The UK labour market will take “years rather than months” to fully recover from the economic shock of the COVID-19 crisis, according to a leading employment think-tank.
The Institute for Employment Studies (IES) made the prediction in a report published this week entitled “Getting Back to Work”. The report also estimates that employment has already fallen by up to two million, equivalent to five per cent of the UK workforce.
If this estimation proves to be accurate, the drop in employment will double that seen in the last recession and five times larger than the previous largest quarterly fall at any point since records began in 1971.
The report also calls on the government to adopt a five-point “Back to Work” plan including the creation of a “Cobra” group for jobs, which would consist of government departments and agencies, local government, sector bodies, trusts and foundations and key stakeholders.
The institute predicts a “reasonable chance” of unemployment peaking relatively quickly should the UK be able to end its lockdown smoothly by late spring. However, should the lockdown continue into the summer, they forecast a possible “second wave” of large-scale job losses as businesses start to run out of cash reserves and credit options.
“Overall, we think that it is highly unlikely that we will see a steep recovery in employment or unemployment in the near future, and we expect that it will take years rather than months for the labour market to fully recover,” said the report.
The priorities identified by the IES are:
- Investment in new active labour programmes for those out of work
- Refocusing skills and training to support the recovery
- An integrated and coherent offer for young people
- An orderly withdrawal from the Job Retention Scheme
- A new, partnership-based, ‘Back to Work’ campaign
The institute estimates that their proposals would cost some £4.7 billion to implement over the next three years, but suggests that evidence from previous programmes shows that the return on investment would be far higher than this figure, and that the cost of inaction would be higher still.
IES institute director Tony Wilson said: “In order to be ready to act in the months ahead, we need to act now. However, the sheer scale of the challenge means that government will not be able to do this by itself.
“We recommend that government brings together a ‘Cobra’ for jobs, to work together on designing, co-ordinating and mobilising this response, and convening a wide range of partners including government departments and agencies, local government, sector bodies, trusts and foundations, and key stakeholders.
“The proposals will help to ensure that as the economy recovers, we can keep people attached to work, help them find better work, and minimise the ‘scars’ from being out of work.
“With a cost of around £4.7 billion over the next three years, the evidence from previous programmes tells us that this investment would more than pay for itself in the future; while the evidence from previous recessions tells us that the costs of inaction would be far higher.”
9th April 2020.