UK’s post-lockdown recovery ‘loses bounce’

The UK economy “lost some of its bounce” in September, with the initial rebound from Covid-19 lockdowns showing signs of fading, according to a new business survey.

The IHS Markit/CIPS flash composite Purchasing Managers’ Index (PMI), which measures how the private sector is doing, fell to a three-month low of 55.7 in September after jumping to 59.1 in August. However, a score above 50 still indicates growth.

This month’s slowdown was especially acute in services, particularly in the restaurant sector with the end of the Eat Out to Help Out scheme, said Chris Williamson, chief business economist at IHS Markit.

“Demand for other consumer-facing services also stalled as companies struggled amid new measures introduced to fight rising infection rates and consumers often remained reluctant to spend,” Williamson added.

Duncan Brock, group director at CIPS, the Chartered Institute of Procurement & Supply, said that Covid-19 restrictions were continuing to “suffocate” the UK economy, wiping out some of the recent gains in the manufacturing and services sectors. Meanwhile, supply chains were still facing bouts of instability with stock shortages and longer delivery times.

He concluded: “With the weakest overall optimism since May when the recovery started, the fragility of the economic recovery has been revealed.”

Lockdown restrictions introduced at the end of March led to the UK’s GDP shrinking by a record 20.4% in the second quarter of 2020, following a 2.2% decline in the first quarter of the year.

UK unemployment reaches highest level for two years

The economic fallout from the coronavirus pandemic is continuing to emerge in the UK, with new figures showing that unemployment has risen to its highest level for two years.

In the three months to July the UK unemployment rate grew to 4.1%, representing about 1.4 million people out of work, according to the Office for National Statistics (ONS). This is 104,000 more than a year earlier and 62,000 more than the previous quarter.

Young people were particularly hard hit, with the biggest drop in employment seen among those aged 16 to 24.

The monthly report also shows that redundancies increased by 58,000 on the year and 48,000 on the quarter to 156,000 — the fastest rise since the financial crisis.

It comes as businesses are preparing for the end of the furlough scheme, which has helped 9.6 million people retain their jobs during lockdown and prevented a sharper rise in unemployment so far.

Under the Coronavirus Job Retention Scheme, the UK Government initially paid 80% of people’s wages. This was reduced to 70% at the start of September, with employers expected to make up the remainder of pay, and the scheme is scheduled to end altogether on 31 October.

Chancellor Rishi Sunak has ruled out extending the scheme past the end of next month.

Commenting on the latest figures, ONS director of economic statistics Darren Morgan said that as parts of the economy reopened in July, fewer workers were on furlough and there was a rise in average hours worked.

However, he added, “with the number of employees on the payroll down again in August and both unemployment and redundancies sharply up in July, it is clear that coronavirus is still having a big impact on the world of work.”

Employers planning redundancies at twice the rate of last recession

Employers in Britain are making plans for redundancies at more than double the levels seen in the 2008/9 recession, new figures reveal.

It comes after social distancing measures to prevent the spread of Covid-19 forced workers to stay at home, brought transport to a halt, and closed businesses across the country, including offices, shops, pubs and restaurants.

Under legislation that applies in England, Scotland and Wales, employers must notify the Insolvency Service if they plan to make 20 or more workers redundant in any single “establishment” using a form called HR1.

Based on HR1 data obtained following a Freedom of Information request, the Institute for Employment Studies (IES) estimated that redundancies will reach 450,000 in the third quarter of 2020 — significantly higher than the quarterly peak in the last recession (of just over 300,000) — with a further 200,000 redundancies in the final quarter of the year.

Part of this rise may be explained by increased compliance with HR1 reporting requirements, but the vast majority is a consequence of the Covid-19 pandemic and its economic impacts, IES said.

Labour Force Survey data for January-June 2020 shows that 240,000 people were made redundant in the first half of the year.

To help minimise and respond to the anticipated job losses, IES called for:

– A reduction in labour costs, to stimulate employment demand and new hiring;
– Targeted wage support for viable firms facing ongoing disruption;
– Guaranteed access to rapid, high quality employment and training support;
– Increased enforcement of employment and redundancy rights; and
– Regular publishing of detailed HR1 data, to enable local economic partners to respond.

HMRC estimates 1 in 10 furlough claims may have been fraudulent or paid in error

Businesses may have wrongly claimed up to £3.5bn in furlough payments, HM Revenue and Customs believes.

The UK Government has so far paid out £35.4bn through the Coronavirus Job Retention Scheme to help protect jobs and businesses during the Covid-19 pandemic. The scheme covered up to 80% of an employee’s salary while they were placed on leave due to the impact of coronavirus.

However, HMRC estimates that 5-10% of the total amount may have been claimed fraudulently or paid out in error. It intends to investigate fraudulent claims, HMRC chief executive Jim Harra said on Monday.

Speaking to MPs on the Public Accounts Committee, Harra said: “We have made an assumption for the purposes of our planning that the error and fraud rate in this scheme could be between 5% and 10%.

“That will range from deliberate fraud through to error.”

Although employers will be expected to check their claims and repay any excess amount, HMRC will focus on tackling abuse and fraud.

It is currently reviewing 27,000 “high risk” cases where officials believe a serious error has been made in the amount an employer has claimed, according to BBC News.

Figures from mid-August show that 9.6 million people had been put on Government-supported furlough, with claims made by 1.2 million employers.

UK faces biggest recession on record

The UK is in recession for first time in 11 years, after coronavirus lockdown measures led to a huge drop in economic activity.

The Office for National Statistics (ONS) said on Wednesday that gross domestic product (GDP) slumped by a record 20.4% in the second quarter of 2020 following a fall of 2.2% in the first three months of the year.

It comes after shops, pubs, restaurants, hotels and other businesses were ordered to close their doors on 23 March to help stop the spread of Covid-19.

The dramatic decrease in GDP is around twice the size of declines in Germany and the United States and leaves the UK second only to Spain in terms of the economic impact of coronavirus in advanced economies.

April was the biggest drag on the quarter. The first full month of restrictions on “non-essential” businesses saw a record fall of 20.0% in monthly GDP and was followed by growth of 2.4% in May and 8.7% in June as restrictions were relaxed. However, the economy is still 17.2% smaller than it was in February 2020 and the UK is now in the largest recession on record.

What’s more, while the worst may be over in terms of economic growth, Chancellor Rishi Sunak has warned that the economic slump will lead to more job losses in the coming months.

The Bank of England expects the unemployment rate, which currently stands at 3.9%, to climb as high as 7.5% by the end of the year as the furlough scheme is wound down.

UK employment shows biggest drop in over a decade

UK employment shows biggest drop in over a decade

The number of people in work in the UK has fallen by the largest amount in over a decade, new figures show.

It comes after the UK Government imposed a nationwide lockdown on 23 March to help stop the spread of coronavirus.

Around 730,000 people have become unemployed since March, the Office for National Statistics official statistics (ONS) said — the biggest quarterly decrease since 2009.

Younger workers, older workers and those in lower-skilled jobs were worst hit.

“This is concerning, as it’s harder for these groups to find a new job or get into a job as easily as other workers,” said Jonathan Athow, deputy national statistician at the ONS.

With many people furloughed, the ONS also registered a record low in the number of hours worked.

And there were pay decreases for those still working. Regular pay levels were down 0.2% compared with a year earlier — the first negative pay growth since records began in 2001, BBC News reported.

The next quarterly figures are expected to show a big increase in unemployment as the furlough scheme winds down.

Jeremy Thomson-Cook, chief economist at Equals Money, said that the true level of those out of work had been “very effectively lowered” by the job retention scheme and the worst was still to come.

“Unfortunately, the end of the furlough scheme will present a cliff-edge, statistically and economically, for those currently relying on government support to make up their wages,” he warned.

Capital Economics forecasts that the unemployment rate will rise from 3.9% to around 7% by mid-2021.

Accountants to be edged out by robots, says DB CEO

Deutsche Bank chief executive John Cryan says work now done by qualified accountants could soon be carried out by robots.

Cryan told a Frankfurt gathering: “In our bank we have people doing work like robots. Tomorrow we will have robots behaving like people. It doesn’t matter if we as a bank will participate in these changes or not, it is going to happen.”

Deutsche Bank is currently undergoing a restructuring programme led by Cryan, who joined the bank in 2015. Deutsche Bank employs 100,000 people around the world.

Cryan joins other senior banking figures to predict the impact of automation on the profession. Andy Haldane, chief economist at the Bank of England, has said up to 15m jobs are at risk in Britain from the rise of the robot. The former chief executive of Barclays Antony Jenkins has described technology as “an unstoppable force” giving banking an “Uber moment” of disruption.

Automation could lead to better productivity, as accountants are freed from number-crunching to focus on more analytical roles that contribute to strategic direction. However, critics say that automation undermines the market by increasing unemployment, so there are fewer consumers able to buy the products made by robots.

Cryan also said that Frankfurt is set to receive a banking boost from Brexit. The banker said the German city has the regulatory capacity, law firms, consultants and airport capacity to take business from the City of London. Around 4,000 of Deutsche Bank’s 9,000 London-based staff are said to be preparing to move to the city after Brexit.

Bad weather hits UK retail sales

Retail sales across the UK fell between February and March this year because of bad weather, the Office for National Statistics (ONS) reported today.

The quantity bought in the retail sector decreased by 0.7% in March compared to the prior month, while the amount spent remained unchanged.

In comparison to the same period last year the quantity bought was down by 0.5%, broadly in line with economists’ expectations. This follows strong year-on-year growth of 2.5% in February 2013 and a year-on-year decrease in January of 0.6%. The amount spent increased by 0.1% between March 2012 and March 2013.

Over the whole of the first quarter, retail sales increased by 0.4% compared with the preceding three-month period.

With severe winter weather in much of the country, consumers embraced online shopping last month. The ONS reported that “non-store” retailing registered its biggest rise since March 2009.

In total, UK consumers spent an average of GBP601.4m online each week in March 2013. This represents an increase of 20.5% compared with March 2012.

Excluding automotive fuel, the amount spent online accounted for 10.4% of all retail spending.

Commenting on today’s figures, the British Retail Consortium’s director general, Helen Dickinson, said that the coldest March for 50 years had resulted in mixed fortunes for different retailers. While food sales were strong due to Easter celebrations and the cold weather, sales were sluggish for seasonal items like spring and summer fashion ranges.

David Kern, chief economist at the British Chambers of Commerce, pointed to the “encouraging” growth in sales between the fourth quarter of 2012 and the first quarter of 2013 which he said reinforces the organisation’s hope for a small rise in GDP, with the services sector offsetting weaker areas of the economy such as manufacturing and construction.

UK chancellor confirms lower expectations for economic growth

The UK economy is now expected to contract by 0.1% in 2012 and then grow by 1.2% in 2013, the Office for Budget Responsibility announced today.

This is a significant downgrade from predictions made by the OBR in March, when it expected the economy to grow by 0.8% this year and 2% next year.

In a report published to coincide with Chancellor George Osborne’s Autumn Statement in the House of Commons, the OBR also revised upward its forecasts for public sector borrowing over the next five years.

According to the OBR, tax revenues will be lower because of the weaker outlook for the economy. As a result, the government is no longer likely to achieve its target of reducing public sector net debt by 2015-16.

The chancellor has now pushed back the target by a year, saying that debt will begin to fall as a proportion of national income by 2016-17. Osborne is also extending austerity measures by another year to 2018 in order to close the budget deficit, although he claimed that such measures would be implemented “fairly” with savings made from bureaucracy and a greater contribution from the richest households and those on benefits.

He pointed out that people on out-of-work benefits had seen their incomes rise at twice the rate of working people, and said that over the next three years benefits such as jobseekers allowance and child benefit will increase by just 1% per year. There will also be a further cut in tax relief on pension contributions, with the the amount that can be paid into a pension each year with tax relief reduced by GBP10,000 to GBP40,000 and the lifetime allowance cut to GBP1.25m from GBP1.5m from 2014-15.

Among other measures announced in the Autumn Statement, the chancellor said that he would increase efforts to collect tax from multinational companies operating in the UK, cut corporation tax to 21% from April 2014, cancel the planned fuel duty rise and lift the personal allowance – the amount that people can earn before paying income tax – by more than planned to reach GBP9,440 from April next year.

OECD lowers forecast for UK economy in 2012

The Organisation for Economic Co-operation and Development (OECD) has said that it expects the UK economy to contract by 0.7% in 2012.

This is a significant decrease from the OECD’s forecast in May that the economy would grow by 0.5% this year.

In its latest Interim Economic Assessment, the organisation confirmed that the global economy has weakened since the spring, driven by developments in the euro area where key European countries are entering a recession that is having an impact worldwide. The persistent crisis in the euro area is weakening confidence, trade and employment and slowing economic growth for OECD and non-OECD countries alike.

Downgrading its growth forecasts for developed economies across the world, the OECD revealed that it expects Britain to be one of the worst hit. The economies of Germany, France and Italy are predicted to shrink by just 0.2% on an annual basis. Outside of Europe the prospects are somewhat brighter, with growth expected in the US, Canadian and Japanese economies.

The OECD called for further policy action to be taken in order to instill more confidence, for example by cutting rates and expanding stimulus programmes. It also said that the European Central Bank should lower the rates at which banks borrow from it and consider further action to help normalise monetary policy transmission in vulnerable countries.

Pier Carlo Padoan, chief economist at the OECD, stressed that resolving the euro area’s banking, fiscal and competitiveness problems is the key to recovery.