While latest ONS data shows recovering UK labour market, with the furlough scheme coming to an end and additional NI costs from April 2022, Paul Craig, portfolio manager at Quilter Investors, assesses the potential impact from an economic perspective.
Job creation continues apace in the UK, but for how long this can be sustained is unclear just now. The end of this month sees the withdrawal of the furlough scheme, and with 1.6m people still having their wages subsidised in one shape or another, it is unfortunately unlikely all of these people will be kept on into full-time employment.
Despite the success of the furlough scheme and the mass unemployment that many had feared being prevented, the jobs market remains very much in recovery and below pre-pandemic levels. As has been widely reported the UK has somewhat of a skills shortage, with many industries reporting hiring difficulties and lack of available labour. With Covid following close on the heels of Brexit there is uncertainty to whether the UK will be able to match those seeking work with the jobs that are available.
The new national insurance levy also adds an additional cost to employers, and as such we remain unsure whether this could also cause businesses to review or temper future hiring needs.
The economy has undergone a dramatic shift almost overnight and it is important the government responds by making training and upskilling available to help fill these voids.
The latest GDP figures also showed an economy that was struggling to release the shackles with subdued growth following the relaxation of restrictions. It is important that the labour market remains tight as the government is clearly hoping disposable incomes are spent and the economy is driven forward as much as possible in case further cases emerge.
For now, however, the Bank of England will see the reduction in the unemployment rate as a positive and another step towards its goal to reduce the mass of stimulus it has been providing.