Businesses creep closer to safer territory, but we’re not out of the woods yet

Sarah Coles, personal finance analyst at Hargreaves Lansdown, comments on the publication of ONS statistics of pandemic impact on businesses and people’s lives, showing cautious improvement.

Key points:

89% of businesses were trading in early August – up from 71% in January.
4% of the workforce were on furlough – down from 20% in January.
Most of those on furlough were only furloughed for part of the time (42% were fully furloughed).
One in 50 businesses expect to make people redundant during the next three months.
The phasing out of furlough was the third most common reason for planned redundancies.

Sarah Coles commented:

“Businesses are creeping closer to safer territory, with more companies opening up, doing better business, and bringing people back from furlough. But we’re not out of the woods just yet, and the end of the furlough scheme is sneaking up on us.

“Almost nine in ten businesses are trading again, and the percentage of staff on furlough has fallen to a new low. Meanwhile, the number of firms saying they’re turning over less cash than usual is down from 65% in June last year to 29%.

“However, not all businesses or industries are equal, and some service industries are finding it particularly difficult to bring staff back. 11% of the workforce in arts, education and recreation businesses are still furloughed. Other service industries with high levels of furlough include hairdressing and beauty, laundry and dry cleaning, and funeral services.

“Meanwhile, costs are becoming more of a headache, and a quarter of businesses say the price of materials, goods or services has been rising more than normal for the past two weeks. Many feel unable to pass those extra costs on to consumers, and only 8% had increased the price of goods or services sold. It makes life increasingly difficult, especially for those businesses whose turnover hasn’t returned to normal levels yet.

“In some cases, the furlough scheme has been a lifeline, but the end of the scheme is sneaking up on us, and when it’s withdrawn altogether at the end of September, it could pull the rug out from underneath those who rely on it.

“One in 50 businesses expect to make people redundant during the next three months, and the phasing out of the furlough scheme was the third most popular reason – given by more than a quarter of them (28%). Businesses are also cutting staff because they need to cut costs (41%) and because changes in the business during the pandemic mean that specific job roles don’t exist any more (36%). Meanwhile, 7% said the business was closing and another 7% said it was relocating.

“If you’re currently on furlough, or your employer is struggling, it’s an incredibly worrying time. There is a crumb of comfort though in separate experimental vacancies data from the ONS.

“While vacancies fell at the beginning of August, they’re still significantly higher than before the pandemic. In the transport, logistics and warehouse categories, vacancies are currently at 332% of their level in February last year. They are also particularly high in some regions, including the North-East, where they’re at 176% of their pre-pandemic level, the East Midlands at 161% and Northern Ireland at 154%. While it’s only an early indication from one job site, there’s the hope that if your job doesn’t come through this in one piece, there could be something else out there for you.”

Kindly shared by Hargreaves Lansdown

Main photo courtesy of Pixabay