The Economy Summary is part of our Weekly COVID-19 Bulletin, sent every Thursday. You can sign up to receive your copy here.
At a Downing Street briefing early this week, the Prime Minister said he plans to stick ‘like glue’ to his plans for easing current measures. He confirmed that step two – where shops, hairdressers and beer gardens can reopen – will go ahead on 12 April as planned.
Analysis from Springboard indicated there was ‘pent up demand’ from consumers for bricks-and-mortar shops, with the firm predicting a 48% increase in sales after the next stage of lockdown easing on 12 April. On a similar note, data from Barclaycard showed that spending on leisure and entertainment increased by 136% last week.
Business insights and impact on the UK economy
The percentage of businesses currently trading has increased gradually from 71% in early January 2021 to 75% in late March 2021. This is a similar level to that seen in July 2020, but lower than the 84% seen in mid-December 2020.
The percentage of currently trading businesses experiencing a decrease in turnover, compared with normal expectations for this time of year, has fallen from 46% in January 2021 to 40% in mid-March 2021.
Prior to August 2020, when the first lockdown restrictions in response to the coronavirus pandemic were in place, the percentage of currently trading businesses experiencing a decrease in turnover, compared with normal expectations for this time of year, was consistently above 50%, reaching 65% in early June 2020 (when comparable estimates began). When compared with the 40% of businesses experiencing a decrease in turnover in the most recent estimates, this suggests current lockdown restrictions do not seem to be having the same scale of impact, perhaps because of businesses adapting.
The proportion of businesses’ workforce on furlough leave increased from 11% in early December 2020 to 19% in mid-March 2021. This level was last seen in late July 2020, when coronavirus restrictions were easing after the first national lockdown in the UK. The 19% of businesses’ workforce on furlough leave in mid-March 2021 equates to approximately six million people.
Signs of a recovery in the jobs market have emerged with recruiters reporting that permanent hiring activity reached a six-year high in March. The latest labour survey by KPMG and the Recruitment and Employment Confederation recorded that month-on-month growth in permanent placements was the highest since April 2015. Demand for temporary staff rose at the fastest rate since November 2017.
A new Government-backed loan scheme launched this week to support firms through the gradual reopening of the economy from Covid-19 lockdown measures. The Recovery Loan Scheme follows on from the previous support offered by lenders via the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), and Coronavirus Large Business Interruption Scheme (CLBILS). Under the new scheme, businesses can apply for loans between £25,000 and £10 million which are 80% guaranteed by the Government.
Stronger recoveries from the Covid-19 pandemic in the US, the UK and other rich western countries will result in faster than expected growth for the global economy this year, the International Monetary Fund (IMF) has predicted. The IMF suggested that the UK will be the fastest growing advanced economy in 2022 as a result of the successful vaccination scheme and Treasury spending, with it likely to return to its pre-pandemic level of activity in late 2022.
According to accountancy and business advisory firm BDO, the UK economy may see a significant boost to its recovery as close to 86% of UK mid-tier businesses told BDO they are looking to recruit more staff over the next six months, with over half (54%) planning permanent appointments. More than a third (36%) of business leaders said they would now hire apprentices as a direct result of the Government’s £3,000 apprenticeship grant announced in the Budget. This came as part of a larger 70% of businesses planning to recruit in this area regardless of the incentive.
Investment plans also received a boost in the March budget. Nearly half of businesses (47%) are planning new investments following the ‘super deduction’ initiative, which allows companies to cut their tax bill by up to 25p for every £1 they invest. According to the data from accountants at BDO, three-quarters of the UK’s medium-sized businesses state that 2021 is the time to invest, and 26% of them are already planning to invest in new locations or M&A.