Service sector employment fell sharply in last quarter as UK entered recession
Employment fell sharply across the UK services sector in the three months up to August as the coronavirus pandemic sent the country into the deepest recession on record.
The service sector dominates the business landscape in this country, making up nearly 80 per cent of the economy.
According to a survey conducted by the CBI, employment in the retail-focused consumer services sector fell to a balance of -63 per cent, the fastest-paced fall on record, in the quarter.
The data showed that headcounts would continue to fall in the next three months, though at a slower rate – -48 per cent – than in the current period.
Across business and professional services firms, employment also plunged to -32 per cent, the quickest rate since May 2009, during the previous financial crisis.
Again, this is set to slow over the next three months, but will still hit a rate of decline of -18 per cent, the CBI said.
Ben Jones, the industry body’s chief economist, said that the government would need a “bold plan to prevent jobs” when the furlough scheme ends in October.
Many fear that unless it is extended or replaced with new initiatives, the end of the programme could lead to a massive wave of redundancies over the winter.
In the second quarter, UK GDP shrank 20.4 per cent, sending the country plunging into recession as the pandemic saw great swathes of the economy shuttered.
Despite some signs of a bounceback in June, chancellor Rishi Sunak warned that “hard times were here”, and that many jobs would be lost.
Service sector suffers ‘worrying falls’
The survey also showed that prices and profitability had both also shrunk over the period, as did business volumes.
As with employment, the declines are expected to continue but to ease over the next three month period.
The main area of divergence between consumer services and business and professional services came in terms of sentiment.
For the former, sentiment continued to deteriorate, albeit at a slower pace than in the previous quarter – -20 per cent, up from -86 per cent in the prior three months.
However, for business and professional services, optimism flipped back into the positive at 9 per cent, a rapid improvement from May, where the figures stood at -78 per cent, the lowest balance since November 2008.
Jones said: “This quarter has shown some worrying falls in volumes, profitability and employment for the services sector.
“Although the pace of these declines is expected to ease, it’s clear that the services sector still faces challenges in terms of demand, revenues and cash flow.
“There is also a clear divergence by sub-sector, with consumer services seeing a particularly severe hit to activity and employment.
“Meanwhile, although business and professional services appear to be holding up slightly better in comparison, future challenges include what our trading relationship will look like with the EU next year.”