Macro Blues & Micro Bounce? legal

By Professor Nigel Jump, professor of regional economic development, Bournemouth University

Business activity in the southern regional economies has been in decline since August. Although SW England still has the lowest UK unemployment rate (ONS 2.1%, three months to November), the highest employment rate (79.3%) and the lowest inactivity rate (18.9%), the latest regional survey (from Nat West/S&P) shows SW orders, employment and exports falling through to the end of 2022.

As interest rates climb and real incomes slide, creditors and debtors are tightening their belts. The housing market is sagging. Over the festive season, retail sales volumes were fair, but the lack of consumer confidence (lowest readings on record) does not augur well for activity in early 2023, especially with household savings ratios being under pressure from the cost-of-living crisis. Will precautionary savings pick up now? For the long term, this would be good – making funds potentially available for productivity enhancing investment. In the short term, however, it might take spending out of current demand. This should be part of a necessary adjustment to relieve the stagflation economy, but it would not be pleasant for businesses and markets right now.

The official inflation measures are still high (CPI 10.5%, CPIH 9.2%) in the year to December, but there are tentative signs of some price pressures easing, with the world wholesale gas price back to pre-Putin levels.

Are we at a turning point or just a pause? Much depends on three elements: domestically, on how the myriad labour cost disputes resolve; internationally, on how the Ukrainian war evolves; and financially, on how further tightening of monetary policies by the central banks is paced and scaled. Meanwhile, as well as energy prices dropping, other commodity and shipping costs may be easing towards lower inflation but beware a Russian spring offensive. Food prices continue to accelerate, (reaching +16.9% year-on-year to December). Overall, ‘core’ inflation may be starting to soften, albeit slowly, from the recent peak.

Against this background, January’s keynote speech by Chancellor Jeremy Hunt set out the government’s plans to boost economic growth. The Chancellor identified “four Es” (enterprise, education, employment and ‘everywhere’) as agendas in need of improvement if we are to address poor UK productivity, skills gaps and low business investment. Hunt spoke of opportunities to use the regulatory freedoms of Brexit to boost sectors including technology, life sciences, clean energy, creative industries and advanced manufacturing. He talked of lower taxes in the medium to long term and the need to address structural labour shortages. The Chancellor did not ease, however, the general concern about the UK’s absolute and relative economic performance. Afterwards, business representatives, from CBI and FSB alike, criticised the lack of policy detail in the speech. Many hope that March’s budget will provide important details for action to quell inflation and yet support growth: no mean feat.

On 2 February, the Bank of England raised base rates to 4%. The UK’s ‘stagflation’ problem remains and further increases in interest costs are possible, despite, (indeed, to ensure), the recession risk. IMF Forecasters are predicting a UK recession – (the only major economy predicted to experience negative growth in 2023). This prospect reflects the country’s relatively high exposure to dissonance in its supply chains and workforce flows.

With respect to labour, there is clear demand for two broad types of skills. First, there are those skills which are commonly required across places, sectors and occupations. These include a range of basic digital, services and, perhaps, green competences which nearly all workers will need to demonstrate to employers: abilities in using foundational and advanced software and awareness of relevant drivers of energy and material sustainability. Second, there are the specialised skills needed in specific industries or for key functions. These include parts of finance, manufacturing and/or certain services where innovation drives overall growth and business and personal success. Areas such as AI, automation and energy/ climate substitution are part of this category.

In its current cycle, the UK economy is a low productivity enterprise with weak competitiveness. A recent FT column has listed the following areas as those holding back the UK economy: disruptive tax and regulation systems; poor management and planning; weak educational performance, inadequate skills and inequality; trade barriers and low investment; skewed business finance and regional disparities; short termism, imbalanced innovation and disjointed politics.

That’s quite an agenda of areas needing improvement in the years to come. It took at least a decade and a half to get into the present situation. The task, to lift the structural macro blues and build on any tactical micro bounce, starts now. www.bournemouth.ac.uk

with Frettens Solicitors

Many of you will have heard in the news about Elon Musk, having bought Twitter, making many of the company’s workers redundant. Now

43 ex-employees of the company are looking to take Twitter to an employment tribunal for unfair dismissal. The company failed to consult with employee representatives for the minimum 45 days, having proposed to make at least 100 employees redundant. In addition, Twitter failed to provide adequate reasons for the dismissals and, practically, suspended them from their jobs, with no contractual right to do so.

If the allegations prove to be correct, Twitter was in breach of the Trade Union and Labour Relations (Consolidation) Act 1992. This legislation obliges employers to carry out collective consultation with employee representatives when making large scale redundancies.

Twitter is also potentially liable for unfair dismissal claims by each of the ex-employees, if they can show either the redundancy was a sham or individual consultation with employees was not carried out.

If the matter goes to an employment tribunal and the ex-employees succeed, they could each receive a protective award of 90 days’ pay, plus loss of earnings of up to a year’s pay, if they are unable to obtain new employment.

Twitter can, even if they did not go through a proper procedure, argue that it wouldn’t have made a difference and that the employees would have been made redundant regardless. Any loss of earnings claim would therefore be low value. It is quite likely many, if not all, of the ex-employees will be offered settlements not to continue with legal proceedings.

This story is an important reminder to employers about the potential cost, both financial and in reputation, that failing to follow a fair redundancy procedure can bring. If you would like advice on a redundancy situation, please contact me below.

Email: pburton@frettens.co.uk

Telephone: 01202 491737 www.frettens.co.uk

with PKF Francis Clark