The number of planned redundancies in the UK jumped 103% in just one month, from 8,869 in January 2022 to 18,043 in February 2022.
Data from the Insolvency Service, based on reports the government agency receives from businesses on planned redundancies, suggests that the number of redundancies is set to increase sharply as interest rates continue to rise. In February the Bank of England made the second of three increases in interest rates – pushing up the cost of borrowing for businesses.
Raoul Parekh, Partner at law firm GQ|Littler said: “An extreme shortage of staff and hopes of a post-Covid recovery had persuaded businesses to hold off on redundancy programmes, with numbers in December 2021 and January 2022 at their lowest levels since April 2019. It looks like that period of stability might be behind us.
“It’s clear that the Bank of England intends to slow the economy in order to keep inflation under control.
“Spiralling energy costs and other impacts from the war in Ukraine are also likely to dampen optimism among businesses and lead to cost cutting.”
The firm considered that it was likely that some businesses were making redundancies in anticipation that consumer spending would drop off in some sectors because of the cost-of-living crisis which is expected to be exacerbated by the rise in National Insurance rates in April.
This rise in the number of planned redundancies comes after months of low redundancy rates.
Raoul Parekh, Partner at GQ|Littler says: “It is not yet clear whether these higher numbers of dismissals will result in higher unemployment, or whether the current labour shortages instead create a higher sectoral churn.
“Given the attention paid to P&O Ferries’ mishandled redundancy programme employers will want to ensure that any similar measures are undertaken with extreme care and as sympathetically as possible.”
The redundancies come at the same time as a renewed shortage of available labour. Claire Warnes, head of education, skills and productivity at KPMG UK, reflecting on figures from REC and KPMG said: “There’s no end in sight to the deep-seated workforce challenges facing the UK economy. Once again this month, job vacancies are increasing while there are simply not enough candidates in all sectors to fill them. With unemployment staying low, there are many great opportunities for job-seekers to join or rejoin the workforce in all sectors.”