Guardian’s monthly economic tracker paints mixed picture with businesses forced to close despite rising spending
Unemployment in Britain is beginning to climb despite a modest rebound in economic activity in the past month as coronavirus lockdown restrictions are lifted, Guardian analysis shows.
As the government eases restrictions on business and social life after three months of lockdown, the Guardian’s monthly tracker of economic news paints a mixed picture of an economy slowly recovering from the deepest recession in living memory.
Britain’s economy shrank by a record 20.4%, according to the latest figures for April, and job losses appeared to be mounting, with thousands of businesses forced to close.
However, closely watched surveys of business activity suggest the moment of maximum damage for the economy may have passed, while consumer spending and road trips are starting to rise as lockdown is eased.
As Britain exits the initial phase of the Covid-19 crisis, Rishi Sunak, the chancellor, is expected to announce a package of measures to stimulate the economy in a major speech next month.
But with signs of a slower recovery than first anticipated, the shadow chancellor, Anneliese Dodds, is warning in an article in the Guardian against cutting back support too quickly.
The Guardian has chosen eight economic indicators, as well as the FTSE 100 level, to track the impact of Covid-19 on jobs and growth and the measures used to contain it. Faced with a synchronised global recession of the kind unseen since the Great Depression, the coronavirus crisis watch will also weigh how the UK is faring compared with other countries.
Three months into the health emergency, the latest snapshot shows several warning lights flashing on the dashboard. In a sign of the mounting jobs crisis, the number of people out of work and claiming work-related benefits has jumped by 126% since the beginning of tlockdown to reach 2.8 million.
HMRC figures show the number of people on company payrolls plunged by 612,000 last month compared with March, while new job vacancies collapsed by the most on record. Unemployment is expected to more than double from the current rate of about 4% to levels last seen in the 1980s.
With thousands of businesses forced to close permanently or temporarily ceasing trading, more than 9 million workers have been furloughed on the government’s emergency wage subsidy scheme, at a cost of about £23bn to the exchequer.
However, the government will scale back the support from the end of next month, as ministers prioritise the reopening of the economy to help companies recover.
Dodds, in her Guardian article, said winding down the furlough scheme without providing extra support to companies still unable to reopen risked triggering a jobs crisis this summer.
“The government’s one-size-fits-all approach to support schemes makes no sense – it treats industries that can open today and industries that can’t exactly the same,” she said.
In the latest measure to reboot the economy, Boris Johnson on Tuesday announced that more businesses would be allowed to reopen from 4 July, including pubs, hotels and restaurants, and physical-distancing guidelines would be downgraded from 2-metres to “1-metre-plus”. The change was expected to enable more establishments to reopen with protective measures in place.
Business leaders have, however, warned of widespread job losses for companies forced to stay closed for longer, including gig venues, theatres and other leisure and hospitality outlets. Company bosses have also sounded the alarm that profits would remain under severe pressure for months, given the ongoing Covid-19 public health risks.
In the first week that non-essential stores were allowed to reopen, shopper numbers on England’s high streets surged by 45% compared with the previous week, according to the data provider Springboard. However, footfall remained down 54% on the same week in 2019 as large numbers of people continued to stay away.
Adam Marshall, director general of the British Chambers of Commerce, said: “While the relaxation of the 2 metre rule will help more firms increase capacity, we are still a long way from business as usual. Broader efforts to boost business and consumer confidence will still be needed to help firms trade their way out of this crisis.
“Businesses also need a clear roadmap to recovery, including fresh support for the worst-affected sectors and geographic areas, and broader fiscal measures to get the economy moving again.”