IoD Says Government Needs More Tax Incentives

Institute of Directors (IoD) responds to latest employment figures.

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Institute of Directors (IoD) responds to latest employment figures.

Responding to the latest official employment figures, showing work hours and vacancies fell, while productivity also had decreased, Tej Parikh, Chief Economist at the Institute of Directors, said: “Even before lockdown, coronavirus was threatening to take the shine off the UK’s sterling jobs record.

“Initial estimates for April don’t make for easy reading. It’s clear that without the Government’s furlough scheme, the picture would have rapidly deteriorated even further.

“While furloughing is holding off some job losses for now, it’s not yet clear how firms will react as the scheme changes in August and as social distancing continues.

“Many companies will still be in the middle of a cashflow crisis, and will struggle with any cost increases. Government faces an onerous task in winding down the scheme without causing too much pain.

“The UK’s dire productivity record is one thing that can’t be put down to the pandemic.

“In fact, many businesses have been innovating more than ever in response to the lockdown. As firms get up and running again, money will be tight, and widespread debt will hold back new projects.

“The Government should seek to spur investment through tax incentives, otherwise companies will be slower to adapt to the new normal, and our productivity performance will remain in the doldrums.”

Labour market statistics for Northern Ireland.

The labour market statistics were published by the Northern Ireland Statistics & Research Agency:

Confirmed redundancies increased over the year.

  • The number of confirmed redundancies (3,108) in the most recent 12 months was 47% higher than in the previous 12 months (2,112). NISRA, acting on behalf of the Department for the Economy, received confirmation that 117 redundancies took place in April 2020.
  • A total of 783 redundancies were proposed in April 2020, higher than March’s total of 557; and a further 124 were proposed in the current month to 18th May.

NI Claimant Count (Experimental Series) increased over the month.

  • In April 2020, the seasonally adjusted number of people on the claimant count was 56,200 (6.1% of the workforce). This represents an increase of 26,500 (89%) from the previous month’s revised figure, the highest monthly increase on record. At 6.1% the claimant count rate is similar to rates seen in 2009/10 and 2014, and below the most recent peak of 7.3% in December 2012.

Employee earnings from PAYE increased over the quarter and the year.

  • Data from the latest HMRC PAYE RTI show that NI had a median monthly pay of £1,715 in the three months to March 2020, which was an increase of 1.5% on the previous three months and an increase of 3.3% on the same time last year.

The NI unemployment rate was unchanged over the quarter and decreased over the year.

  • The latest NI seasonally adjusted unemployment rate (the proportion of economically active people aged 16+ who were unemployed) for the period January-March 2020 was estimated from the Labour Force Survey at 2.4%. The unemployment rate was unchanged over the quarter and decreased by 0.5pps (percentage points) over the year. Although recent changes were not statistically significant (i.e. the recorded changes did not exceed the variability expected from a sample survey of this size), the unemployment rate was significantly below rates in late 2018.
  • The NI unemployment rate (2.4%) was below the UK rate (3.9%), the European Union (27) rate (6.5%) for February 2020 and the Republic of Ireland rate (5.4%) for March 2020.

Employment rate and economic inactivity rates were unchanged over the quarter.

  • The proportion of people aged 16 to 64 in work (the employment rate) was unchanged over the quarter and increased over the year by 1.1pps to 72.4%. Although recent changes were not statistically significant, the employment rate was significantly above rates in late 2018.
  • The economic inactivity rate (the proportion of people aged 16 to 64 who were not working and not seeking or available to work) was unchanged over the quarter and decreased over the year by 0.7pps to 25.8%. Although recent changes were not statistically significant, the economic inactivity rate was significantly below rates in early 2018.

Data Collection.

  • Due to COVID-19 NISRA changed how it collects information from households. From mid-March the face-to-face interviews have been suspended and all interviews are carried out over the phone.
  • A new online Labour Market Survey was also rolled out in April designed to capture a subset of labour     information and will supplement the main Labour Force Survey data.
  • There is currently a lower than usual response rate to the labour market surveys. NISRA would like to encourage households, who have been selected, to take part in the surveys and thank those who continue to respond to the household surveys. Responding ensures NISRA can continue to produce reliable statistics on the impact of the pandemic on the labour market.

Commentary.

  • The Labour Force Survey estimates relate to January to March 2020. The impact of COVID-19 on the labour market is therefore not fully reflected in these estimates, which showed no change in the employment rate, the unemployment rate and the economic inactivity rate over the quarter to January-March 2020. The unemployment (2.4%) and economic inactivity (25.8%) rates were both lower than one year ago while the employment rate (72.4%) was higher than one year ago. Similarly, although at 33 hours per week, the average number of hours worked in January to March was an hour lower than the same quarter last year, it was still within the range seen during 2019 (33 to 34 hours).
  • More timely indicators relating to April and May begin to show the impact of COVID-19 on the labour market. The number of out of work benefits’ claimants (the experimental Claimant Count) almost doubled (increased by 26,500 or 89%) over the month to April (reference date 9th April) while the number of proposed redundancies was 783 in April and a further 124 were proposed in the current month to 18th May. The number of proposed redundancies in April is the fifth largest in the last five years while the monthly increase in the claimant count is the highest monthly increase since records began and brings the claimant count to 2014 levels.

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The statistical bulletin and associated tables are available at:

https://www.nisra.gov.uk/statistics/labour-market-and-social-welfare/labour-force-survey