Despite the expectation of a tsunami of Brexit-related job-losses, UK businesses actually managed to reduce their spending on redundancy payments in the last year to £3.6bn* from £3.8bn in the previous year, says EMW, the commercial law firm. Contributor Jon Taylor, Partner – EMW.
The total number of redundancy payments in the UK has also dropped to approximately 310,000 in 2017-18, down 7% from 333,000 in the previous year. The law firm says that although increased redundancies may still occur as a result of Brexit, current job losses are not as bad as some had forecast at the time of the referendum.
Despite concerns over the impact of Brexit, the UK economy has continued to grow, albeit at a slow pace. Annual UK economic growth was 1.2% in 2017-18, compared to a 2.5% growth rate in the Eurozone over the same period.*.
EMW says that a tight labour market with low levels of unemployment might be encouraging some businesses that are restructuring to reallocate surplus staff within their organization rather than making them redundant. The UK’s unemployment rate has now fallen to its lowest point since 1975**.
Jon Taylor, Partner at EMW also says that large scale redundancy and restructuring programmes that have taken place since the last recession means that UK businesses are still relatively lean in terms of staffing levels. Jon Taylor, Partner at EMW, says: “These statistics show that the two big bogeymen, AI and Brexit, have not created the large-scale job losses that many have feared they would.”
“However, that does not mean we are out of the woods yet. There remains continued uncertainty over the shape of the future relationship between the UK and EU. Depending on the final outcome of Brexit, a rise in redundancies is definitely not out of the question.”
EMW says that the drop in the value of redundancy payments may fall further in the future as tax on redundancy payments rose sharply in April 2018 to employers. Under the new rules, all payments in lieu of notice are now taxable and the previous £30,000 tax-free exemption does not apply. Adds Jon Taylor: “That tax increase might not hurt now but when the economy is struggling then that extra tax and NI charge will really be felt.”
*Year-end 31 March 2018
**ONS UK labour market