Confidence on the rise for UK bosses as more workers return

Barely one in 10 workers is still on furlough as bosses bring most of their staff back

Company bosses have turned optimistic about the future prospects of their businesses for the first time since the pandemic began, as the economic recovery takes hold and more workers return to the office, albeit slower than the Government had hoped.

Confidence among executives understandably plunged during the coronavirus outbreak and the subsequent lockdown that placed large parts of the economy on ice. But almost 40pc of those surveyed by the Institute of Directors said they are optimistic or very optimistic on their organisation’s future over the next year. This easily outweighs the 28pc who are pessimistic. The remaining one third said they were neutral on the question.

When asked about the wider economy, the majority said they are pessimistic, though the depth of their gloom has lessened in recent months as the reopening has picked up pace.

“We’re just starting to see a few green shoots, but firms are still in a great deal of difficulty,” said Tej Parikh, the business group’s chief economist. “Lockdown lifting has given companies some room to manoeuvre, but with the virus still in circulation, there will be a lid on the economic recovery.

“With the furlough scheme drawing to a close, firms are being forced to make difficult decisions. While the Treasury wants to avoid freezing the economy in place indefinitely, it should act to support jobs more widely, by cutting employment tax.”

The number of workers on furlough fell again, with just over one in 10 private sector employees still paid to stay at home under the job retention scheme, the Office for National Statistics found.

This is down by two thirds from a peak of more than three in 10 in May, and equates to around 2.4m people.

At the same time more workers are returning to offices, factories and other places of employment.

Just one in five are still exclusively working from home as most people took the commute at least once last week. The shift back to normality means the number still at their kitchen tables has fallen by almost half from the high point in June when nearly 40pc worked entirely from home.

Britain’s growing economic recovery means 57pc travelled to work one at least one day in the final week of August, the Office for National Statistics found, up from a low of a little over one in three back in May.

The remainder include those on holiday, on furlough, on parental leave, with caring responsibilities, or employed by companies that have yet to reopen.

The number of workers on furlough fell again, with around one in 10 private sector employees still paid to stay at home under the job retention scheme.

This is down by two-thirds from a peak of more than three in 10 in May, and equates to around 2.4m people.

Analysts at Capital Economics estimate that the reopening of schools in England this week, following those in Scotland last month, could boost GDP by as much as 5pc. This is because output will rise in the education sector, and more parents will be able to work while their children are in the classroom.

Bank of England surveys similarly showed that most workers are now back on business premises for the first time since the pandemic struck, with bosses anticipating this will rise to two-thirds of their workforces in the coming months.

The expected hit to sales is ebbing. Business decision makers surveyed by the Bank expect sales to be down by less than 14pc in the third quarter, which is only half as bad as they had anticipated when asked to forecast sales back in May.

There is still a serious impact on investment, however, which is down by almost one-third, and on employment, which is likely to be down by 7pc.

Even into the middle of next year, bosses still anticipate a 5pc hit to employment, amounting to one worker in every 20.

That is matched by the purchasing managers’ index, a survey of businesses from IHS Markit, which shows the economy recovering rapidly, even as companies shed workers.

The index climbed to 58.8 for the services sector in August. This is the highest level for five years. Any score above 50 indicates an expansion in activity, so this shows rapid growth from July to August.

Including manufacturing, which is rebounding even more strongly, the private sector as a whole recorded a PMI of 59.1, its highest level since 2014.

New orders are increasing as the economy reopens and demand returns, and expectations for future growth are also strong.

However, growth is still coming back from very low levels in lockdown, and companies are cutting back their workforces to reflect this.

The employment component of the PMI remains deep in negative territory, coinciding with the tapering of the furlough scheme, which requires more employer contributions to workers’ wages from this month.

“A further surge in service sector business activity in August adds to signs that the economy is enjoying a mini boom as business re-opens after the lockdowns, but the concern is that the rebound will fade as quickly as it appeared,” said Chris Williamson, chief business economist at IHS Markit.

"The current expansion is built on something of a false reality, with the economy temporarily supported by measures including the furlough and Eat Out to Help Out schemes. These props are being removed. The burning question is how the economy will cope as these supports are withdrawn.”