Opinion: Ian McConnell: Scottish employee-owned campervan firm Jerba provides glimmer of hope amid coronavirus crisis wreckage

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The unemployment fall-out from the pandemic has been colossal.

The speed and sharpness, or otherwise, of the recovery remains to be seen, in the UK and around the world. And this will ultimately dictate what happens on the unemployment front.

There have been some reasons for hope, with a survey this week from media group Caixin and financial information company IHS Markit showing the services sector in China grew in June at its fastest pace for more than a decade.

In the UK, the construction sector returned to growth in June, according to the Chartered Institute of Procurement and Supply. The manufacturing sector recorded marginal growth. Services continued to contract, although at a much-reduced pace.

It remains difficult to see where things go from here. In contemplating rebounds of whatever strength in activity, we have to remember how steeply output plunged amid the necessary lockdowns. In China, the services sector continued to shed jobs even as it recorded rapid growth in June.

As consumers in the UK and elsewhere are urged to spend to get the economy moving again, the thing we must remember is that their ability to do so, and their confidence to part with cash where they do have the means, will depend crucially on the labour market picture.

The overall behaviour towards their staff of the businesses asking people to spend their money with them, and of other employers, will therefore be crucial to the capability, or otherwise, of consumers at large to get the economy moving.

It is awful to see millions of people who were getting on fine with their daily lives before the coronavirus pandemic hit and absolutely necessary lockdown measures to slow the spread were put in place – often in jobs that were not under any or much threat – now having either lost their employment or fearing such an outcome.

The UK Government coronavirus job retention scheme, through which the taxpayer funds 80 per cent of the wages and salaries of furloughed workers up to £2,500 a month, was launched to preserve employment. It is costing tens of billions of pounds. However, it has helped to protect more than nine million jobs, at least for a while, and the economic, social, and health costs of not implementing such a programme as lockdown was put in place do not bear thinking about.

However, the key thing was always going to be how to unwind the scheme without seeing all the good work in saving employment undone through mass job losses. The continuing haste of the UK Government in its desire to end the scheme by October has in this regard been utterly lamentable. And so has the hurry to get employers to start contributing from August, when many cannot afford to do so. Also regrettable is the continuing lack of any dispensation for sectors which will be at the back of the queue to reopen, or to do so fully. These policy shortcomings look like a massive problem going forward and do not bode well for the labour market outlook.

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However, employers must also take responsibility amid this crisis.

Many, such as those in the likes of the hospitality sector, will be limited in what they can do to support employment by the extent of their cash reserves. Without the backing of the furlough scheme, many will have no choice but to make people redundant. This is why continuing UK Government furlough support for sectors in need, at no cost to employers until they can get back up and running properly, is so crucial and should be given. As it has been pointed out previously in this column, a stitch in time saves nine, and it is far easier for a government to prevent job losses than to try to create employment through policy measures in the midst of a downturn. No matter the degree to which such policy measures might be well-intentioned or targeted.

However, many businesses do have options, either in terms of retaining all of their workforces or minimising job losses. As the economy reopens, many will be able to cover their overheads and have money to pay their staff. The question for them will be around the extent to which they are willing to take a short-term hit in terms of a reduced profit level, and/or in suspending or cutting dividend payments to shareholders temporarily, to minimise their job cuts.

It is impossible to overstate the importance for the greater good, in terms of the economy and society, of minimising job cuts from this massive dislocation. And employers must resist any temptation to erode the longer-term employment conditions of workers amid the crisis.

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Doing the right thing by minimising job cuts and continuing to honour current employment conditions should also be to the longer-term benefit of businesses, preserving their skills base and capacity to ramp up activity as recovery comes. It will also help foster employee loyalty, the benefits of which are difficult to measure but should not be underestimated. And then there is customer perception. It is to be hoped that customers remember, when this is all over, which companies did the right thing by their employees and which did not.

UK claimant-count unemployment surged in April to exceed two million for the first time since 1996 and hit 2.8 million in May, up by 1.6 million since March. Scottish claimant-count, which measures the number of people claiming benefit principally because of unemployment, has risen from 111,400 in March to 217,600 in May.

Many businesses seem to be taking their responsibilities to their employees seriously, thinking long and hard about what they are doing.

Others, sadly, appear to have been champing at the bit to cut costs. They have followed the utterly predictable pattern seen in their usual, often semi-regular, cost-cutting rounds, with the focus remaining on short-term profit margins in spite of the extraordinary circumstances we are facing.

Of course, it will be far easier for some businesses to do the right thing than others, depending on their cash position and crucially on the sectors in which they are operating and the nature of ongoing government support packages.

It will also in many cases depend on the ownership model. In this context, it would be good to see institutional investors in stock market-listed companies buy into the notion of taking a longer-term approach to profitability amid this crisis, preserving capacity and skills even if this might mean a short-term squeeze on profits or dividend payouts. Many family businesses have, in more normal times, prospered from a long-term vision.

A lot of what is happening at the moment is about mindset, and whether companies and investors can recognise this as an exceptional situation. If they can, and take a long-term view, it will boost greatly the prospects for overall recovery in the immediate future, through which everyone will benefit.

One heartening story on the employment front, small in scale but nevertheless among important glimmers of hope amid the gloom, has come from North Berwick-based campervan converter Jerba. This employee-owned business, which had to halt production during the coronavirus pandemic lockdown, shared full details of its financial position including its bank balance with staff to reassure them about job security amid the crisis.

All 15 of the firm’s staff, who were furloughed under the coronavirus job retention scheme, have returned to the factory to work on a backlog of orders.

Jerba Campervans, which converts Volkswagen Transporter vehicles into campervans, cited potential for a boom in “staycations” to boost demand as it returned to production in late June.

It is, in that sense, better placed than many businesses because of the sector in which it is operating. However, what stood out was the message of reassurance from co-founder and director Simon Poole to employees when production was suspended during the lockdown.

He said: “I notified early on ‘here’s what’s in the bank’ and reassured that thanks to a number of van sales completing before lockdown, we were in a secure position to pay everyone’s full pay for months to come, regardless of when we receive our due grants. It felt obvious to do this – and on reflection that alone seems to encapsulate how different employee-ownership businesses can be.”

This focus on reassuring employees that their future is secure for months ahead would, if replicated across all those businesses which are in a position to do it, provide a great boost to hopes of recovery, in terms of instilling consumer confidence and enabling responsible spending.

Sadly, in some companies which do have a choice, this focus is unlikely to feature.

We will never know for sure the degree to which the corporate cost-cutting we are seeing is avoidable. However, we can be sure that avoidable job losses will hamper recovery. And we must not underestimate the huge costs of such short-sighted behaviour to the economy and society.