Job creation and cuts tell tale of two economies

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Getty Images

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Governments, businesses and consumers have been forced to do more online as a result of social distancing

Two jobs announcements this week give us clues about what is happening in our economy.

The good news was the US financial services firm PEAK6 setting up a Belfast base with the intention of employing 160 people over the next four years.

These are highly skilled jobs, mainly in software engineering.

Judi Hart, the firm’s chief operating officer, praised the city’s “rich talent offering and thriving technology sector”.

The bad news was at the Coleraine factory of AVX, a US-based electronics manufacturer.

The firm, which is a major supplier to the car industry is cutting 77 jobs, around a third of its local workforce.

It said the economic fallout from the pandemic had resulted in declining demand for its products.

  • Belfast-based IT firm increases profits by 9%
  • US software firm to create 170 new jobs

The expansion of PEAK6 suggests that firms which create digitally tradable goods and services have, to some degree, been insulated from the impact of the pandemic.

In fact firms like this have seen economic trends accelerating in their favour – governments, businesses and consumers have been forced to do more online as a result of social distancing.

Take the Belfast IT firm Kainos which specialises in helping government digitise its processes.

It has thrived during the crisis, despite all its staff working from home, and this week provided an upbeat trading statement saying it has a “robust pipeline” of work.

Or look at the Bazzarvoice, a US firm which provides services to online retailers.

It continued to grow its Belfast operation during the lockdown, adding 25 new recruits since March.

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WILL OLIVER/EPA

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The Eat Out to Help Out scheme helped the hospitality industry encouraging people back into restaurants during August

But the AVX job cuts demonstrate that the physical economy is having a much tougher time.

Hardest hit of all is what we might call the social economy, those bits of economic life which involve people coming together in a happy and unstructured way.

Most obviously there are the drink-only pubs which are still closed and don’t yet have a reopening date.

But added to that is much of the creative and artistic sectors which are also prevented from returning to anything like normality.

The question of government’s response to this also came into sharp focus this week.

Employers who are using the furlough had to start contributing to employees wages and the entire scheme will be wound up at the end of October.

The Northern Ireland Executive has written to the chancellor calling for it to be extended.

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Chris Ratcliffe/PA Wire

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The Treasury funded furlough scheme is winding down

But Downing Street seems determined that it will end and the thrust of policy now seems to be about directing people into jobs which are sustainable without government support.

That is going to have to mean a focus on training and re-skilling, an area of employment policy which, at best, has patchy outcomes.

It’s worth revisiting a study produced by the Institute for Public Policy Research (IPPR) a couple of years ago.

It praised some skills initiatives in Northern Ireland, such as the Assured Skills scheme which sees government work with employers to design vocational training programmes for specific job creation investments.

But it also highlighted how middle-aged people in Northern Ireland are more likely to be economically inactive compared to the UK average.

It says this points to a “significant gap” in training for those mid-career and who may have been made redundant.

With the end of the furlough likely to mean more redundancies getting resources into this area now looks like a priority.

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