The number of redundancies UK businesses have told the Insolvency Service they are going to make has seen an 86% drop in Q3 2021 compared to the same period in 2020, says GQ|Littler, the specialist employment law firm.
The number of planned redundancies peaked at 290,000 at the height of the first lockdown (Q3 2020) but has dropped with every subsequent quarter, reaching a low of 40,601 between July and September 2021.
GQ|Littler says the drop suggests that before the spread of the Omicron variant UK employers had become increasingly confident about the state of the economy. However, the firm warns that the informal lockdown created by the Omicron outbreak – and the lack of any support equivalent to the furlough scheme – could put businesses under greater financial pressure, in turn leading to more redundancies.
The data on planned redundancies is drawn from information that employers are obliged to submit to the Insolvency Service if they intend to make 20 or more employees redundant within a period of 90 days.
Raoul Parekh, Partner at GQ|Littler says: “The steady drop in planned redundancies suggests employers had been taking an optimistic view of the future. However, the rapid emergence of the Omicron variant has knocked that confidence especially in the retail and hospitality sectors.”
“Employers will be waiting with bated breath to see what – if any – further action the Government takes.”
GQ|Littler warns that employers who opted to make employees redundant rather than make use of furlough could potentially find themselves facing unfair dismissal claims in the future.
Raoul Parekh says: “Given the sudden shock to the economy caused by the pandemic, it’s not surprising that the immediate response by some employers was to make cuts. Nobody knew how long lockdown would last for, or exactly what government support would be put in place.”
“However, employers who jumped the gun and didn’t consider furlough before making cuts could find themselves being brought in front of an employment tribunal. We’re just starting to see the first cases coming through, and the position is still not clear.”