Businesses have dramatically scaled back investment plans for the rest of the year in response to the uncertainty surrounding the future of the UK economy, according to a leading business survey.
The Institute of Directors (IoD) said its confidence tracker revealed the Covid-19 crisis had driven down investment intentions among its members for the next 12 months by 11 percentage points to a record low of -43%.
The monthly survey found investment and hiring intentions “plumbed new depths” last month despite some easing of the lockdown and an improvement in the overall confidence business owners have in the economy, which increased from -69% in April to -60%.
Tej Parikh, the IoD’s chief economist, said firms were more optimistic about their own recovery than the broader economic situation, though it was too early to say whether the small and medium-sized businesses that make up the bulk of the IoD’s membership had turned a corner.
He warned ministers that businesses would need support through the recovery period or many would go to the wall.
“The government must pull out the stops this summer. If it holds back too much ammo for later in the year, firms’ recoveries will be slowed,” he said.
Which UK companies are cutting jobs in the coronavirus crisis?
The coronavirus lockdown has virtually halted international travel and tourism, hitting airlines and other travel companies, aerospace and auto manufacturers and oil companies hard.
As these businesses adjust to dramatically reduced revenue projections, job losses are starting to mount alarmingly. More than 40,000 redundancies have already been announced across these sectors, with more than 10,000 likely to be in the UK.
The jet-engine manufacturer has confirmed that 3,000 job cuts, of a planned 9,000 worldwide, will be made in the UK. Rolls-Royce will make the first round of redundancies through a voluntary programme, with about 1,500 posts being lost at its headquarters in Derby, as well as 700 redundancies in Inchinnan, near Glasgow, another 200 at its Barnoldswick site in Lancashire, and 175 in Solihull, Warwickshire.
The luxury carmaker intends to shrink its workforce by almost a quarter, slashing 1,000 roles through a voluntary redundancy scheme. The majority of Bentley’s 4,200 workers are based in Crewe in Cheshire.
Aston Martin Lagonda
The Warwickshire-based luxury car manufacturer has also announced 500 redundancies.
The oil company plans to make 10,000 people redundant worldwide, including an estimated 2,000 in the UK, by the end of the year. The BP chief executive, Bernard Looney, said that the majority of people affected would be those in office-based jobs, including at the most senior levels. BP said it would reduce the number of group leaders by a third, and protect the “frontline” of the company, in its operations.
The UK flag carrier is holding consultations to make up to 12,000 of its staff redundant, a reduction of one in four jobs at the airline. BA intends to cut roles among its cabin crew, pilots and ground staff, while significantly reducing its operations at Gatwick airport.
Richard Branson’s airline is to cut more than 3,000 jobs, more than a third of its workforce, and will shut its operations at Gatwick.
The airline has announced plans to cut 4,500 employees, or 30% of its workforce.
The Irish airline intends to slash 3,000 roles and reduce staff pay by up to a fifth.
The shipping firm intends to cut more than a quarter of its workforce, a loss of 1,100 jobs. The company, which operates passenger ferries between Dover and Calais, and across the Irish Sea, as well as Hull to Rotterdam and Zeebrugge, will initially offer employees voluntary redundancy.
Officials at the Treasury and Bank of England are concerned that businesses will delay spending on new plant and machinery, IT systems and upgrades to ageing properties while they cope with the coronavirus crisis, jeopardising the recovery.
Ministers have come under pressure to announce tax cuts and other incentives to spur extra spending by consumers and businesses to prevent the recession turning into a depression lasting several years.
Referring to the employment protection scheme that pays employees 80% of their wages if they cannot work, Parikh added: “When the furlough scheme ends, employment could take a hit. The government should help companies fill the gap by reducing the cost of hiring.
“With cash tight, smaller firms could also benefit from tax breaks to adjust to the new normal, while the debt businesses have built up will hold back the economy unless it’s addressed.”
The report followed analysis by the stockbroker Peel Hunt of the cancelled investment decisions of listed companies, which it estimates has reached £23bn.
Last month, the IoD reported that 51% in a poll of 720 company directors said their growing debt obligations were having a negative impact on their recovery, while 57% said it would hold back their investment plans over the next two years.
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