There has been mixed news on jobs and employment recently. So with the first six months of the year gone, is the glass-half-full or half-empty?
Friday was June 30th: Half way through the year. No, I can’t believe it either: only seems like last week that we were clearing away the Christmas dinner…
But time passes and – in economic terms – we have reached the end of the second quarter. So how has GB plc fared in the first half of the year? After the General Election, and as the Brexit negotiations begin in earnest, what does the current situation look like, especially with regard to jobs and employment prospects?
There has been the usual mixture of good and bad news: the glass is very much half full or half-empty, depending on your own perspective. After the vote to leave the European Union the pound dropped sharply (from roughly $1.50 to $1.30). It continued to slide through the rest of 2106 and ended the year at $1.2351. As we will see, this was great news for exporters, but bad news for inflation and wages.
The other side of the fall in the pound was a rise in the stock market – good news for those with investments or with pensions invested in the UK stock market. Having closed June 2016 at 6,504 the FT-SE100 index of leading shares climbed steadily through the rest of the year, ending December at 7,143.
Over the first six months of 2017, the pound has regained some of the lost ground – it ended June at $1.3026 – whilst the stock market has risen by 2.38% to 7,313.
Inflation rears its ugly head
As we wrote recently, however, the fall in the value of the pound has pushed up inflation. What cost £100 to import at $1.50 now costs £115. This was reflected in recent figures for May, which showed inflation jumping to 2.9%, with the probability that it will go above 3% later in the year. As average wages have only risen by 2.1% this means that most people have seen a fall in their pay in real terms – especially those who are currently subject to the public sector pay cap. People have less disposable income and it was no surprise to see the savings ratio – the proportion of our disposable income that goes into savings – at a record low according to the latest figures from the Office for National Statistics. It fell to 1.7% for the period January to March, down from 3.3% in the previous quarter.
The ONS also confirmed that UK growth for the first quarter of the year was 0.2%, compared to 0.7% in the final quarter of 2016. Expect to see predictions of 2% growth for the year revised downwards anytime soon.
But – if your glass is determinedly half full – then you will rightly point to the fact that a recent CBI survey showed manufacturers’ order books at a 29 year high, with food, drink, tobacco and chemicals leading the way. The same survey showed export orders at a 22 year high, with CBI Chief Economist Rain Newton-Smith saying,
“Britain’s manufacturers are continuing to see demand for ‘Made in Britain’ goods rising. Total and export order books are at highs not seen for decades, and output growth remains robust.”
So how is all this translating into jobs and the prospects for employment? As we wrote above, the picture is mixed…
First, the bad news
Last week it emerged that Tesco has plans to cut 1,200 head office staff – just a few days after it said 1,000 call centre staff were going. The main areas to feel the brunt of these latest cuts will Welwyn Garden City and Hatfield (close the Tesco’s head office) as the supermarket group continues to cut costs under new chief executive Dave Lewis. There was the usual PR statement from the proverbial ‘spokesman:’
“This is a significant next step. The new service model will simplify the way we organise ourselves but also allow us to invest in serving shoppers better.”
Dave Lewis was brought in after Tesco’s accounting scandal in 2014 and has now overseen the loss of thousands of jobs. So far the strategy seems to be working, with the group reporting a 2.3% increase in like-for-like sales in the first quarter, its sixth consecutive quarter of growth. And there was good news for those Tesco workers that survived the cull, as a 10.5% increase to hourly pay over the next two years was announced.
But it is not just Tesco. If consumers do not have the money to save then they also do not have the money to spend, and several ‘big names’ have cut back on staff. Boots have announced two rounds of job cuts, with 300 to 350 staff going (principally store ‘assistant managers’). A second round saw Boots close its photo-processing labs and 400 more staff went. We have written previously about a ‘20th Century high street struggling to cope with 21st Century shopping habits’ and with John Lewis and shoe retailer Clarks also announcing jobs cuts, it is easy to assume that more and more retail jobs will disappear.
Now the good news on employment…
Maybe not. There are some success stories in retail. For example, Bunnings, the Australian DIY chain that owns Homebase, has just unveiled plans to create over 1,000 new jobs in the UK as part of a £500m investment programme. The company will open 20 pilot stores across the UK, up from its original expectation of 10 stores.
Even more ambitiously, Google has just submitted plans for its ‘landscraper’ UK HQ in King’s Cross. The building – due to open in 2020 – will be as long the Shard is tall, will rise to 11 floors and will ultimately provide 3,000 jobs, plus the jobs that will be created in the construction.
Meanwhile, Rolls-Royce has protected 7,000 engineering jobs in the East Midlands after announcing its biggest investment in the UK for more than a decade. It will be investing £150m in Derby, creating up to 200 extra jobs and safeguarding the other jobs for five years. Simon Hemmings, from the Unite union, said it was “a once in a generation investment and a big commitment to the UK.”
Meanwhile in Scotland…
So there has been good and bad across most parts of the UK: Unfortunately, there is still one part of the country where the glass is most emphatically not half-full – and that is Scotland, where the economy is showing signs of slowing faster than the rest of the UK as consumer spending fades and firms remain reluctant to invest.
The EY Scottish Item Club has predicted ‘below-par’ growth of just 0.9% in 2017 – roughly half that of the UK as a whole. In particular, it sees the Scottish retail sector being hit hard as pressure on consumer spending grows. It also expects employment in Scotland to fall – down 0.1% this year followed by decreases of 0.5% and 0.3% in 2018 and 2019 respectively. As The Scotsman gloomily pointed out, Scotland has missed out on the UK jobs boom, with wages and the employment rate still lower than they were before the financial crash ten years ago.
But over the whole of the UK, the employment and jobs picture is mixed – and it is likely to remain that way as the uncertainties over the political situation and Brexit continues. The public sector pay cap may be eased, but there will not suddenly be a wages explosion. Similarly, some firms will continue to do well, others will do badly and face the inevitable ‘re-structuring.’ The best advice may be the advice your Granny gave you: save some money for a rainy day. As the weather forecasters would say, the outlook is changeable…