Manufacturers are calling for the establishment of a National Skills Task Force, as companies are bracing themselves to have to make substantial redundancies as the rate of decline in orders accelerates, and pessimism about a return to normal trading within the next year has grown, according to a survey released today.

Make UK, the manufacturers’ organisation, says that the establishment of a Task Force which would have the objective of retaining key skills within industry by redeploying people who have lost their jobs to other companies and enabling them to be retrained. A smaller such scheme was set up after the financial crisis in 2008 but Make UK believes there is now a case to establish a larger-scale project that is rolled out on a national basis.

The survey also comes ahead of an expected announcement by the Chancellor of the Exchequer on plans to gradually unwind the Job Retention Scheme and a requirement for employers to make an increased contribution to the salaries of furloughed staff. In response, Make UK is urging the Chancellor to provide employers with as much clarity and certainty as possible to enable them to plan any restructuring, together with increased flexibility in the scheme to allow for part-time working two days a week.

Make UK chief executive Stephen Phipson said: “There is no disguising the fact these figures make for awful reading with the impact on jobs and livelihoods across the UK. Industry and the Government must now leave no stone unturned to retain as many key skills as possible within the sector to ensure it is in a position to effectively recover when growth eventually returns, which at some point it will.

“As part of this, the Government should establish a National Skills Task Force with the aim of retaining and re-deploying as much talent within the sector as possible. This will help ensure that companies have the necessary skills and capacity to be quick out of the blocks for any upturn in demand.

“In addition, the Job Retention Scheme has been very effective in allowing employers to retain as many of their staff as possible. But, industry accepts that it cannot continue indefinitely and will understand the plans to reduce the cost to the taxpayer and ask companies to make a greater contribution. In doing so, however, the Chancellor should provide as much clarity and certainty for companies as possible while, at the same time, introducing an element of real flexibility into the scheme which allows for part-time work.”

According to the latest Covid-19 Manufacturing Monitor published by Make UK, the number of companies now operating in some capacity continues to grow, standing at just under 95%. However, despite this, a quarter of companies plan to make redundancies in the next six months with a further 45% possibly planning to do so. At this stage, just under a third of companies (30%) are planning to retain all their staff.

Of those that do plan to make redundancies, over a third of companies (33.3%) are expecting to make up to 10% of staff redundant, just under a third (31.1%) up to a quarter of employees, while more than a quarter (28.9%) plan to make up to half their staff redundant.

Make UK also warned that the rate of decline in orders has increased compared to the last survey two weeks ago with the number of companies reporting order declines of more than half up from just under a quarter to just under a third (31.8%) while those reporting declines of up to half also increased from just under a quarter to just over (27.1%).

Furthermore, the number of companies who believe it will take more than a year to return to normal trading conditions has also grown slightly from the last survey, up to just under four-fifths (37.8%) from 36% two weeks ago.

The extent to which pessimism among companies has grown is highlighted by the fact the figure for the same question stood at just 17% of companies a month ago.

Make UK has made the following recommendations to the Chancellor on changes to the Job Retention Scheme.

1. Certainty and notice — employers need to know exactly what is happening and want explicit detailed guidance around the changes so they can work to a fixed timeline with sufficient time to prepare any restructuring to their workforce.

2. Real flexibility — removing the three week minimum period must be a priority when the scheme becomes more 'flexible' in August with the element of flexibility allowing furloughed employees to work part-time. Part-time work should be allowed at least for two days a week, where these employees would receive their normal contractual salary. In addition, the Government needs to provide a top-up for employers National Insurance Contributions and pensions.

3. If there is a guillotine that prevents employees joining the furlough scheme for the first time, the introduction of new flexibility must be introduced at the same time. This would allow employers to put additional employees on furlough, without losing the opportunity to benefit from the scheme, and allowing staff to continue to work at least some of the time

The survey of 224 companies was carried out between 19 and 26 May.