Long-term impact of no-deal Brexit ‘worse than Covid-19’

Leaving the European Union without a trade deal would have a bigger impact on the UK economy in the long term than the damage caused by Covid-19, the Bank of England governor has warned.

Speaking to MPs on the Treasury Select Committee, Andrew Bailey said that a no-deal Brexit would cause disruption to cross-border trade and damage the goodwill needed to build a future economic partnership.

If the UK fails to agree to a deal before the Brexit transition period expires at the end of December it will revert to World Trade Organisation tariffs and trade barriers with its biggest trading bloc.

The central bank governor acknowledged that the fallout from the pandemic and the second national lockdown in England was having a greater short-term impact on the economy.

But he argued that in the longer term, the economic cost of leaving without a deal would be larger than the cost of Covid.

“It takes a much longer period of time for what I call the real side of the economy to adjust to the change in openness and adjust to the change in the profile of trade,” Bailey said.

In September, an analysis by the London School of Economics and UK in a Changing Europe concluded that the long-term economic impact of a no-deal Brexit could be two or three times as large as that of the pandemic.

UK could be heading for double-dip recession

Activity in the UK’s private sector contracted in November as the national lockdown in England ended four months of expansion, according to early data.

The IHS Markit/CIPS Flash UK Composite PMI is down to 47.4 so far in November — the first time the index has gone below 50 since June. Any score under 50 represents a decline in activity.

This early “flash” reading of the index compares to a level of 52.1 in October.

The downturn was driven by the fastest reduction in service sector output since May as pubs, restaurants and other leisure and hospitality businesses closed under new Covid-19 lockdown measures.

Manufacturing was largely unaffected by the lockdown and this is reflected in the manufacturing PMI, which rose to 55.2, up from 53.7 in October and the highest since August.

Stockpiling the before end of the Brexit transition period on 31 December 2020 contributed to the boost in manufacturing.

Chris Williamson, chief business economist at IHS Markit, warned that the November survey data points to a double-dip recession, with the latest lockdown measures causing business activity to collapse across much of the economy.

He added: “Some comfort comes from the data suggesting that the impact of the lockdown has not been as severe as in the spring, and manufacturing has also received a significant boost from inventory building and a surge in exports ahead of the UK’s departure from the EU at the end of the year, providing a fillip for many companies.

“However, while the lockdown will be temporary, so too will this pre-Brexit boost.”

Options After You Have a Baby

When you become a new mother, you may feel like you no longer have any choices available to you. A loss of identity is normal, especially if this is your first child. In the first few weeks after giving birth, you may want to focus solely on your baby, and not give your future a second thought. However, after some time, you might start considering what you want to do with your life outside of parenthood.

It is completely normal and important that you still have personal goals, and an identity, outside of motherhood. Figuring out what you do in the future, when your child is with a childminder, family member, or at preschool, can be fairly daunting. Depending on your home situation, and income, there can be several options at your disposal.

Work from Home

For some women, it may be possible to stay at home with their baby and not need to worry too much about their finances. For others, that may feel like it is not a possibility due to the need for extra income to pay the bills. This is where working from home can benefit you greatly. If you are able to come up with a business idea that will work for you, you could always work from home on a self-employed basis. Using email and telephone communication, your skillset, a computer, and invoicing software, it is possible for you to generate either a full or subsidiary income while also raising your child.

Return to Work

Some women may want to have time away from their family, and that is natural, or perhaps they simply do not want to work within their home. At the same time, these may also be women who have worked hard to build up their career, or simply enjoyed their job prior to giving birth. By discussing a return to work with your employer, as well as the potential for flexible hours to suit your parenting needs, you might be able to continue working and parenting at the same time.

Return to Education

If you have childcare covered, and are able to survive without working, or on reduced hours, you may also want to consider returning to education. Studying as a mature student is increasingly popular, and there are many educational routes available. Some parents like to study full time, the same way that a lot of school leavers do. Others may prefer to learn on a part time basis, so they can still manage their home. Some providers may also offer courses via distance learning, meaning you could gain a qualification from home while looking after your baby.

Whatever you choose to do, it is important that you recognise that you are still a woman and an individual. Being a mum is just one part of who you are and, while important, you want to continue nurturing the rest of yourself too.

Should there be a tax on working from home?

Working from home has allowed millions of people to continue working during the Covid-19 pandemic. But not every job can be done remotely, and a new report argues that home-working should be taxed in order to help support people whose jobs are under threat.

Deutsche Bank strategist Luke Templeman proposed a tax of 5% of a worker’s salary, which would be paid by the employer. In cases where an employee is provided with a desk but chooses to work from home instead, the worker would pay the tax out of their salary for each day they work from home.

The report argues that those who can work from home receive direct and indirect benefits, including savings on travel, lunch and clothes, as well as greater job security, convenience and flexibility.

For the UK, the tax equates to just under £7 per day, based on a salary of £35,000.

The self-employed and those on low incomes would be excluded and the tax would only apply outside the times when the government advises people to work from home.

Research by Deutsche Bank has shown that, after the pandemic has passed, more than half of people who worked from home for the first time want to continue doing so for between two and three days a week.

“The sudden shift to working from home means that, for the first time in history, a big chunk of people have disconnected themselves from the face-to-face world yet are still leading a full economic life,” Templeman said.

“That means remote workers are contributing less to the infrastructure of the economy whilst still receiving its benefits.”

Income generated by the tax would be paid to people who can’t do their jobs from home, for example to support them while they retrain or to recognise essential workers on low wages who assume a greater Covid risk.

Coronavirus: redundancies reach record high

UK employers made a record 314,000 redundancies in the three months to September, according to new figures from the Office for National Statistics (ONS).

The unemployment rate rose to 4.8% in the same period, its highest level since November 2016 and up from 4.5% in the previous month as Covid-19 continued to take a toll on jobs.

Businesses made more workers redundant in anticipation of the end of the furlough scheme, which was originally due to be phased out by the end of October. It has now been extended until the end of March.

ONS deputy national statistician for economic statistics Jonathan Athow told the BBC that about 2.5 million people are still on furlough, with “quite a lot of uncertainty” about what would happen to them.

“We might see furlough creep up again and that might mean we don’t see any further big increases in redundancies or unemployment, but it’s way too early to tell what will happen,” he added.

According to the data, the number of employees on UK payrolls has fallen by 782,000 since March, when the first coronavirus lockdown was imposed across the UK.

The total number of people officially classed as unemployed rose by 243,000 to 1.62 million in July to September, the biggest increase since May 2009, and the number of redundancies was 181,000 higher than in the previous quarter.

Job vacancies have continued to recover, rising by 146,000 in August to October compared with the previous three months.

Athow noted, however, that these figures predate the reintroduction of lockdown restrictions in many parts of the UK.

‘Real living wage’ for UK workers rises to £9.50 an hour

More than 250,000 people who work for an employer accredited with the Living Wage Foundation are set to get a pay rise.

Almost 7,000 employers across the UK have pledged to pay the rate recommended by the Living Wage Foundation to ensure all staff earn a wage that meets the real cost of living, and covers everyday needs. The “real Living Wage” rates are independently calculated based on what people need to live on.

The rates for 2020/21 have been announced as £9.50 an hour in the UK (a 20p increase) and £10.85 in London (10p increase).

The UK Government’s compulsory minimum, the National Living Wage, currently stands at £8.72 an hour for anyone over the age of 25.

A full-time worker paid the new £9.50 real Living Wage will receive over £1,500 in additional wages annually compared to the current Government minimum. For a full-time worker in London this figure rises to £4,000.

Over 800 additional employers have been accredited with the Living Wage Foundation since the start of the Covid-19 pandemic, including Tate and Lyle Sugars, Network Rail and Capital One.

“It has been the cleaners, security guards and catering staff who have kept our factories clean, safe and well-fed over the last six difficult months,” said Gerald Mason, senior vice president of Tate and Lyle Sugars. “We’re pleased to recognise their value and role in helping us feed the nation.”

Small retailers ‘more resilient’ than big chains during pandemic

Independent retail and leisure businesses in Britain have shown greater resilience in the Covid-19 pandemic than chain stores, according to new data.

Retail data consultancy the Local Data Company found that small independent firms on the High Street saw a net decline of 1,833 stores in the first half of 2020 — less than a third of the 6,001 chain stores lost.

During the first half of the year there were 20,019 closures of independent shops and 18,186 openings.

That compares with 11,120 closures for branded retailers with five or more stores, and 5,119 openings.

Taken together, there were 31,139 store closures and a net decrease of 7,834 shops.

With almost two-thirds (64%) of the retail and leisure market comprised of independent businesses, the gap between big and small firms is even greater in percentage terms with independent businesses declining by 0.54% versus 2.77% for chain outlets.

“The latest figures on the GB retail and leisure market tell the story of an immensely challenging few months for the retail and hospitality sector,” commented Lucy Stainton, head of Retail and Strategic Partnerships at the Local Data Company.

“While the independent market has fared much better than chains, it is still in decline and combined, these two sectors total the biggest decline seen in a H1 period since our records began.

Stainton said that independent businesses had fared better as they were able to be more agile, bringing in new product lines and offering deliveries. They also benefited from having a smaller cost base to cover during periods of little or no trade and were able to take advantage of government support schemes.

“However, as we continue through the year with various local lockdowns and restrictions, life will not get any easier for operators,” Stainton added. “These figures mark only the first phase in the impact of the pandemic on the retail economy this year with 20% of the market still temporarily shut and with more months of difficult trading conditions ahead.”

Lockdowns wipe out £2bn of sales at Primark

Covid-19 lockdowns have cost Primark £2bn in lost sales, according to its parent company, Associated British Foods.

The discount fashion retailer does not sell products online, which meant that it was unable to continue trading when local restrictions forced its stores to close.

It also has no plans to offer a click-and-collect service during the coming lockdown in England.

A spokesperson for Primark quoted by BBC News said: “Although we will look at alternative business models from time to time, there are no immediate plans to trade online.”

The UK first went into lockdown at the end of March and “non-essential” retailers were permitted to reopen in June. Since then, Primark has seen “robust” sales of around £2bn.

The retailer’s UK like-for-like sales are down 12% from a year ago. It has seen slower sales at its large city centre stores because of fewer commuters and tourists, but sales at retail park locations are higher and shopping centres and regional high street stores are broadly in line with last year.

George Weston, chief executive of Associated British Foods, has called for extended store trading hours in December to help retailers offset the impact of the latest round of lockdowns in the UK.

“In some locations we could even open 24 hours. We know the demand is going to be there,” Weston said, as quoted by the Financial Times.

“It would be easier to limit numbers in stores if we could say to people ‘you can come back at these other times’,” he added.

Borrowers allowed payment deferral ahead of new lockdown

With a four-week lockdown set to come into force in England on Thursday, the financial regulator has said that lenders should give customers longer to pay back what they owe if necessary.

The new Covid-19 restrictions mean that all non-essential retailers and leisure facilities will close and people will be told to avoid all non-essential travel by private or public transport.

To support those financially affected by coronavirus, the Financial Conduct Authority (FCA) has proposed that consumer credit customers who have not yet had a payment deferral can now request one for up to six months. Borrowers who are currently benefiting from a first payment deferral can apply for a second deferral. These measures apply to credit card, car finance, personal loan, rent-to-own, buy-now pay-later and pawnbroking customers apply across the UK.

Similar measures are proposed for mortgage borrowers.

Customers with short-term credit such as payday loans can apply for a payment deferral of one month.

The regulator plans to work with trade bodies and lenders to implement the proposals as quickly as possible.

It is important that customers continue to make repayments if they can afford to do so, the FCA stressed.

“Borrowers should only take up this support if they need it.”

How will home working affect the UK economy?

UK businesses could suffer from a lack of creativity due to colleagues not being able to interact in the workplace during the Covid-19 crisis, the Bank of England’s chief economist has warned.

Covid-19 has had a dramatic on the way we work, with many people forced to work from home for the first time. Shortly after the UK first went into lockdown, the Office for National Statistics (ONS) found that almost half (46.6%) of people in employment were doing some work at home, and of those 86.0% did so as a result of the coronavirus pandemic.

And while this brings potential benefits for employees (such as no commute) and employers (such as the opportunity to reduce overheads), there are downsides when people are no longer mixing together in the workplace, Andy Haldane said.

In a speech at the recent Engaging Business Summit, Haldane acknowledged that virtual meetings “can be an efficient way of getting things done, indeed often more effective than the physical” but he argued that informal chats at work are often more useful than formal meetings.

The chief economist added: “Whether it is creative sparks being dampened, existing social capital being depleted or new social capital being lost, these are real costs and costs which would be expected to grow, silently but steadily, over time. They weigh on the other side of the ledger when it comes to assessing the case for home-working. They cast doubt on whether it will lead to the promised land of improved productivity and greater happiness.”

Haldane concluded that businesses need to find the right balance between what distracts employees and what fires their imagination.

“For me, the 0-5 model of homeworking strikes this balance in the wrong place, as with hindsight did my pre-pandemic 5-0 model.”