Britain’s biggest companies are slashing tens of thousands of jobs in a desperate effort to reduce costs as the coronavirus pandemic shocks the economy and forces businesses into survival mode.
The latest moves came Monday from oil major BP (BP) and luxury goods maker Mulberry, which said would cut 15% and 25% of their global workforces, respectively. That translates to 10,000 jobs at BP (BP) and 350 at Mulberry.
Major UK companies now have more than 75,000 job cuts in the pipeline, with more expected as partial lockdowns and social distancing continue into the summer months. Smaller companies are also being slammed, adding hundreds of thousands of job losses to the total.
British Airways (ICAGY) is slashing 12,000 jobs, or more than a quarter of its workforce, in response to the severe drop in travel demand during the pandemic. Rival carriers EasyJet (ESYJY) and Virgin Atlantic will jettison 4,500 and 3,000 positions, respectively, while engineering and aerospace company Rolls-Royce (RYCEF) is cutting 9,000 jobs. Parts supplier Meggitt (MEGGF) is reducing its workforce by roughly 1,800.
Niche carmakers are also being hit hard, with jobs going at Bentley (1,000), McLaren (1,200) and Aston Martin (500). HSBC (HBCYF) announced in February that it would slash 35,000 positions, but has since put most of those redundancies on hold to avoid forcing workers to search for a new job during the pandemic.
UK government data so far hasn’t captured the hundreds of thousands of jobs that were likely cut in April.
The UK unemployment rate remained below 4% in March, according to official data. But more timely indicators that include April give a sense of the looming jobs crisis. The number of workers on company payrolls dropped by more than 450,000 between March and April, government data show.
The worst is almost certainly to come.
Some 8.7 million workers in the United Kingdom have been furloughed as part of a program under which the government covers 80% of their salaries. But with support being phased out from August until the program ends in October, and with businesses facing a collapse in demand, companies may struggle to find work for many furloughed employees when they return.
“Business leaders know that the government’s support can’t be infinite, but the ugly truth is that if there’s no money coming in the door, many firms will be forced to make difficult decisions come August,” Jonathan Geldart, director general of the Institute of Directors, said late last month.
In a survey of 700 company directors, nearly a quarter said they could not afford to make any contribution to the salaries of their furloughed workers between August and October, the institute said.
Restaurants, pubs and bars could be particularly hard hit. The Telegraph reported on Monday that UK Prime Minister Boris Johnson had decided to bring forward the reopening of the hospitality sector to late June from early July after being told that as many as 3.5 million jobs in the sector were at risk.
Andrew Wishart, UK economist at Capital Economics, wrote last month that he expects the unemployment rate to increase to 9% in the coming months. “Most of that jump should quickly be reversed once the lockdown ends, but we still expect the unemployment rate to remain elevated over the next few years,” he said.