced – see ERM factsheet), Grattan (1,000 job losses – see ERM factsheet) and London Underground (1,000 job losses – see ERM factsheet).

Economic prospects

The UK macroeconomic outlook also remains rather gloomy. In official statistics (346Kb PDF) released on 11 February 2009 by the UK’s Office for National Statistics (ONS), unemployment had increased to almost two million people by the end of 2008. Economists also expect the figure to continue to rise. An economist at the Institute for Public Policy Research (IPPR), Tony Dolphin, stated: ‘Unfortunately, it now seems inevitable that unemployment will exceed three million during 2009’.

UK trade unions are similarly pessimistic about the prospect of rising unemployment and continue to urge the government to pursue a more active economic policy. The General Secretary of the Trades Union Congress (TUC), Brendan Barber, responded to the February figures by stating:

This is another set of dreadful figures, and we fear worse is still to come. The government must act as boldly on unemployment as they are on the banking sector. Benefits and redundancy pay need to be raised to cushion the financial blow to the newly unemployed. The government needs urgently to introduce a short time working subsidy to help companies avoid redundancies in the first place.

The Confederation of British Industry (CBI) published its own research findings during February 2009, highlighting the impact of the credit crunch. Nearly two in five companies (37%) reported that they had cut staff numbers over the past three months because of credit-related issues. This proportion rose to almost half in the case of large companies, 40% of which had also cut back on production. CBI highlighted that, ‘without urgent intervention from the government, the credit crunch hitting companies will get even worse over the next three months.’

Commentary

Both ERM and UK national data reveal that UK job losses have risen dramatically in recent months. Although the current UK unemployment rate of 6.3% is lower than the European average of 7.7%, it would appear that it will soon exceed this figure. In light of these developments, it is also possible that UK economic and social regulation will become more interventionist in nature. Recent meetings between the UK government and the social partners, and the announcement of a package of measures aiming to stimulate employment in the UK (UK0902029I), would seem to confirm this trend.

Thomas Prosser, IRRU, University of Warwick