Uber sees demand return to pre-pandemic levels

The number of Uber rides booked by UK users has bounced back to pre-pandemic levels, the ride-hailing provider said on Monday.

It comes after lockdown restrictions were eased and people started going out to bars and restaurants again.

During the week that many restrictions on hospitality were lifted, bookings matched or slightly exceeded those of the equivalent week two years ago.

Wider geographic coverage beyond big cities, as well as new forms of transport such as traditional taxis, also helped fuel the rebound.

Although demand has been highest in the evening, there has also been a rise in the number of trips during the morning commuting hours, Uber said.

With some people still wary of using public transport due to the pandemic, Uber is aiming to hire thousands more drivers.

“Following the swift rollout of vaccines in the UK, people are travelling on the Uber platform just as much as they were before the pandemic,” Ash Kebriti, Uber’s UK general manager, told City A.M.

“We are now looking to sign up 20,000 new drivers across the UK, as cities continue to recover.”

Consumers likely to play safe rather than spend, spend, spend

Half (51%) of people in the UK who have built up their savings during the pandemic intend to hang onto these funds, new research suggests.

The findings pose a challenge to the view that the UK economy will bounce back in 2021 due to a sudden release of pent-up consumer demand, says Ipsos MORI, which surveyed more than 3,000 people for Nationwide Building Society’s UK Consumer Insight Panel.

What’s more, this comes at a time of record-low interest rates, when there has never been less of an incentive to save.

Three quarters (74%) of those who took part in the survey said they want to save more than they have done in the past, as the pandemic has shown the world is full of risk and uncertainty. And eight in ten (79%) said they want to save enough money so they don’t need to worry about losing their job.

Looking at public values, the findings also reveal that hedonistic sentiment among the UK public has fallen to its lowest level for 22 years. Between 1999 and 2019, an increasingly large proportion of UK residents agreed with the idea that “The important thing is to enjoy life today, tomorrow will take care of itself”.

Two years later this progression has been reversed, with less than half (46%) of the public agreeing. For the first time since 1999, more disagree than agree with this statement.

“At this stage in the recovery, the data suggests that ‘The Great Unlock’ could be less like the roaring twenties, and more like the 1950s – with the nation adopting a type of post-war austerity,” Ipsos MORI concluded.

Pay cut for half of UK workers in 2020

Half of workers in the UK experienced a real-terms pay cut last year, new research suggests.

That’s despite official data indicating the fastest pay growth in nearly two decades. Average weekly earnings growth reached 4.5% in late 2020 – its highest level since 2002.

This level of pay growth feels too good to be true, says the Resolution Foundation, and on closer examination it is too good to be true.

The data is distorted by the effects of the UK government’s furlough scheme, people in higher-paid roles earning more, and lower-paid workers falling out of the workforce through job losses.

According to the Resolution Foundation, the median pay rise was just 0.6% in the third quarter – a real-terms pay fall of 0.2% – meaning that at least half of all workers experienced a pay cut. The median pay rise increased to 1.8% in the fourth quarter (1% in real terms), which is an improvement but still the second lowest since mid-2013.

The figures also showed that younger workers experienced the biggest deterioration in annual pay growth. Coming at such a crucial early stage of their careers, this could potentially have a long-term impact on their pay prospects.

Commenting on the findings, Hannah Slaughter, economist at the Resolution Foundation, said: “The economy experienced its biggest recession in over 300 years last year, with a third of private sector workers put on furlough at its peak. And yet somewhat implausibly, pay growth reached its highest level in almost 20 years.

“Sadly, the story of bumper pay packets from official headline data is too good to be true. In reality, half of all workers experienced a real-terms pay cut last autumn, with pay growth deteriorating most among those who have been hit hardest by the pandemic – the young, the low-paid, and those working in social sectors like hospitality.

“This pay deterioration is particularly concerning for young workers as it risks scarring their pay for many years to come. The government should therefore prioritise getting young people’s pay and careers back on track during the recovery, and that is likely to require further policy action beyond that announced in the Budget.”

Fewer redundancies planned after furlough extension

There was a fall in the number of jobs at risk of redundancy in November, despite a second lockdown in England and other restrictions in Wales and Scotland.

Figures released to the BBC in response to a freedom of information request show that employers in Britain were preparing to make 36,700 redundancies last month. That’s down from a peak of 156,000 in June and is the lowest number of planned redundancies since lockdown restrictions were introduced in March.

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.

The figures suggest that Chancellor Rishi Sunak’s decision to extend the furlough scheme until the end of April 2021 has helped to protect jobs.

Sainsbury’s, Gregg’s, John Lewis, Edinburgh Woollen Mill and Jaeger and were among the companies that announced job cuts in November.

However, around 25,000 more jobs could be lost with the failure of big retailers Arcadia and Debenhams, if the two groups are unable to find buyers. Topshop owner Arcadia fell into administration at the end of November and the news was swiftly followed by the end of last-ditch efforts to rescue department store chain Debenhams, which had been in administration since April.

For now, the November figures provide “encouragement that there will be a steady trickle, rather than a tsunami, of job losses over the next few months,” said Ruth Gregory, senior UK economist at consultancy Capital Economics.

Lower prices for clothing and food drive down UK inflation

The UK’s inflation rate fell to 0.3% in November from 0.7% in October, according to the latest monthly report from the Office for National Statistics (ONS).

Lower prices for clothing, food and non-alcoholic drinks made the biggest contribution to the fall.

These were partially offset by higher prices for games, toys and other recreational activities as people looked for ways to entertain themselves at home during the second Covid-19 lockdown.

In its report, the ONS noted that clothing and footwear prices have followed a different pattern in 2020 compared with previous years. There was increased discounting during March and April, probably in response to the first lockdown. Prices then remained relatively stable to August. Between August and October, prices broadly increased as usual, but this has been followed by a fall between October and November, whereas prices normally rise between these two months when the autumn ranges come in.

Ruth Gregory, senior UK economist at Capital Economics, quoted by the Daily Telegraph, said that the sharp fall in inflation “came as a bit of a surprise”. She added:

“Some of these moves were driven by temporary factors so we still expect inflation to rise temporarily back towards the 2% target next year. Beyond that, though, the slack in the economy should keep underlying price pressures subdued and allow inflation to drop back to 1.5% in 2022. That is unless a no-deal Brexit pushes it up to a peak of 3-4%.”

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.

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.

‘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.”

UK inflation rises to 0.5%

The UK’s headline rate of inflation climbed to 0.5% last month as restaurants, pubs and cafes raised their prices following the end of the Eat Out to Help Out scheme.

Designed to support the catering sector after months of lockdown due to Covid-19, the discount meals scheme offered 50% off food and non-alcoholic drinks up to £10 during August. More than 100 million meals were bought through the scheme.

The Consumer Prices Index (CPI) began rising more quickly in September when the scheme came to an end, according to the latest report from the the Office for National Statistics (ONS).

In catering services, prices rose by 4.1% between August and September 2020, compared with a rise of 0.2% between the same two months in 2019.

Transport costs also went up in September as demand for second-hand cars increased.

The price of second-hand cars rose by 2.1% between August and September 2020, compared with a 1.4% fall between the same two months a year ago.

Despite the higher CPI, inflation remains below the Bank of England’s 2% target and analysts believe that the Monetary Policy Committee may decide on additional monetary stimulus measures next month to help boost the economy.

Covid-19 ‘bounce back’ loans could cost UK taxpayers £26bn

Up to 60% of borrowers may default on business loans provided through the UK Government’s Bounce Back Loan Scheme, the National Audit Office (NAO) has warned.

A new report by the spending watchdog says that the scheme “succeeded in quickly supporting small businesses” but the Government faces a potential loss of £15bn to £26bn through businesses not being able to repay the loans and fraud.

The Bounce Back Loan Scheme was set up to support smaller businesses during the Covid-19 pandemic. Loans are delivered through commercial lenders and small and medium-sized firms can borrow between £2,000 and up to 25% of their turnover, with a maximum loan of £50,000 available.

Demand has been greater than anticipated, with the total value of loans provided through the scheme now predicted to be £38bn to £48bn, up from an initial estimate of £18bn to £26bn.

However, the Bounce Back Loan Scheme has less strict eligibility criteria than other Covid-19 related business loan schemes, relying on businesses self-certifying application details with limited verification and no credit checks performed by lenders for existing customers.

This lower level of checks presents credit risks as it increases the likelihood of loans being made to businesses that will not be able to repay them, the NAO said.

What’s more, the Government’s 100% guarantee against the loans reduces lenders’ incentives to recover money from borrowers.

An earlier third-party review commissioned by the British Business Bank found that, while some risks can be mitigated, there remains a “very high” level of fraud risk, caused by self-certification, multiple applications, lack of legitimate business, impersonation and organised crime.

The full extent of losses, both credit and fraud, will emerge when the loans are due to start being repaid from 4 May 2021.

The NAO called for the Government to implement a thorough debt-recovery process with lenders and consider how it might better prevent fraud in any similar schemes in the future.