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One in Five Freelancers Could Quit Self-employment

By: Rachel Miller

After two decades of growth in UK self-employment, a new study by the London School of Economics has found that one in five freelancers consider it likely that they’ll leave self-employment as a result of the coronavirus crisis.

The research, undertaken by the Centre for Economic Performance at the London School of Economics (LSE), found that the easing of pandemic restrictions over the summer only had a marginal effect on the self-employed, with 58% saying they had less work than usual in August 2020.

The LSE report – COVID-19 and the Self-Employed: Six Months into the Crisis – has found that even after England’s first lockdown lifted, 32% of self-employed workers had fewer than 10 hours of work a week in August.

Self-employed workers who operate through digital apps in the gig economy have had more work, according to the LSE report. However, 78% of these workers – including parcel delivery workers and private hire drivers – said they felt their health was at risk while working.

Other key findings include:

  • 28% of respondents had applied for a second grant under the Self-Employment Income Support Scheme (SEISS);
  • Of those who had not applied for either the first or second rounds of the SEISS grant, 38% were not sure of their eligibility;
  • A third of respondents think normal activity will not resume until after February 2021;
  • One in ten think it will never resume.

Of most concern is that 20% of freelancers polled said they “consider it likely” that they’ll leave self-employment as a result of the crisis – this rises to 59% among those aged under 25. The newly self-employed are more than twice as likely to report having trouble with basic expenses when compared to other self-employed workers (52% versus 24%).

Stephen Machin, co-author and CEP director, said:

“While the growth in self-employment has been one of the key trends in the labour market in the past two decades, there are now early signals that this trend could be set to reverse.

“By the summer, there had already been a sharp fall in the number of self-employed workers – this may be primarily due to the lockdown, but for some it will be due to realising the risks of self-employment. The COVID-19 crisis has vividly illustrated the social insurance available to different types of workers, with many experiencing the basic safety net of Universal Credit for the first time.”

According to the Association of Independent Professionals and the Self-Employed (IPSE), “glaring gaps in support” are leading to “long-term, avoidable decline” in the self-employment sector.

The latest data from the Office for National Statistics (ONS) shows that the number of self-employed workers in the UK has already fallen to 4.53 million, down from 5.1 million at the end of 2019.

Derek Cribb, IPSE ceo, said:

“After the 2008 financial crisis, it was rising self-employed numbers that kept unemployment comparatively low – as uncertain employers looked for more flexible expertise instead of permanent employees. Now, this does not appear to be happening and the self-employed sector is in precipitous decline. Some self-employed are finding their way into full-time roles, but many others are joining the record flow into unemployment.

“Government must work quickly to stem this flow by urgently getting support to the left-behind self-employed groups. Extending support would be a cost now, yes, but it would be a temporary cost during the pandemic, to hold back an even worse unemployment problem later.”

Written by Rachel Miller.

FBS Small Business Index

The latest FSB Small Business Index has found that times are tougher than ever for small firms after two difficult years.

The survey of 1,500 UK small firms, conducted by the Federation of Small Businesses (FSB), finds that SME confidence has been in negative territory for nine consecutive quarters – since July 2018. It comes as small business revenue growth hits an all-time low and staff lay-offs hit an all-time high.

The Q3 SBI confidence figure stands at -32.6, down 28 points on last quarter. Only a third (34%) of those surveyed at the end of last month expect their performance to improve over the coming three months. The significant majority (66%) expect performance to worsen.

The findings also show that a record one in four (25%) small firms reduced headcounts last quarter. An even higher proportion (29%) expect to make redundancies over the coming three months; 12% say they expect to let at least a quarter of their staff go.

COVID-related disruption has caused revenue growth to fall to its lowest recorded ebb, with more than half (56%) of those surveyed reporting a drop. A similar share (50%) expect revenues to fall next quarter.

The FSB is warning that any potential economic recovery is stalling ahead of a difficult trading period in the run-up to Christmas and the end of the Brexit transition period. More than half of exporters polled say international sales have fallen over the past three months.

Although the FSB has welcomed the chancellor’s improvements to the current business and job support schemes, it is now calling for new measures, including:

  • Support for those that have received no income support to date;
  • A reduction in the cost of hiring new staff;
  • Lessening the burden of business rates;
  • Providing more resources for those looking to start a business for the first time.

“We must not forget that small firms were already under the cosh thanks to political uncertainty, rising costs and creaking infrastructure well before the Spring,” said Mike Cherry, FSB national chairman.

“The chancellor made some very welcome adjustments to support measures last week … However, too many are still without the help they need to weather current disruption – not least company directors, the newly self-employed, those without premises and those further down supply chains in the retail, leisure and hospitality sectors. An ambitious rescue package for these groups is urgently needed.

“If we want small business owners to create jobs, we have to bring down the costs of employment, starting with employer national insurance contributions. If we want them to invest, innovate and expand, we have to alleviate the strain of wider government-imposed overheads, including those stemming from an outdated business rates system which continues to stifle too many community businesses all over the country.”

Written by Rachel Miller.

Analysis: The impact of Universal Credit in Wales
October 29, 2020
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Analysis: The impact of Universal Credit in Wales by Policy in Practice

Just before the onset of COVID-19, Policy in Practice completed a major study of the impact of Universal Credit in Wales. Early in 2019, we were commissioned by the Welsh Government to look at how Universal Credit had affected the Welsh Council Tax Reduction Scheme. The Welsh Government also wanted to know if the introduction of Universal Credit had led to any changes in the level of rent and council tax arrears. 

Groundbreaking study

This study broke new ground for Policy in Practice: 

We made extensive use of administrative data from all 22 Welsh local authorities, tracking the benefit journeys of claimants in four waves over a period of 12 months, and matching with data on rent arrears and council tax arrears. It was the first time we have used data from so many authorities and housing associations in one national project. The matching and analysis were complex and very challenging, but well worth the effort.·       

We also ran two large-scale surveys to get a better understanding of the personal experiences of Universal Credit that are not evident from administrative data. We invited people to take part in the survey in several ways, one of which was via a link in our award-winning Benefit and Budgeting Calculator. Nearly 500 actual and potential benefit claimants completed the claimant survey, and nearly 500 stakeholders such as social and private landlords, local authority officials and third sector organisations completed the stakeholder survey.
Five findings from the 18 month data-led investigation into Universal Credit in Wales

There is a wealth of information in the two reports published by the Welsh Government, an interim report published in January 2020 and the final report published in July 2020. The key findings are:
1.     A generous Council Tax Reduction (CTR) Scheme pays off
2.     Universal Credit has resulted in some council tax and rent arrears
3.     Awareness of CTR, and take-up, are still too low
4.     The impact of Universal Credit on CTR can be mitigated by changes to the scheme
5.     More help should be given to those claiming Universal Credit
Further analysis commissioned to understand the impact of COVID-19

This research was carried out before the COVID-19 pandemic and so does not take account of the increase in Universal Credit claims that have resulted. We are delighted that the Welsh Government has now asked us to analyse the impact of the pandemic on CTR caseloads. We will look at the economic impact, demographic changes, and likely impact on future CTR caseloads and council tax collection rates.

Find out more

Pooling administrative data can help other areas plan for and track recovery from COVID-19. Policy in Practice has secured funding to help with this. Find out more here or contact us to discuss.·       

Published in January 2020, the interim report focuses on the impact of Universal Credit on the Council Tax Reduction Scheme (CTRS) and possible amendments to the scheme. Download the interim report

Published in July 2020, the final report looks at the impact of Universal Credit on the Council Tax Reduction Scheme, council tax reduction awards, council tax arrears and rent arrears. It also considers the experience of Universal Credit claimants and stakeholders. Download the final report
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Covid-19: Government Launches £238m Scheme for Jobseekers

Jobseekers will be offered coaching and advice on moving into “growing sectors” as part of a £238m employment programme, the government has said.

Job Entry Targeted Support is aimed at helping those out of work because of Covid-19 for three months.

Work and Pensions Secretary Therese Coffey said it would give people “the helping hand they need”.

But Labour said the scheme “offers very little new support” and it was “too little too late”.

Last month, official figures showed that the UK unemployment rate had risen to its highest level for two years, with young people particularly hard hit.

The Job Entry Targeted Support (JETS) scheme will “boost the prospects of more than a quarter of a million people across Britain”, Ms Coffey said.

The Department for Work and Pensions says it is recruiting an additional 13,500 “work coaches” to help deliver the new scheme. 

Speaking to the BBC, Ms Coffey said JETS is aimed more at helping “adults beyond the age of 25” learn how their skills “can be used in different parts of the economy” – and she cited construction and care as examples of growing sectors. 

Chancellor Rishi Sunak said the scheme would “provide fresh opportunities to those that have sadly lost their jobs, to ensure that nobody is left without hope”.

“Our unprecedented support has protected millions of livelihoods and businesses since the start of the pandemic, but I’ve always been clear that we can’t save every job,” he said.

“I’ve spoken about the damaging effects of being out of work, but through JETS we will provide fresh opportunities to those that have sadly lost their jobs, to ensure that nobody is left without hope.”

However, Labour’s shadow work and pensions secretary, Jonathan Reynolds, said: “By the government’s own admission at least four million people could lose their jobs during the crisis. All it can muster in response are piecemeal schemes and meaningless slogans.

“This new scheme offers very little new support and relies on already overstretched work coaches on the ground, while many of the new work coaches promised have yet to materialise.

“It’s too little too late again from a government that simply can’t get a grip on this jobs crisis.” 

‘Difficult trade-offs’

Mr Sunak is due to address the Conservative Party Conference later, saying the government has been faced with “difficult trade-offs and decisions” during the coronavirus pandemic.

He will say that while he cannot protect every job, “the pain of knowing it only grows with each passing day”.

Mr Sunak will say his “single priority” as chancellor is “to create support and extend opportunity to as many people as I can”. 

“We will not let talent wither, or waste, we will help all who want it, find new opportunity and develop new skills,” he is expected to say.

In an interview with the Sun ahead of his speech, Mr Sunak also defended his Eat Out to Help Out scheme after suggestions it may have helped fuel the second wave of coronavirus cases.

The chancellor said the scheme had helped prop-up two million jobs and that he had no regrets about paying for it.

Mr Sunak also strongly pushed back on the idea of further lockdowns, which he said would be detrimental not just to the economy but to society as well. 

“Lockdowns obviously have a very strong economic impact, but they have an impact on many other things,” he said.

On the 22:00 curfew on pubs and restaurants, Mr Sunak said ministers were implementing such rules “to try and nip this in the bud”, but he acknowledged it was “frustrating”. 

“Everyone is very frustrated and exhausted and tired about all of this,” he told the paper.

Labour’s shadow chancellor Anneliese Dodds said her party had urged Mr Sunak to introduce a wage support scheme that incentivised employers to keep more staff on, but “he ignored these calls and now nearly a million jobs are at risk when the furlough scheme ends in a few weeks’ time”.

“When he speaks at Conservative Party Conference, Rishi Sunak must promise to get a grip of the jobs crisis before it’s too late,” she said.

“If he doesn’t, Britain risks an unemployment crisis greater than we have seen in decades – and Rishi Sunak’s name will be all over it.”

Employment: Seven Ways the Young Have Been Hit by Covid

By Eleanor Lawrie & Ben Butcher
BBC News

Young people have been particularly hard hit by the pandemic’s disruption to the jobs market.

The under-25s saw the biggest rise in unemployment during lockdown, and some graduate or entry-level roles attracted thousands more applications than usual.

1. Young people left the workplace first

Under-25s were more likely to be furloughed than any other age group.In the first three months of lockdown, half of eligible 16 to 24-year-olds were placed on the scheme, which supports people unable to work because of the pandemic, compared with one in four 45-year-olds. Hannah Slaughter, economist at the Resolution Foundation think tank, says hard-hit sectors like retail and hospitality – where many jobs cannot be done from home – have a disproportionately young workforce.

Chart showing furloughing

They were also the age group also most likely to lose their job, with the youth unemployment rate rising to 13.1%, compared with 4.1% for the whole UK. About 7% of 18-24 year-olds reported they had been made redundant because of the pandemic, compared with 4% of 50-65 year-olds. The government hopes to address this with its Kickstart scheme, which will pay employers £1,500 for every 16 to 24-year-old to whom they offer a ”high quality” work placement.

young people unemployment

2. Under-25s now make up a third of new universal credit claims

As youth unemployment rose, so too did the number of young people claiming universal credit. By July, just under one in three first-time universal credit claimants was under 25, up from one in five in March.

Chart showing the number of people claiming universal credit

But Ms Slaughter expects youth unemployment to get worse when the furlough scheme ends in October.”Young people are more likely to be in sectors which still aren’t up to the levels of activity before the pandemic” she said.”When businesses start making difficult decisions about redundancies, young people are likely to be disproportionately affected.”

3. Young adults in northern England were worst affected

These changes have not been evenly felt across the country, with more deprived areas seeing a quicker uptake in work-related benefits by young people. Using data on the uptake of universal credit and jobseeker’s allowance, BBC analysis found that the proportion of young people on the benefits had doubled between March and June.

A map of the UK shows where the highest proportion of out-of-work benefit claimants are.

The worst-hit areas were generally in the north of England, with parts of Liverpool and Blackpool most affected. In Liverpool’s Walton area, for example, one in five 16-24 year olds is now claiming universal credit or jobseeker’s allowance – up from 7% in January 2020. In total, 50 constituencies across the UK now have more than 15% of young adults claiming one of the benefits.

4. Online graduate job vacancies fell by 60%

Those looking for a job fresh from university are facing a tough timeThe number of graduate jobs advertised fell 60.3% in the first half of 2020 on one online recruitment website, compared with a 35.5% overall fall in adverts.About 5,000 jobs were listed on the CV-Library platform in January-July in the ”graduate” jobs category, compared with 2,000 a year earlier.

Chart showing competition for grad places

Within that, graduate jobs advertised in marketing fell by 84%, while roles in construction and administration both dropped by more than 70%. Applications only fell by 33%, meaning considerable extra competition for many roles. Twice as many people applied for public sector roles than the year before, and five times as many for IT vacancies. One positive was the average graduate salary on the platform increased by 7.1% year-on-year to £24,626.The fall in vacancies is borne out across the UK. Positions on online platform Adzuna were 45% lower in mid-September than in 2019, according to Office for National Statistics analysis.

5. Apprenticeships have stalled

Companies have taken on fewer apprenticeships over lockdown. From 23 March to 30 June, apprenticeship starts halved compared with the previous year, but this fall was not evenly split between age groups.

Chart showing monthly apprenticeship starts

Unsurprisingly, the sectors which saw the sharpest drop across all age groups were retail and tourism, which both declined by 75%. However, education placements only declined by a quarter.

6. Young people’s pay could be lower for three years after the pandemic

The UK’s financial watchdog, the Office for Budget Responsibility (OBR) estimates unemployment will hit 10% by the end of 2020, up from 4.1% last year .If this happens, young people who do find employment will face lower average wages for several years, Resolution Foundation analysis suggests, as they ”trade down” to the best job available.

Chart showing pay

Two years after leaving full-time education, it expects new education leavers’ hourly pay, after inflation, compared with pre-pandemic times, to be:

  • 8% lower for highly qualified leavers (degree and above)
  • 6% lower for mid-qualified leavers (A-level or equivalent)
  • 13% lower for lower-qualified leavers (GCSE and below)

As happened after the 2008 recession, lower-skilled workers are likely to take the biggest hit. But the effect will last longer for mid and high-skilled workers, who may end up in sectors with less opportunity for a pay rise than offered by traditional graduate jobs. That assumes lower-skilled workers can actually get a job. The think tank predicts they are a third less likely to be in employment three years after entering the jobs market, than if the pandemic had never happened.

7. Young people are more likely to stay in education

One positive outcome of the crisis is that younger people may remain in education. This would shield them from the worst of the downturn, and lead to higher productivity and a better-skilled workforce.

Young people are keen to stay on in education.   [ 40.5% of 18 year-olds applied to university by June, a record high ],[ 17% spike in new applications between March and June ],[ 1 year extra study could halve a low-skilled worker's unemployment chances ],[ 10% rise in postgraduate applications in the 2008-9 recession  ], Source: Source: UCAS, Resolution Foundation, Image: Woman in library

To an extent, this happened in the 2008 recession. The effect may be much larger this time around, says Xiaowei Xu of the Institute for Fiscal Studies, as sectors like hospitality and retail are also where many people first start working. ”There’s an incentive to staying on in education because of how terrible the economy is, which means that people may receive more and better education.”She adds that this year’s A-Level grade inflation means some students will go to a better university than they would have done.

European Employers Expecting to Shed Staff as Government Support Dries Up
September 22, 2020
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By Richard Stuart-Turner

More than half (59%) of European employers are expecting to make staff redundant once government support comes to an end, according to new research from employment and labour law practice Littler.

Only 17% of respondents to Littler’s European Employer COVID-19 Survey Report said they did not expect to reduce their workforce following the end of wage subsidies. 

Most employers are expecting job cuts to happen quickly, with 63% saying they would begin to implement reductions in staff as soon as the law allowed before the government schemes ended or within two weeks of their expiration. Just 10% said they would wait three months or longer.

Speaking to HR magazine, Stephan Swinkels, Littler’s coordinating partner international, said:

“As government support winds down, we do see so many companies restructuring their workforce in one way or another. It doesn’t always need to be terminations, it can also be restructuring them by terminating locations and asking people to work from other places.

“If we do end up with a second wave, my prediction is that there will be a second, third or even fourth batch of government support measures, there is no way around it.

“I think most governments have learnt from the first batches what worked and what didn’t work, and just pumping money and making it available is not the right thing. Governments are looking at strategic sectors or industries that they want to support, and they must also have some political clout.”

The report also looked at remote working practices and found that in the wake of the abrupt shift from the office to home working at the start of the pandemic, respondents expect the top long-term, positive implication on the workplace to be a greater acceptance of the benefits of remote work.

Forty-one per cent of employers surveyed said they are making or will make changes to their remote working policies to allow for more flexibility, as long as employees continue to demonstrate productivity while working from home.

An encouraging 80% of respondents said they are requiring or considering requiring more employees to work remotely either somewhat or to a great extent. 

The main reasons for considering this shift were allowing for greater productivity of employees (41%), addressing the difficulty and cost of implementing new safety measures (38%) and allowing for the closure of offices (25%).

Swinkels said:

“Productivity depends a bit on the sector, but people are working even harder sometimes than they used to in the office, they’re more efficient and willing to work longer and more flexible hours, so I do think that this will structurally change the way we work.

“But softer productivity is more difficult to duplicate from home – the social communication between employees, the DNA of a company and the loyalty and the identity that a company can have. It’s also more difficult for new people to onboard and integrate.”

Littler’s research also found that most employers are taking at least some action to address their employees’ mental health and wellbeing during the pandemic. 

Fifty-seven per cent of respondents have offered their staff more flexible work schedules while 51% have asked for frequent feedback on their organisation’s pandemic response.

Littler’s European Employer Covid-19 Survey Report was completed by 758 HR professionals and in-house lawyers across Europe in late July and early August 2020.

UK Faces a ‘Tsunami’ of Unemployment in the Autumn
September 8, 2020
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The TUC is encouraging the government to create a new job protection and upskilling programme as the Job Retention Scheme (JRS) comes to a close next month.

Tuc Union

Following Bank of England predictions that 2.5 million people could be out of work by the end of the year, the TUC warned the clock is ticking to avoid a “tsunami of unemployment” in Autumn.

It said the government risked throwing away the good work achieved by the JRS and has therefore created a new short-time working scheme designed to prevent mass unemployment and help firms bounce back after the crisis.

Short-time working is where employees agree to or are forced to accept a reduction in working time and pay.

The Job Protection and Upskilling Deal also focuses on helping workers whose jobs are at risk to develop the skills they need for the future.

The TUC recommended businesses receive a 70% subsidy from the government provided they bring back every worker on the scheme for a minimum proportion of their normal working hours.

Any worker whose employer needs them to work for less than 50% of their normal hours would receive free reskilling training.

Employees would also receive 80% of their salary for the hours they are not in work, including when they are training.

Companies would only get help if they can demonstrate they have been hit by coronavirus restrictions, pay their fair share of tax in the UK, boost workers’ rights, pay staff fairly and do not pay dividends while using the scheme.

Frances O’Grady, TUC general secretary said working people must not bear the brunt of the recession.

“Protecting decent jobs with fair pay is how we recover. The job retention scheme showed what government can do during a crisis. It saved many people from the dole queue and stopped good companies going to the wall.”

Ben Willmott, head of policy at the CIPD, said there was need for the government to consider additional support for employers once the furlough scheme had closed.

“The sort of short-time working scheme proposed by the TUC has a proven track record of supporting employment in other countries and could help employers hardest hit by COVID-19 to continue to minimise redundancies, particularly in the event of significant local outbreaks or a full blown national second wave over the winter.

“The focus on upskilling is also crucial at this time but many workers who would fall outside the remit of the TUC’s proposed scheme also need support to train so we think that it would make more sense to significantly expand the National Retraining Scheme for this purpose.”

The plan also has built-in contingencies for companies hit by local lockdowns, with companies in this situation automatically qualifying for help through the scheme.

In Austria, unions and employers have extended their coronavirus short-time work scheme for another six months and in France, this will be extended to June 2022.

Agata Nowakowska, area vice president at Skillsoft, said a short-time working model and retraining could help us better prepare for jobs of the future.

“As the war for talent intensifies in the post-pandemic circumstances, employee development and talent pooling will become increasingly vital to building a modern workforce that’s adaptable and flexible.

“Addressing and easing workplace role transitions will require new training models and approaches that include on-the-job training and opportunities that support and signpost workers to opportunities to upgrade their skills.”