Lots of vacancies but not in the right places for furloughed workers

Madhu's restaurant group is struggling to recruit chefs and other staff as business picks up, ITV Business Editor Joel Hill reports

It is really quite miraculous. Lockdowns have lifted and the evidence of economic revival is everywhere. The number of people on company payrolls (29.1 million in August) has returned to pre-crisis levels and the economy is awash with vacancies.

The UK has just endured the severest hit to economic growth in 300 years. Not only have mass redundancies been avoided, but the unemployment rate peaked at 5.2% just before last Christmas - well below the 8.5% registered in 2011 after the financial crisis.

Credit: ONS

The reason for this happy outcome is, of course, the government’s Coronavirus Job Retention Scheme, otherwise known as the furlough scheme, which has proved remarkably effective at persuading companies to hold onto their staff during the downturn by subsidising their wages.

The furlough scheme ends in a little over two weeks time and, although it’s clear that there are still around 1.5 million people receiving furlough support (approximately half of whom are partially furloughed) there is no sign that companies have begun to let people go.

Sanjay Anand, owner of Madhu's restaurant group, says nearly 10% of jobs in his business are vacant and that in 40 years of business, he believes this is "the most difficult period in terms of recruitment"

The Office for National Statistics (ONS) data suggests that anyone who does find themselves out of work when furlough ends will not struggle to find re-employment.

The number of vacancies in the UK reached 1.1 million in August, a record and 26% higher than the pre-crisis level. There are openings in every sector and every region of the UK.

Credit: ONS

Economic research consultancy Pantheon Macro insists that the reality is likely to be rather different. Vacancies are skewed towards different industries to those which have used the furlough schemes.

Anyone who finds themselves out of work post-furlough is likely to have to retrain or relocate in order to find re-employment.

Businesses have reacted coolly to the abundance of jobs available, many pointing out that they are struggling to fill them.

The British Chambers of Commerce speaks of a “hiring crisis” which it is blaming on Brexit and Covid. It predicts the unemployment rate will rise when furlough ends - peaking at 5.1% at the end of the year (it’s currently 4.6%).

The CBI agrees. It says recruitment shortages are “impeding growth” and repeats its call for the government to make it easier for firms to bring in the people they need from abroad.

Credit: Pantheon Macro

That’s not going to happen. The government is betting that the lumps and mismatches in the labour market are temporary and that this problem will fade.

It believes in private sector solutions: British companies offering British workers better pay and working conditions.

Wages are already rising. Average weekly earnings (which includes bonuses) rose by 8.3% in July, well above the headline rate of inflation.

The ONS urges caution, explaining that the number is distorted by the use of the furlough scheme and the fact that those on lower incomes were disproportionately made redundant last year.

For what it’s worth, the Bank of England believes wage inflation will be short lived and that next year prices will be rising faster than pay, which is a far less comfortable prospect.

For now though employees can enjoy the fact that the balance of power with employers has shifted noticeably in their favour. At the moment, if you are a lorry driver, a butcher or a welder, you can more or less name your price.