25 April 2023 – Redundancies have made the news a lot this year already with many big companies laying off staff to mitigate higher costs, including Amazon, Meta, Twitter, Tesco and Wilko.
Due to Brexit and the pandemic, 2022 has seen a labour shortage, which made finding the right staff difficult for small businesses. Recruitment was seen as one of the biggest issues last year.
But now, with inflation still high and increasing business costs, 2023 appears to become the year of redundancies. As small and big companies battle to stay afloat in a difficult economic climate, laying off staff becomes the last resort for many.
Months of continued rising costs, labour shortages as well as a stagnant economy have posed big challenges for small businesses. Many of which were still recovering from the upheaval caused by the pandemic.
90% Increase In Redundancies Compared To Last Year
According to the latest figures by the Office for National Satistics (ONS), the number of UK companies considering redundancies are at a record high.
The data shows that in March 2023, an average of 76 businesses wanted to make more than 20 staff redundant, as the distribution of HR1 forms shows. These forms have to be completed by any employer who wants to make more than 20 people redundant.
This is a 90% increase compared to March 2022, when only 40 businesses completed these forms to notify of proposed layoffs.
In 2023 so far, the number of HR1 forms has increased monthly by 44% since the start of the year, with an average of 66 employers per week sending the notification.
The current levels of proposed redundancies are similar to November 2022, when the second lockdown forced many small businesses to lay staff off in order to stay afloat.
ONS data for insolvencies looks no better, with 2,457 registered companies going into insolvency in March 2023, which is 16% higher than the same period last year.
Findings from research by HR consultancy Ayming UK support the figures by the ONS. Their data shows that 26% of UK businesses are likely to make staff redundant in 2023.
Additionally, almost half (49%) expect to cut costs this year. And 37% are planning to reduce hiring activities.
These figures show that UK businesses are losing their business confidence due to the challenging financial situation, with inflation eating into profits. The dire situation of the economy also contributes to the negative outlook of many businesses.
With this, the job landscape is changing. While last year, employees had the upper hand, as a labour and skill shortage forced many companies to offer more benefits and better pay packages.
But now, with the economy stagnating, the tables have turned. Reduced budgets mean many perks and benefits are no longer viable for businesses.
Employees had the pick of roles last year whilst the economy was buoyant, but now organisations are having to make high levels of redundancies as the economy bites back.Scott Ward, People, Performance and Development Partner at Ayming UK
Ayming UK data suggests that 29% of UK firms are likely to reduce benefits in 2023. 27% said they are likely to freeze pay this year.
Reduction In Energy Bill Support Pushed Many Over The Edge
One of the biggest costs in the past 12 months for small businesses was for energy. And while the Energy Bill Relief Scheme (EBRS) meant that most companies could avoid making staff redundant last year, this support has now ended.
Small businesses cannot keep accepting increases in costs across the board like this and still remain profitable. Inevitably businesses will fold and people will lose their jobs.Debbie Porter, Managing Director of Destination Digital Marketing
Since April, small businesses have to content with government support at a lower level, which means energy bills for most of them have risen again.
The Federation of Small Businesses (FSB) has warned that reducing the support for energy bills for small businesses would result in many having to close down.
Their research suggested that 28% of the small companies that fixed in their energy bills last year are likely to downsize or close down after prices rise again.
Increased numbers of redundancies can be seen as a result of the reduced support with energy bills.
The high number of redundancies is bad news for the economy, because when people lose their jobs, their spending power reduces. And small businesses are more likely to struggle as they won’t have the cash reserves that larger businesses have.
With 99.2% of businesses in the UK being classed as small businesses, they are vital for the health of our economy. So an increase in layoffs will hamper the economic recovery.
This in turn will mean the risk of further redundancies is increased too. It looks like this year will be just as challenging as the previous one, albeit in a different way.