On July 13, Business insider posted an article based on Credit Suisse report headlined “'Mayday! Mayday!' — Britain's impending recession will kill nearly 500,000 jobs”. Similar predictions by other economists suggested an increase in unemployment post-Brexit, a labour market reaction similar to the financial crisis of 2008.
However, data revealed by the ONS suggested that post-Brexit, employment remained stable. In fact, the number of people in Britain claiming jobless benefits fell in July. The ONS publication in October further revealed that UK employment rate is an all-time high at 74.5 per cent. The most recent figure for November 2016 shows unemployment rate being at 11 years low at 4.8 per cent. The labour market is not showing any signs of a post-Brexit downturn. However, this may be due to the economy being close to full employment level as data shows a decline in wage growth and a decline in employment growth which suggests that the labour market might face troubles in next few years.
On a similar note, the chief business economist at IHS Global Insight, said that “[Business] surveys have also indicated a waning in the hiring trend, and suggest that we’re likely to see a more severe weakening of the official labour market data in coming months.”
Given the surprise results of the labour market in the early post-Brexit months, it cannot be ruled out that the future may hold similar surprises. The employment impact in the coming months even if it is in line with the initially predicted outcomes of declining job statistics will have a varied impact across different sectors. Some sectors are likely to gain while others may lose out. The public sector is likely to experience an increase in employment at least in the short term due to the vast array of laws and regulations that need to be re-written and assessed. Moreover, UK employment law will no longer be subject to the EU law which means that laws like the Working Time Directive of 1998 will no longer apply. This can have an impact on employment by removing the restrictions on long working hours and night work.
On the other hand, low skilled sectors can experience a reduction in labour supply due to the potential decline in migration from EU countries. However, the impact on overall employment due to this is ambiguous. In the City of London, job losses are expected as some financial services firm may relocate their headquarters to other European cities. At the same time, though, Google has confirmed the establishment of its London headquarters creating 3,000 more jobs. This shows that there is substantial uncertainty present in the future employment statistics.
Moreover, Brexit can also potentially change the regional distribution of jobs in the UK depending on how foreign direct investment is affected in different destinations as was seen following the recession of 2008.
Despite the uncertainty regarding the job creation and losses in different sectors and the regional distribution of jobs, in the short to medium term, Brexit is likely to lead to a reduction in demand which will translate into a lower GDP which essentially means lower employment levels in the economy.
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