UK businesses hit by £3.5bn in costs of redundancy pay-outs
- Cost of redundancy falling, but still at a high level
- Concerns that Brexit could push bill higher
Laying off staff will cost UK businesses an estimated £3.5 billion in 2016, as the cost of redundancy continues to eat into profitability, says EMW, the commercial law firm.
EMW says that although the total has fallen down from £4 billion last year*, this is still a heavy burden for businesses looking to cut costs and improve efficiency. The average redundancy payment per worker is now £15,284**.
EMW says that despite the post-recession economic recovery, post-recession, that the cost of redundancy is still at a very high level. Within some sectors, such as banks and retail, there are still long term restructuring plans being implemented, which were triggered in part by the credit crunch. Recent examples in the banking sector of large scale restructuring include Commerzbank and RBS.
Jon Taylor, partner at EMW, says that “The burden of redundancy pay outs is still weighing very heavily on UK businesses. The damage to employment caused by the last recession is still being felt in some respects, as businesses are continuing to assess and streamline their employment structures.”
“For large businesses such as banks, the credit crunch and the measures taken to deal with it together with changes in the sector brought about by technology had hugely detrimental effects, and required extensive restructuring programmes.”
EMW says the continued substitution of labour by technology in areas as diverse as Fintech and industrial robotics means, that regardless of the economic cycle, levels of business restructuring and job losses remain high.
EMW says that there is a concern amongst businesses that economic uncertainty following the Brexit vote could push redundancy levels higher, as jobs could potentially be cut or moved overseas. Businesses said to have considered cutting UK staff numbers post-Brexit and moving large proportions of their operations overseas include Lloyds Bank, JP Morgan and Morgan Stanley.
Jon Taylor says that, “Impacts to the economy due to Brexit have not yet become clear, however it is possible that economic uncertainty will result in the current level of redundancies rising.”
“For example, within the financial services sector, there has been discussion post -Brexit, of the possibility that some of the more senior roles may be moved overseas, to places like Zurich, Frankfurt and Paris.”
“The recovery from the global financial crisis is still in action for many businesses, and therefore any further negative impacts to the economy, such as the potential outcomes from Brexit, are likely to set them back even further in the recovery process.”
“Making redundancies are part of ensuring financial stability for a struggling company, and therefore the overall cost of these is unlikely to reduce if the economy begins to fail.”
*Based on data from HMRC
**May include some significant enhancements or cost of notice