Retailers and restaurant groups are sounding the alarm on the UK jobs market, as applicants surge for waning numbers of vacancies while employers shrink their workforces and cut staff hours.
Next chief executive Lord Simon Wolfson last week warned of growing pressure on jobs as Labour’s sweeping overhaul of workers’ rights threatens added complexity for employers on top of the rise in costs after last year’s Budget.
The FTSE 100 retailer said that while its vacancies had fallen 35 per cent over the past two years, the number of applications per job had soared 76 per cent.
Wolfson said that while he did not expect a big employment shock, it was becoming harder for people to enter the workforce or change jobs.
“Almost every industry is just becoming slightly more mechanised, introducing AI, inducing productivity measures in response to rising costs . . . My guess is that the effect is going to be felt the most by those seeking to enter the workforce or move jobs.”
Sir Tim Martin, founder and chair of Wetherspoons, said Wolfson was “spot on” and his pub chain was also experiencing a sharp rise in job applications.
“One pub manager said that a part-time afternoon shift had got a hundred applications,” he said. “There are a lot of people looking for work.”
Martin said the government’s “policies that were meant to help working people risk hurting the people they want to help”.
Hospitality and retail businesses are bearing the brunt of tax and minimum wage increases and new workers’ rights that drive up labour costs particularly sharply in sectors with large numbers of low-wage, part-time young workers.
Job losses in these two sectors account for most of the 145,000 fall in payroll employment recorded since the minimum wage changes and rise in employers’ national insurance contributions were announced last October.
Official data published last week suggests the overall UK labour market is starting to stabilise, with both payroll employment and vacancies steadying in August following a sustained period of decline.
Unemployment remains relatively contained at 4.7 per cent, redundancies are close to pre-pandemic norms and the Bank of England now sees “less of an immediate risk that the labour market would loosen very rapidly”.
But Kate Nicholls, chair of the UKHospitality trade body, said the industry’s workforce had dropped by 10,000 people in the past month alone and that businesses were not keeping on summer staff. “Two-thirds of members say they are reducing staff hours and headcount largely due to national insurance, anticipation of further national living wage rises and uncertainty around the Employment Rights Bill.”
The reforms encompassed by the bill — including day one protection against unfair dismissal, a new right to guaranteed hours and an extension of statutory sick pay — will have a disproportionate effect in hospitality, where many workers are on zero or low hours contracts.
The British Retail Consortium has highlighted that there are 97,000 fewer jobs in retail than last year, while vacancy rates are also dropping.
Helen Dickinson, chief executive, said it was “vital that the chancellor’s autumn Budget does not increase costs to the high street further, or else it will be working people who will pay the price as local, flexible jobs are lost, and the cost of living continues to rise”.
The number of vacancies in the UK between June and August was 119,000 lower than a year ago, according to the Office for National Statistics.
Andrew Murphy, chief executive of toy chain The Entertainer, which will soon be transferred into a trust owned by its 1,900 employees, said the official data was masking the pain in the jobs market because many businesses were slashing hours rather than jobs.
“We still need people in stores but maybe that person was doing 20 hours before and now they are only doing 12,” he said. “We have had to cut 20 per cent of hours in 70 of our smaller stores”
Murphy also blamed last October’s Budget for increasing the burden on employers.
“It’s the law of physics,” he said. “Businesses have to look at every way they can reduce staffing costs, either by taking out job tasks, cutting hours, outsourcing or automating.”
He added that the government’s move to increase national insurance contributions and lower thresholds at which companies start paying the tax “took the biscuit . . . The government has made the error of seeing everything in isolation, rather than realising the pain all these measures cause. It will push some retailers under.”
Spencer Craig, founder of London-based coffee chain Pure, said that “for every job we advertise — whether that’s a barista, a store manager or marketing manager — we get 500 applicants. Two years ago that was about 50 applicants. It’s a tough market for people to find a job at all. We’re also seeing a lot more senior people applying for junior roles”.
Craig said Pure had started cutting staffing hours as soon as the Budget came in, and that Labour’s measures amounted to “bizarre policy — it’s anti-employment”.
“For a government that wants to get people off the welfare bill and into employment and achieve growth, the Employment Rights Bill makes it even harder to employ people”.
MPs last week voted against amendments to the Employment Rights Bill passed by the House of Lords before the summer recess that would have addressed some of employers’ concerns about the new day one right to protection against unfair dismissal and a right to guaranteed hours.
The government’s own impact assessment suggested the bill would impose £5bn in annual costs on the corporate world.
However, crucial details of many of the key measures — including how the new right to guaranteed hours will work and who will be eligible — will be settled only through regulation once the bill has become law.