This week Britain looks on course to enter a double-dip recession this winter, as business surveys show economic growth almost halted last month even before the latest England-wide lockdown was announced, according to financial data company IHS Markit. Business service activity rise is much softer than September, new orders have declined for the first time since June and there is a sharp drop in employment again in October. Meanwhile, the number of infection cases continues to increase with an ONS estimate of 568,100 people infected.
- The headlines last week said that, in the third quarter, the US economy grew at the fastest pace ever recorded masking the fact that the economy faces significant problems. Economic activity remains well below the pre-crisis level, growth likely decelerated during the third quarter, and the outlook for the fourth quarter is troubling. In the third quarter, real (inflation-adjusted) GDP increased at an annualized rate of 33.1%.
- Following a sharp decline in the first quarter, China’s economy bounced back spectacularly and the virus has largely been suppressed. However, a new study by the Peterson Institute says that the recovery “comes with a price.”
- Deloitte highlight that real GDP in Europe was up 12.7% but down 4.3% on last year. Following a pattern of a sharper decline in the second quarter the fast the rebound in the third. However, Europe is experiencing a surge in the virus.
- ECB indicates that a significant tightening of credit standards took place in the third quarter, and generally signals trouble ahead. It says that this change in bank lending standards was driven by banks’ risk perceptions related to the virus.
- The IMF predicted a muted recover, the sharp summer rebound in activity faces strong headwinds from a second wave of Covid-19 infections, Brexit-related uncertainty, rising unemployment, and stress on corporate balance sheets. They predict a contraction by 10.4 per cent (this is consistent with other forecasters) in 2020 and to recover partially in 2021, with growth at 5.7 per cent (this is a revision down on what forecasters were predicting early in the pandemic), in both cases downwardly revised from their latest World Economic Outlook forecast.
- British economic output per hour worked dropped by 1.8% during the three months to June, when the coronavirus lockdown was at its height, a smaller decline than the 3.0% drop initially estimated in August, official figures showed on Wednesday. The Office for National Statistics said output per worker fell by 21.7%, similar to the initial estimate and close to the record 19.8% quarterly fall in GDP over the same period. “This reflects the impact of furlough schemes, which reduced hours worked but preserved workers’ employment statuses,” the ONS said.
- Britain’s manufacturers are calling for Business Rates to be waived or reduced in tandem with a boost to investment allowances to help fire up an industrial recovery. The call by Make UK was made on the back of the latest Manufacturing Monitor tracker which shows that while the sector continues to stabilise, companies increasingly see a long road ahead to any kind of normal trading conditions with redundancy plans still in the pipeline.
- The impact of the second wave of the lockdown could be especially hard on the nations and regions of the UK. In the West Midlands, for instance, this would equate to around 26,000 firms and 375,000 jobs. This is in a region where the number of firms scaling or achieving high growth episodes and whose levels of innovation and productivity have historically lagged behind. Such an order of mass insolvencies and business failure will take years to recover from. It simply drives a coach and horses through any attempt to ‘level up’.
- Business confidence in the West Midlands has dropped as coronavirus cases in the area increased, with companies reporting lower confidence in their own business prospects while hiring intentions fell significantly. Business confidence fell nine points during October to -15 per cent, according to the latest Business Barometer from Lloyds Bank Commercial Banking.
- Qualitative information from regional business representative organisations highlights that there is a degree of understanding for the reasoning for the lockdown, but dissatisfaction in the sharing of information and preparation opportunity for businesses.
- A National Audit Office review of employment support schemes found that the Departments implemented the schemes quickly and ahead of schedule; the schemes have been largely successful in protecting jobs through the lockdown, with at least 12.2 million people benefitting from support; the schemes were relatively straightforward to apply for, and payments quickly reached applicants; there is evidence that significant levels of furlough fraud occurred, with limited controls over employers’ arrangements with employees.
- Research by WM REDI has looked at the impact of lockdown and risks associated with the closure of hospitality and retail. The work highlights that the West Midlands (NUTS 2 region) appears to be a mid-table case with 5.9% of its total GVA depending on these activities, however, it is more exposed in jobs terms with 108 thousand jobs are at risk with this lockdown measure. Most affected are Culture, Media and Sports related jobs (19.7%); Textiles, Printing and Other Skilled Trades (37.3%); Leisure, Travel and related (16.0%); Other managers and proprietors (24.6%); and the Elementary Administration and Service occupations (28.0%), and low skilled occupations are more exposed to a shut-down in these two sectors than the medium and high skilled occupations.
- Covid-19 has exacerbated longstanding inequalities affecting Black, Asian and minority ethnic (BAME) groups in the UK as mounting evidence suggests that BAME communities were disproportionally hit hardest by the pandemic. According to recent research by two leading think tanks – the Institute for Public Policy Research (IPPR) and the Runnymede Trust. It is well documented that BAME groups face structural barriers and the IPPR’s research finds that underlying diseases and genetic factors explain only a fraction of what is a ‘massive risk disparity’. An important concern here is the lack of NHS funding and how it should be allocated across regions so that those people at greatest risk get the greatest measure of intervention. Recent IPPR findings suggest that minority ethnic communities have been exposed to significant public health budget cuts in recent years.
- The EHRC report the economic impact of the pandemic has been unequal, entrenching existing inequalities and widening others; young people have experienced an interruption to their education, and access to support for remote working has widened inequalities; and older people, ethnic minorities and some disabled people, particularly those in care homes, have been disproportionately impacted.
- The Carnegie Trust has published a report that recommends a multi-year jobs plan, strengthening the labour market safety net, enabling learning and adapting continuously. They also present actions for a renewed focus and promoting and incentivising on good work, terms of employment, pay, skills and training, health, jobs design and work-life balance, voice and representation and building the movement for good work.
- A report by CEP on “generation COVID” shows that they have experienced worse labour market outcomes in terms of job loss, not working and earnings losses during and after lockdown and concludes that there are stark and sustained inequalities in the labour market and education outcomes for the under 25s.
- The Centre on Household Assets and Savings Management (CHASM) has released an annual report looking at financial inclusion and living standards have been protected by equally unprecedented government intervention. But the future for both the economy as a whole and individual living standards looks very uncertain. There is positive news in relation to financial inclusion with the number of people ‘unbanked’ reaching an all-time low in 2018/19. But there is a growing concern about access to cash as bank branch closures escalate and free cash machines continue to disappear from local high streets. The household savings ratio has also seen a massive lockdown spike. There is good news with increasing levels of occupational pension membership but, here again, there are concerns that contribution levels are too low to provide a sufficient level of income on retirement.
- The European Automobile Manufacturers’ Association (ACEA) has called on the EU to adopt a less restrictive stance on UK auto firms’ access to the EU market, pressing it to ‘reconsider its position’ on the rules of origin that will be used to decide whether goods will qualify for tariff-free trade.
- For the second week in a row, overall national footfall has remained at around two-thirds of the level of the previous year (in the week of the 25th October 2020).
- There is still significant churn in starts and dissolutions in businesses nationally.
- 39% of businesses across the UK have less than six months of cash reserves.
- For the West Midlands, the total online jobs adverts have increased from 77.3% (16th October) to 80.8% (23rd October) of its 2019 average.
- 37% of working adults in England have worked exclusively from home between 21st to 25th October, this increased to 42% for those in tier 3 and then to 46% for those in tier 2.
The weekly monitor brings together data and intelligence from the WM REDI partnership into one single source which can be shared and utilised in planning and responding to the challenge of the virus. This is a rapid review of the issues. It is not intended to be a comprehensive assessment but rather a practical report which places emphasis on emerging issues and the best data and intelligence we have to date.
The monitor is feeding into the regional recovery planning that can help the regional economy bounce back and quickly move forward once lockdown restrictions start to be lifted.
The work is being endorsed by political and business leaders a task force of experts are being set up through WM REDI partners to better understand the impact of the lockdown and what measures will be needed to get the economy moving again.
City-REDI / WM REDI have developed a resource page with all of our analysis of the impact of Coronavirus (COVID-19) on the West Midlands and the UK. It includes previous editions of the West Midlands Weekly Economic Monitor, blogs and research on the economic and social impact of COVID-19. You can view that here.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI or the University of Birmingham.