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All Change: pandemic winners and losers

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Simon Lythgoe antitrust, private sector, covid-19...

​This has been a truly extraordinary year for businesses. For the recruitment industry as much as any other, Covid-19 has been more devastating than anything in living memory. Over 500 million jobs evaporated across the globe. In the UK, new vacancies fell by over 60% between March and May. Since that early devastation, things have “improved” (the fall is now only 40% year on year), but, with a long way to go before we are out of the woods, who will be the winners and who will be the losers in the years to come?

On the face of it, some industries will suffer more than others. Travel (especially airlines), hospitality, retail, arts and creative industries have all taken a pummeling. They are not the only ones. I doubt there are many, if any, recruiters who have not shed staff.

That said, the big picture is more nuanced than it appears. Sure, bricks ‘n’ mortar retail has taken a hammering, but online retail has boomed. International travel has fallen off a cliff, airline pilots are being made redundant, yet staycations have never been more popular and thousands are applying for jobs from trainee accountants to paralegals. The High Street as we knew it is doomed, yet embedded within its buildings are the seeds that could make city centres bloom again as housing, the arts and café-culture reshape our urban environments. Opportunity beckons there, for those who can seize it…

It is hard to generalise though. Variations exist across different industries. For example, government figures from July show that, unsurprisingly, IT, with a 37% take-up of the scheme by employers, saw fewer employees being furloughed than any other area of the private sector outside agriculture. Accommodation & food had an 87% take-up, while the public sector, in contrast, saw only a 6% of employers make use of the scheme. Tech, obviously, will lead any charge out of recession, but even it is not immune and we know IT recruiters are making redundancies too.

Even during the lockdown, some industries kept going. For example, construction, although furloughing thousands, never fully stopped outdoors (other than in Scotland) and £4bn of big-ticket, shovel-ready infrastructure projects, not to mention a political need to build more houses will, surely, help that sector come through strongly in the medium term. Construction also provides an interesting example of an industry that has been forced by the pandemic to up the pace of technological change: an area in which it was (and still is) lagging badly.

However, it is clearly much easier for building sites (and factories) to operate under social distancing than it is for the service industries that traditionally rely on face-to-face contact. Recruitment is a case in point, yet like all the rest it is now accelerating the use of automation, adapting and becoming ever more comfortable with online interviewing and onboarding while developing and enhancing its ability to win new business via online channels, content marketing and social media. And, of course, as in almost every industry, the change to working from home for at least some of the week is here to stay.

The keyword is all this is change. Technological change may be the path which industries and individual businesses take as they strive to survive, but the imperative for most is to reset their fundamental modus operandi in light of the new, changed circumstances and then marry revised, safe working practices with the tech that makes it easier to achieve their strategic goals. Consequently, it’s no surprise that one of the stronger parts of Cedar’s business just now is our team that works with procurement, business transformation and change management...

In finance, where FinTech is growing rapidly, the onus is going to be firmly on the increased use of tech. The Bank of England is running very senior level webinars where it’s made clear that “There are reasons to think that the use of AI will increase as firms consider how to refine their business and operating models in a rapidly changing socio-economic environment. Many firms are already using AI-enabled automation to advance cost-saving plans and increase operational efficiency, including managing higher volumes of customer enquiries, processing loan applications, and maintaining call centre capacity. Banks, insurers, and asset managers are also looking to AI and alternative data to complement their use of standard indicators.”

Although the media characterise this as reinforcing the domination of the big players, small, nimble organisations are using tech as the catalyst to transform their businesses. The general line taken by most commentators is that the crisis will widen and deepen the gap between the big and the small – and especially between the mega-big and everyone else. I’m not quite so sure. There are significant pressures on the giant global tech and social media companies, not least in their native America, where a resurgent, more left-wing, Democrat party looks likely to seize power. Could antitrust measures lead to the enforced break-up of Facebook et al? Unlikely, but not impossible – and a real game-changer if it happens.

Almost all of what I’ve said so far is with reference to the private sector. The public sector has, as implied above, largely been shielded from the privations suffered by their private sector counterparts. However, with tax revenues falling substantially as a result, and increasing comment about the gap that exists between the two being made in the (largely centre-right) UK press, this is an area where it’s really hard to call what will happen next. The gap between the two may continue to grow for a short time as governments seek to shore up essential services, but at the end of the day there is no escaping the fact that the public sector too will have to change rapidly to cope with the long-term effects of the Covid crisis. Having been protected so far, it may well be that change, when it comes, is even more rapid and jobs are shed in quantity as technology makes people redundant.

The get-out-of-jail-free card for many organisations is to bring in temporary contractors. However, what we’ve seen over the last six months is that the big companies have shelved all non-essential projects and shed temps as a result. That said, the flexibility offered by contractors means that I think we’ll see their increased use over the next year in every sector. There will be many, very good people losing their permanent jobs in the next few weeks and months and savvy employers should reach out to them before their competitors do. However, it’s not all good news for contractors or those who want to become one. Next year, they have the imposition of IR35 on the private sector (surely a government own goal in the current circumstances?) and coming up fast behind that will be the requirement to comply with HMRC’s Making Tax Digital programme. It’s all change.

If you are or expect to become a candidate, what do you need to do? Essentially, if you work in a business or industry that’s doomed, then, sorry, you are going to have to retrain. If you work in an industry that is still solvent but replacing people with IT, or due to a lack of money from restricted trading conditions/poor cash flow simply can’t continue to pay your salary, sorry, you’re going to have to move jobs and/or retrain.

Many will simply take what they can – the driver and shelf-stacker jobs that are proliferating now – but those with the wit and capacity should look to the future. They can be the winners. Those who can’t, or won’t, change will lose. Winning, of course, means more use of IT and digital. Every industry – finance, procurement, HR, construction, manufacturing, retail - not just IT itself - will need many more people with expertise in computing and digital business. This applies at every level, from the C-suite to the shop-floor. And with taxes inevitably rising to pay for the humongous hit to the nation’s finances and the certainty that the pension age will rise concomitantly, it’s likely that several different career paths will be the norm for Gen Z and millennials over the next 30-50 years. Those who lose their jobs need to do what companies have been doing for the last few months: review, reset and, where necessary, reskill and retrain. Recruitment firms, or at least the savvy ones, will be working now on how best to advise their candidates to negotiate the increasing complexity of the jobs market post-Covid and manage the change between the old and the new. Even with a vaccine and a return to some sort of normal life, there is, I am afraid, no going back.

We believe that what we see in our recruitment business is a reflection of many other areas of the economy. We have had to learn new skills. Candidates and employers have to learn new skills. Being an accomplished performer on Zoom isn’t yet listed as a ‘must-have’ on any job-specs but it’s not hard to imagine it being as fundamental as knowing your way around a spreadsheet in the near future. It is, as I said, all change…