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

2.1k

View
comments

More than one in five UK workers in hospitality were still on furlough last month despite there being nearly 50,000 job vacancies in the industry, it emerged today amid calls by bosses for the scheme to be ended early.

The latest Office for National Statistics data showed 21 per cent of workers in accommodation and food services were off on at least 80 per cent pay between May 17 to 31, despite the full reopening at the start of that period.

And the most recent official data for job vacancies, from February to April this year, showed there were 45,000 on offer in the same industry, which was up 100 per cent on the previous quarter but down 18 per cent year-on-year.  Unofficial estimates have claimed there are in fact now 188,000 vacancies in hospitality, but this is unverified.

The ONS data suggested there were 657,000 job vacancies across all industries – but furlough rates remain high, with bosses saying some staff would rather stay at home while earning most of their full salary than get a new job.

In the arts and entertainment industry, there were 26 per cent of workers on furlough and 8,000 vacancies, while in ‘other service industries’ – such as personal services and repairs – the figures were 26 per cent and 11,000.

Britain’s transport and storage industry had 12 per cent of staff on furlough and 23,000 vacancies; while in administration and support services it was 12 per cent and 46,000; and in education it was 6 per cent and 43,000.

The mismatch between furloughed staff and vacancies has led to calls for the scheme to be brought to a close early, before it is set to end this September – with one pub chain boss saying furlough had now ‘done its job’.

Latest ONS estimates suggest 2.1million people are still on furlough – albeit down from 3.4million in late April – and the high vacancy levels suggest people are staying on it instead of applying for other jobs in the same industry.

Dermot King, the 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.’

And Kevin Georgel, chief executive of the St Austell brewery in Cornwall which has 180 pubs, told BBC Radio 4’s Today programme: ‘I think from a hospitality industry perspective we’d have to say that furlough overall has been tremendous in terms of enabling us to look after the vast majority of our people. 

‘But I think there is a risk now that the furlough scheme is slightly distorting the labour market, and our challenge is how do we find a way through that if we’ve got people that are on furlough doing second jobs, or are sat on furlough when actually their job doesn’t exist? So there is a challenge about how furlough plays out over the coming months now that we have a national labour shortage.’

However, hospitality industry groups such as UKHospitality have insisted that the scheme must remain in place until restrictions are lifted, and demand returns to pre-pandemic levels, to avoid a tsunami of job losses.

Meanwhile the Bank of England’s top economist said that wages must rise to encourage Britons to get ‘out of their front rooms’ and back into work to help support the UK’s recovery which he described as going ‘gangbusters’

Andy Haldane insisted businesses on pause need to reopen and furloughed or unemployed workers must get back to jobs to keep up the momentum. He 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. 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 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. 

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.

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.’

Mr Georgel added that his chain are struggling to recruit workers, telling BBC Radio 4: ‘We’re about 25 per cent down on the teams that we need at this moment in time to meet the demand that we’re expecting over the summer.

‘So we have an unprecedented situation where we have demand growing because of staycations and everybody obviously holidaying in the UK this year, which is very positive. But the counter to that is we just simply can’t find enough people to meet that demand over the summer which is very frustrating as we look to recover from the ravages of the pandemic. 

He continued: ‘I think it’s a combination of factors – clearly a lot of non-EU nationals have returned home for a variety of reasons, and that’s left a hole in the labour pool. I think there’s a confidence issue around hospitality, that’s I think in the short term what we need the Government to help us on, is to rebuild the confidence about our sector and to encourage lots of young people to look for careers in our sector.’

Meanwhile, 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.

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.

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

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.

Meanwhile Bank of England chief economist Mr Haldane said yesterday 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 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.