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UK retailers report more inflation pressure as economy reopens

UK retailers have reported the smallest price falls since the start of the COVID pandemic, partly due to shoppers buying more clothes and shoes as lockdowns eased, and they said price pressures were likely to rise further over the rest of 2021.

With the Bank of England watching carefully for signs of how quickly inflation is picking up, the British Retail Consortium’s shop price index for May showed prices were 0.6% lower than a year before, compared with a 1.3% fall in the year to April.

This was the smallest drop since February 2020.

The BRC’s shop price index typically shows year-on-year price falls, unlike the broader measure of consumer price inflation targeted by the BoE which includes a wider range of goods and services.

The BoE has forecast that CPI is likely to overshoot its 2% target and go above 2.5% by late 2021, due to a global rise in energy prices and what the central bank views as temporary pressures and one-off effects linked to the pandemic.

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British shoppers were keener to spend on new clothes and shoes last month as social-distancing restrictions eased, enabling people to meet at pubs and restaurants, the BRC said.

Supply chain disruption linked to COVID had also pushed up the cost of furniture and electrical goods, it added.

Prices were likely to rise more broadly later in the year, BRC chief executive Helen Dickinson said.

“Global food prices are currently at their highest in seven years, shipping costs have risen threefold since 2019, and commodity prices are climbing. We will likely see these costs filter through in the second half of this year,” she said.

Some new post-Brexit rules which affect food imports from the European Union take effect from Oct. 1, with others coming later, which the BRC warned would push up prices too.

The BRC collected price data between May 3 and May 7.

By David Milliken

Source: UK Reuters

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UK job vacancies highest for a year as lockdown eases

UK job vacancies have hit their highest level since the start of the pandemic as the easing of lockdown measures has led employers to start recruiting.

In the February-to-April period there were 657,000 vacancies, up about 48,400 on the previous quarter.

The unemployment rate fell slightly to 4.8% in the three months to March, down from 4.9% in February, the Office for National Statistics said.

The ONS said there were “early signs of recovery” in the jobs market,

However, despite the rise in job vacancies over the past 12 months, the level remains almost 128,000 below its pre-pandemic level in the January-to-March quarter of 2020.

The official figures confirm several reports in recent weeks by recruitment companies that they are seeing a rise in job advertisements, leading to concern among some employers that they could face staff shortages.

The ONS said the number of workers on payrolls had risen by 97,000 between March and April, but was still 772,000 lower than before the pandemic struck.

Darren Morgan, ONS director of economic statistics, said the number of employees on payroll “rose strongly in April” as the economy began to reopen, continuing an improvement from its November trough.

But he said: “There remains, however, three-quarters of a million people fewer on the payroll compared with the pre-pandemic peak.

“With many businesses reopening, the recent recovery in job vacancies continued into April, especially in sectors such as hospitality and

Chancellor Rishi Sunak said the latest figures showed the impact of the government’s focus on protecting jobs during the pandemic.

“While sadly not every job can be saved, nearly two million fewer people are now expected to be out of work than initially expected – showing our Plan for Jobs is working.”

Business leaders welcomed the vacancy levels as positive signs for the economy, but warned there was still a long way to go.

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‘I’ve applied for 500 jobs’

As many experts have pointed out, Tuesday’s positive jobs news does not disguise that many people in the labour market are still struggling.

Interior designer Sheila Smith lost her job working for hospitality venues in October – and despite some 500 applications is still unemployed.

She worries that businesses are looking for someone younger and cheaper than her. “I’ve been for a few interviews, which I haven’t been successful at,” she told the BBC.

She said the most frustrating aspect of the job search was the lack of communication from potential employers.

“When you take time to go for a job interview, get yourself prepared, but then you hear nothing back – that’s the most frustrating thing.”

Although the number of job vacancies is rising, they are still well down on pre-pandemic levels and Sheila reckons there’s about 200 people applying for each post advertised.

“It destroys your confidence,” she said. “I’ve worked solidly for years in the industry, and you find yourself in this situation scrambling for jobs.

“You feel like you’re stuck at square one.”

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Matthew Percival, director of people and skills at the CBI business lobby group, said: “Businesses are starting to report vacancies they’re struggling to fill so government support for skills and retraining is essential.”

He added that companies still needed clarity over the rules for the next stage of reopening the economy, which is currently planned for 21 June.

Research consultancy Capital Economics said the fall in the jobless rate showed that the jobs furlough scheme was “insulating the labour market”.

The firm added that although it expects the unemployment rate to rise over the next few months, that would most likely be due to people returning to the labour market rather than people losing their jobs.

The most encouraging sign here is that vacancies over the three months to April averaged 657,000. The ONS said its experimental monthly vacancy statistics for April itself were “at near pre-pandemic levels”. There are increasing numbers of employers expressing concern about recruitment difficulties.

The jobs data continue to show some signs of resilience and recovery, with unemployment down again to 4.8%, and employment up for the fifth consecutive month. It’s so far a slow recovery based on gradual re-openings seen up until last month.

The pattern is, though, as uneven as the lifting of the restrictions. Hospitality and retail jobs are still well down on pre-pandemic levels, and this means all of the loss in payrolled jobs and more can currently be explained by what has happened to young workers. There are still over four million workers on the furlough scheme, who count as employed.

Source: BBC

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Economic recovery ‘will be faster than predicted’

THE UK’S economic recovery from the pandemic is likely to be faster than first anticipated, a leading international agency has suggested.

A forecast by the Organisation for Economic Co-operation and Development (OECD) published yesterday shows the vaccine rollout and the lockdown easing were having a more positive effect on the economy than previously predicted.

Experts at the OECD have anticipated that gross domestic product (GDP) will grow by 7.2 per cent this year, and 5.2% next year.

Their report stated that the growth was being driven by a “rebound of consumption, notably of services”, and that GDP is expected to return to pre-pandemic levels in early 2022.

It added: “Keeping up the pace of vaccinations and responding to emerging virus mutations are key challenges going forward.”

It comes after dire warnings from economists during the height of the pandemic, with fears that unemployment would sky-rocket and hundreds of thousands of jobs would be lost forever.

Despite the improved forecast, concerns are still growing over plans to scrap the furlough scheme in September, along with the uplift to Universal Credit benefits.

Opposition politicians, charities and some economists have warned that removing the financial support which has helped people throughout the pandemic suddenly risks creating a “cliff edge” and could see redundancies and job losses rise.

Last week, the SNP urged the Chancellor to reconsider ending the furlough scheme in four months, while yesterday the party’s work and pensions spokesman David Linden appealed to minister Therese Coffey over plans to scrap the rise in UC at the same time.

He argued that experts had said the rise of £20 per week had been a lifeline for struggling families, and risks plunging more people into poverty when it is withdrawn.

Despite upgrading its economic predictions for the UK, the OECD also warned the country could face the biggest decline in potential output growth on average among the G7 group of countries, while losses are estimated to be relatively small in Japan, Canada and the United States.

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It also warned that unemployment levels, currently at 4.9%, will peak at the end of the year.

It also said Brexit will have an impact on economic recovery, explaining: “Increased border costs following the exit from the EU Single Market will continue to weigh on foreign trade.

“Unemployment is expected to peak at the end of 2021 as the Coronavirus Job Retention Scheme is withdrawn.

“Declines in potential output growth in major Euro area members could be 0.3 percentage point per annum on average over 2019-22,”the report added.

“The United Kingdom could suffer the biggest reduction amongst G7 countries (a decline of 0.5 percentage points per annum), in part reflecting the additional adverse supply-side effects from 2021 following Brexit.”

The experts recommended that the UK Government should continue to support the economy until a recovery has begun, explaining: “Fiscal and monetary policies should stay supportive until the recovery firmly takes hold, facilitating structural change as support to existing firms and jobs is scaled down.

“Public investment should address long-term challenges, notably reducing greenhouse gas emissions and boosting digital infrastructure.

“Extending higher levels of cash support beyond current plans and continuing to boost training programmes can help affected households.”

In terms of the global outlook, the OECD has revised up its growth projections across the world’s major economies since the last full outlook in December of last year, putting global GDP growth at 5.8% this year.

Along with the more positive prediction for the UK economy, the OECD also warned that the global recovery from the coronavirus crisis was at a critical stage and much of it hinged on the vaccine availability worldwide.

Chief economist Laurence Boone said that the OECD’s latest projections could give hope to people in countries hard-hit by the pandemic, who may soon be able to return to work and begin living normally again.

He added: “But we are at a critical stage of the recovery. Vaccination production and distribution have to accelerate globally and be backed by effective public health strategies.

“Stronger international cooperation is needed to provide low-income countries with the resources – medical and financial – required to vaccinate their populations.

“Trade in healthcare products must be allowed to flow free of restrictions.”
Responding to the outlook, Chancellor Rishi Sunak said: “The strength of the UK’s growth forecast is testament to the ongoing success of our vaccine rollout and evidence that our Plan for Jobs is working.

“It is great to see some early signs that the UK is bouncing back from the pandemic, but with debt at nearly 100% of GDP, we must also ensure public finances remain on a sure footing.

“That’s why, at the Budget in March, I set out steps we will take to bring debt under control over the medium term; ensuring our future recovery is sustainable.”

By Hannah Rodger

Source: Herald Scotland

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The pound retreats after hitting three-year high amid variant concerns

The pound retreated this morning after reaching a fresh three-year high versus the dollar amid economic recovery hopes.

Well into the London session after the bank holiday weekend, sterling reversed its course to fall 0.2 per cent to $1.4183.

The pound edged lower as concerns over a new coronavirus strain outweighed increasing investor optimism on the UK’s economic recovery.

Three-year high

Sterling touched its highest level since April 2018 of $1.4250 during the Asian session against the dollar.

Analysts attributed the rise to positive global investor sentiment towards Britain’s economic recovery.

“Overseas investor sentiment generally is positive towards sterling given the vaccine roll-out and the reopening of the domestic economy,” said Neil Jones, head of FX Sales at Mizuho Bank.

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“The stage is set for the pound to push higher I would suggest.”

Optimism remains high

UK house prices jumped by an annual 10.9 per cent in May, the most in nearly seven years, mortgage lender Nationwide revealed this morning.

Jones said that the house price data, which surprised in the upside, helped to keep optimism around the British currency.

Economic indicators including retail sales and employment measures are also looking up, as well as a deluge of new orders driving a record increase in British manufacturing last month.

Sterling also found support from Bank of England policymaker Gertjan Vlieghe last week, who said the central bank was likely to raise rates only well into next year.

By Damian Shepherd

Source: City AM

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UK economy set to grow 7.2 per cent this year

The UK economy is set to grow at its fastest rate since the second world war this year and in 2022, the Organisation for Economic Co-operation and Development (OECD) has forecast.

After the Covid-19 ravaged economies, the UK suffered a 9.8 per cent contraction in 2020 – its worst in nearly 300 years.

The organisation anticipates a GDP growth of 7.2 per cent this year and 5.5 per cent in 2022.

The OECD has warned that global recovery is now at a “critical stage” and unequal vaccine distribution could swell global economic disparities.

The collision of Brexit and the pandemic may also hinder the UK more than other G7 nations – while the UK’s losses will likely far surpass that of Japan, Canada and the US, according to OECD.

“Declines in potential output growth in major euro area members could be 0.3 percentage point per annum on average over 2019-22,” it said.

“The United Kingdom could suffer the biggest reduction amongst G7 countries (a decline of 0.5 percentage point per annum), in part reflecting the additional adverse supply-side effects from 2021 following Brexit.”

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A “rebound of consumption, notably of services” has stoked positive growth and GDP is anticipated to return to pre-pandemic levels in the early months of next year.

“Keeping up the pace of vaccinations and responding to emerging virus mutations are key challenges going forward,” the OECD added.

Global GDP growth has been estimated to be around 5.8 per cent this year.

“The strength of the UK’s growth forecast is testament to the ongoing success of our vaccine rollout and evidence that our Plan for Jobs is working,” chancellor, Rishi Sunak, said in response to the OECD’s outlook.

“It is great to see some early signs that the UK economy is bouncing back from the pandemic, but with debt at nearly 100 per cent of GDP, we must also ensure public finances remain on a sure footing.

“That’s why at the budget in March I set out steps we will take to bring debt under control over the medium term; ensuring our future recovery is sustainable.”

By Millie Turner

Source: City AM

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Increases in mortgage arrears expected this year, says UK Finance

More home-owners are expected to fall into mortgage arrears this year as the economic repercussions of the coronavirus pandemic continue to be felt, according to UK Finance.

The trade association, which represents the banking and finance industry, said mortgage arrears remained close to historically low levels in the first three months of 2021.

From March 2020 to the end of March 2021, lenders were offering payment holidays of up to six months to borrowers whose finances had been affected by the coronavirus pandemic.

Nearly 2.9 million mortgage payment deferrals were granted while the scheme was active.

With the economic impact of Covid-19 continuing to be felt, we anticipate there will be further increases in mortgage arrears during 2021

Eric Leenders, UK Finance

For borrowers who need additional support beyond the six-month payment holidays, lenders are continuing to offer tailored support.

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UK Finance’s latest figures show a small increase of 230 mortgages in arrears compared with the previous quarter, with a total of 77,640 home owner mortgages in arrears of 2.5% or more of the outstanding balance.

Within the total, there were 27,280 mortgages with significant arrears representing 10% or more of the outstanding balance. This was an increase of 620 on the previous quarter.

UK Finance said this figure has slowly increased since early 2020 but from a low base, largely driven by customers who had several missed payments before the pandemic.

Eric Leenders, managing director of personal finance at UK Finance, said: “While there was a slight rise in total arrears in quarter one 2021 compared to the historic low levels seen before the pandemic, the additional support from lenders has helped many mortgage customers stay out of arrears.

“With the economic impact of Covid-19 continuing to be felt, we anticipate there will be further increases in mortgage arrears during 2021.

“Any customer who is concerned about their finances should contact their lender early to discuss the options and tailored support available to them.”

Only 190 home-owner mortgaged properties and 180 buy-to-let mortgaged properties were repossessed in the first quarter of 2021.

Although Financial Conduct Authority (FCA) guidance allowed firms to re-start litigation activity from November 2020, lenders voluntarily committed to pause repossessions in line with a “winter truce” from mid-December 2020 to mid-January 2021, UK Finance said.

It added that repossessions are expected to eventually increase due to the backlog of cases that did not take place in 2020.

These cases will have been in train before the pandemic, it said, adding that repossessions are always a “last resort”.

By Vicky Shaw

Source: Belfast Telegraph

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Service sector optimism grows at fastest rate on record

Optimism over the future of the service sector increased at the fastest pace on record in the three months to May as the UK’s economic recovery from the pandemic gathered steam.

According to the CBI’s latest quarterly Service Sector Survey, sentiment about the general outlook for the professional services sub-sector jumped from +23 per cent to +63 per cent, a record leap.

Meanwhile, buoyed by the reopening of non-essential retail and hospitality, the consumer services sector saw optimism jump from -55 per cent to +33 per cent.

The picture was more mixed for volumes, with business and professional services volumes rising at the fastest rate on record last quarter, while consumer services volumes continued to decline but at a much slower pace.

But both sub-sectors expect strong growth in volumes in the quarter ahead.

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The CBI’s data comes after IHS Markit’s flash PMI reading for May suggested that business activity in the UK expanded at its fastest rate since 1998 this month.

Driven by the government’s rapid progress with the vaccination scheme, ministers have been able to peel back restriction layer by layer, allowing business activity to take off.

The service sector is at the core of the UK’s economy, accounting for 81 per cent of total UK economic output in 2020.

Ben Jones, CBI Principal Economist, said: “With the reopening roadmap on track and the vaccine rollout delivering, it’s no surprise to see an uptick in optimism across the sector.

“Both sub-sectors are expecting strong business growth over the next few months as restrictions continue to lift.”

But, he added, “clarity on future social distancing requirements and workplace testing would go further towards smoothing the route to recovery.”

By Edward Thicknesse

Source: City AM

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London and south east now accounts for £4 in £10 of total UK economy

London accounts for almost a quarter of the UK’s total economic activity, according to new figures from the Office of National Statistics.

The capital accounted for 22.7 per cent of total UK Gross Domestic Product in 2019, and 23.8 per cent of total Gross Value Added.

When the south east is added, that figure rises to 37.5 per cent and 38.4 per cent.

London business leaders said the figures demonstrated the need for “concerted action” to ensure the capital continues to power the country’s economy in the aftermath of Covid-19.

And, in the ten years to 2019, London saw GDP growth of 49 per cent compared to 33 per cent across the whole of the rest of the country.

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Total GDP (£m)Percentage of total
UK2,214,362100%
England1,902,98685.94%
North East64,2602.90%
North West212,8439.61%
Yorkshire / Humber146,7466.63%
East Midlands129,8545.86%
West Midlands163,6247.39%
East of England190,9628.62%
London503,65322.74%
South East327,10214.77%
South West163,9417.40%
Wales77,5173.50%
Scotland166,9577.54%
Northern Ireland48,5842.19%
Extra-Regio18,3180.83%
Source: Office of National Statistics

The new data suggests UK GDP grew by 1.3 per cent in 2019. London witnessed the largest growth at 2.2 per cent. Total GDP per head in London was £56,149, compared to the UK average of £32,876.

The Covid-19 pandemic, however, is expected to have hit the capital hard – with hospitality and tourism both hard-hit by lockdowns.

Laura Osborne, Interim Corporate Affairs Director of London First, said: “Central London lost more jobs than any other region, but the stats show that the capital’s economy remains vital to the economic recovery of the whole UK.

“The UK’s rapid economic recovery demands a vibrant, growing capital city. Concerted action is needed to bring people back to the capital, to put Transport for London on a sustainable financial footing and to turbo-charge reskilling. Simply leaving London to bounce back is not enough.”

By James Silver

Source: City AM

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UK economy is expected to accelerate recovery in 2021

OPTIMISM is being felt for the UK economy as the best reading on record has been found in a survey of business activity.

A purchasing index from the IHS Markit saw a surge in growth and employment in the latest reading this month.

IHS credits the surge to the continued unlocking of society and consumers being more confident to visit pubs and restaurants as the Covid-19 vaccine rollout continues.

It follows a rise in business activity seen in March when the retail sector reopened after the third lockdown.

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However, GDP has fallen by 1.5 per cent in the first quarter.

The IHS has warned that although business activity is on the rise, inflation could also surge as consumer prices are increasing.

Early this week it was revealed that the UK’s inflation rate more than doubled to 1.5 per cent in March, it is the highest rate seen in the UK for a decade.

By Gareth Cavanagh

Source: News and Star

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UK economic growth is picking up pace as restrictions ease

HOPES have been raised that UK economic growth is picking up pace in the second quarter after a key survey signalled a big leap in private sector activity in May, driven by a resurgence in manufacturing and the reopening of retail and hospitality.

The seasonally adjusted, flash composite purchasing managers index (PMI) for the services and manufacturing sectors reached a series high of 62.0 in May, up from 60.7 in April. The index gave readings of 56.4 in March and 49.6 in February. IHS Markit and CIPS (Chartered Institute of Procurement & Supply), which compile the data, said the rate of expansion was the fastest since the composite index began in January 1998, and was underpinned by strong contributions from manufacturing and services.

The expansion came amid steep increases in output, new orders and employment in the manufacturing sector, and rising demand for hotels, restaurants and other consumer-facing services as hospitality, tourism and non-essential retail reopened.

The flash manufacturing PMI reading surged to 66.1 in May, the highest since this survey began in January 1992, from 60.9 in April, while the reading for services rose to 61.8 from 61. Any reading above 50 signifies expansion.

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Chris Williamson, chief business economist at HIS Markit, said: “The UK is enjoying an unprecedented growth spurt as the economy reopens. Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade. Business confidence has meanwhile hit an all-time high as concerns about the impact of the pandemic continue to fade.”

Howard Archer, chief economic adviser to the EY ITEM Club, noted that the index had shown employment had risen for the third month in a row after a year of contracting, and at the “fastest rate since June 2014”.

But he observed: “Not so good news saw input prices rise at the fastest rate for nearly 13 years.”

The report noted that pressure on prices came from a “shortages of raw materials and high shipping costs, while service providers often noted increased staff salaries.”

Kieran Tompkins, assistant economist of Capital Economics, said the latest reading from the closely watched IHS Markit/CIPS index – the highest in more than 20 years – “points to the economic recovery shifting through the gears and picking up speed.”

By Scott Wright

Source: Herald Scotland

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