EMPRESA
The financial nightmare that comes after getting the chop
One firm’s experience of a week of job cuts vividly reveals the pressures many British people are facing
From The Sunday Times
November 16, 2008
November 16, 2008
Since he left school 23 years ago Harry Bell has held down a job, worked hard and provided for his family. Then last Monday the axe fell. The economic down-turn shaking the country struck Venture Plastics, a small manufacturing company where Bell worked as an injection moulding technician. He and four colleagues lost their jobs.
“The boss had warned us we were at risk,” said Bell, from Stockton-on-Tees, who had joined the company earlier this year. “But it was a shock. I’m 39. I’ve worked since I was 16. I’ve got a wife and two children and it leaves me in a bad position, suddenly going from having wages that cover the bills to having nothing.”
For several days he wandered around “like a lost soul”, said his wife, Lisa, who works in a hospital. With jobs disappearing in similar businesses, the prospects of another opening in injection moulding are slim. On Thursday he went to sign on at the Jobcentre.
“Since Monday I have done nothing but worry,” said Bell, who earned £18,000 a year. “I’ve worked all my life. I want to work.
“It’s not just losing your job, it’s everything that goes with it. I’ve been for my interview for jobseeker’s allowance and the amount in question, it’s nothing. Nothing. It won’t cover the mortgage, so we have had to phone up all the people we have bills with and explain to them and ask if there is anything they can do to help us out.”
Though not a bitter man by nature, he’s angry, especially with the banks. “The government has bailed them out: what about the rest of us? I’ve never missed a bill in my life. Yet when it comes to banks, who have basically swindled people out of money, they won’t help you out.”
Thousands more workers are going to find themselves in the same position after last week when Britain suffered its worst job losses for more than 15 years. From BT to Virgin Media and JCB, large corporations announced that they would be cutting almost 20,000 jobs in the coming weeks. These are not City slickers on fat salaries – though thousands of them are also being shown the door – they are assembly line workers, factory operatives, technicians and agency staff.
In addition thousands of other ordinary people stand to lose their livelihoods in the small companies that employ more than half the country’s workforce. No announcement, no fanfare, just the abrupt end of their income.
The outlook is so grim that British Chambers of Commerce warns that if government measures to counter the recession fail to work, unemployment could rise to 3.25m over the next 18 months – more than 10% of the workforce.
The Chartered Institute for Personnel and Development says drastic action is needed fast. “It is time for policymakers to throw everything but the kitchen sink at the problem,” said John Philpott, its chief economist. “We need more coordinated international policy action and further cuts in interest rates.
“We also need UK politicians to stop quibbling over which party has the best tax and spending plans and agree on a package of measures.”
Otherwise, the spectre of mass unemployment looms for the first time in a generation.
The story of how Bell and his colleagues came to lose their jobs illustrates in microcosm the shockwaves reverberating through the economy. When Bell joined Venture Plastics, which makes mouldings for the car industry and other businesses, the company was expanding. It had been bought by Nigel Riley, a 40-year-old entrepreneur with more than a decade’s experience as a director of a sizeable manufacturing concern.
Just a couple of months ago, things seemed still to be motoring along. Riley had boosted turnover by 25% in 12 months and had taken on six extra staff. “Until October we had had a reasonable year and had managed to attract new customers,” he said. “Then the world collapsed.” That month the carmaker Nissan halted production for two weeks of two models built in Sunderland; and it said that for a further fortnight production would run only three days a week.
Car sales were plummeting and Nissan was making more vehicles than it could sell. Nissan’s cut in production meant a cut in orders to its suppliers, including one called Nifco, a medium-sized parts manufacturer in Stockton. In the good times, Nifco had outsourced surplus work to other companies, including Venture Plastics. Now that stopped dead. For Riley, whose company employed 18 people, the effect was devastating.
“It’s dreadful,” he said. “We have had notification that in the next couple of months up to 50% of our business may disappear. Car companies are knocking out weeks – BMW [which makes the Mini] have announced they are shutting down for Christmas on December 7 and not opening back up until January 5. We don’t have the resources these larger companies have to continue paying overheads and bills.”
Riley sought help from Peninsula Business Services, a firm that provides legal and employment advice to many small and medium sized companies. The firm, which guided Riley through the tricky procedure for making redundancies, says it is receiving hundreds of calls a week.
The rules meant that Riley had to lay off Bell, even though he has a family to support, rather than others with fewer responsibilities. He also had to let go Brian Large, a supervisor, and James Hart, a factory operative.
Hart, 19, said: “I was bit a shocked when I found out I was being made redundant, but what can you do?” He was taking home between £170 and £210 a week and is hopeful of getting work in a shop in the run-up to Christmas but reckons he will have to sell his car because he can no longer afford to run it.
Large, a 27-year-old who earned up to £240 a week, was less hopeful. “I was angry, but not resentful against the company. They’ve been good to me. But I’m going to struggle. I spent six hours trailing round industrial estates, but nobody is taking people on.”
Even after the cuts, the outlook also remains tough for Riley. He is paying himself just £1,000 a month in an effort to keep the business going and he and his partner, Kim, who handles administration, are often having to work into the small hours.
Though he hopes new orders will come, he added: “If in January we are not seeing signs of recovery or extra work, then we will have to look at additional cuts. If things get worse we could even look at closing the business.
“We have put our savings into this. We have risked everything. Obviously it is a very stressful time for my family.”
He, too, is angry at the banks. “Are they being helpful? Totally the opposite. They have just announced they are putting our charges up. I feel as though I am being shafted from all sides.”
What are the politicians doing to try to avert this looming crisis?
Last week David Cameron, the Tory leader, announced a plan to give firms tax breaks for taking on new workers.
They would be worth £2,500 per employee, said the Tories, and could be paid for from the money saved by keeping the number of unemployment benefit claims down.
The scheme was criticised as flawed by both business leaders and rival politicians, who said it was “unfunded” and no answer to firms’ most pressing problems.
Instead, attention is focused on the government’s prebudget report, due a week tomorrow, after Gordon Brown hinted at a package of tax and spending measures. Though details are being kept under wraps, officials say help will be directed towards small businesses and low and middle-in-come families.
Direct cuts in business costs and personal taxes are what is needed, according to the Institute of Directors; it is calling for a 3p cut in income tax and a 4p cut in corporation tax as part of a £20 billion package.
Some experts are, however, sceptical the government can afford such measures without storing up further trouble.
“Gordon spent his tax proceeds when times were good and can’t afford to give away more,” said Professor Peter Spencer, economic adviser to the Ernst&Young Item club, the economic forecaster, that uses the Treasury’s model of the economy.
David Kern, chief economist at the British Chambers of Commerce, said: “If the markets interpret the UK measures as being reckless, the pound may plummet to dangerous lows.” It was a point echoed yesterday by George Osborne, the shadow chancellor, who was promptly accused of “talking down the economy” by Labour.
Whatever the measures are, they will come too late for many people. Personal bankruptcies in the three months to September jumped by 7% over the same period last year.
In Bradford Paul Elgie and Chris Mapp, founders of the estate agency Melvin Elgie, fear they will join those going bust. They were forced to close their company and are working as salesmen for Virgin Media – which is also now shedding staff – while still being chased for business debts.
Elgie is furious at the way his bank refused to help his company, even though the same banks are being bailed out with billions of pounds from the taxpayer. “They just pulled the money on us,” he complained. “Not only will I be made bankrupt, but some of my taxes are going to pay their bonuses. They didn’t bloody care.”
Many others, though not facing bankruptcy, will have to settle for lower earnings. A former advertising executive from Suffolk, who asked not to be named, has gone from a six-figure salary to trying to get any job he can, including driving a van. “I just want to be able to go home and tell my wife and son that I have got a job and an income again,” he said.
It could become a familiar refrain around Britain in the coming months.
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