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How UK unemployment rates soared in 2020

THE UK’s unemployment rate soared during 2020 as some of the country’s largest businesses were forced to lay off hundreds of thousands of staff, with some of the biggest casualties in the retail, hospitality and travel sectors.

This year the PA news agency tracked nearly 280,000 announced redundancies or jobs that were put at risk since March 23, when the first lockdown started.

It is a clear demonstration of the cost to people of the economic chaos caused by coronavirus.

Some of the cuts, including 5,500 at Cineworld, are likely to be temporary, but the PA figures also hide a large number of job losses, many among smaller companies.

The Office for National Statistics (ONS) said this month that the number of employees on payrolls had fallen by 819,000, most of which were at the beginning of the pandemic.

According to PA’s analysis, June was the worst month, with nearly 75,000 redundancies or possible job losses announced. However, this included HSBC and BP, whose plans for 35,000 and 10,000 possible redundancies were global, and not just limited to UK jobs.

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The fewest number of job losses announced in a full month was in April, shortly after lockdown started on March 23.

Retail jobs were the hardest hit, according to PA’s analysis, with more than 85,000 potential redundancies. Hospitality and travel companies both announced more than 42,000 losses.

The Bank of England said in November that it expected unemployment to peak at 7.75% next year, far ahead of the current 4.9%.

The Government hoped its furlough plan would save jobs, and has paid £46 billion to cover up to 80% of the salaries of 9.9 million people at some point. But between August and October, as the scheme was being phased out, redundancies reached a record high, at 370,000 in that quarter alone.

The furlough scheme, which was meant to come to an end in the autumn, was extended until April as more restrictions hit the economy.

A Government spokeswoman said: “We have put in place one of the world’s most comprehensive economic responses, spending over £280 billion to protect jobs, incomes, and business throughout the pandemic.

“Our Plan for Jobs continues to support people of all ages to get back on the jobs ladder, levelling up the nation as we build back better. We’re doubling the number of Work Coaches across our jobcentres ensuring those in need have access to bespoke support, creating hundreds of thousands of opportunities for young people through our Kickstart Scheme and our SWAPs (sector-based work academy programmes) are helping people retrain for new industries.”

By Richard Browne

Source: Bridgwater Mercury

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Sterling weakens against euro as post-Brexit deal rally falters

The pound weakened versus the euro on Britain’s first day of trading outside the European Union, but strengthened against a softer dollar, climbing above $1.37 for the first time since May 2018, as traders weighed up Brexit relief with COVID-19 risks.

The pound had strengthened after a last-minute Brexit deal was agreed on Dec. 24, which set rules for industries such as fishing and agriculture.

Although the deal does not cover Britain’s finance sector, UK market participants were relieved by an extension which allows them to use platforms in the European Union for swaps trading until March 2021 – a move announced on Thursday in a bid to avoid disruption.

At 0840 GMT on Monday, the pound changed hands at 89.77 pence per euro, down around 0.5% on the day.

Versus the weaker dollar, the pound was up 0.2% at $1.3682, having briefly crossed the $1.37 level for the first time since May 2018 early in the European session. The pound gained 2.5% overall against the dollar in December.

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Commerzbank’s head of FX and commodity research, Ulrich Leuchtmann, said that sterling’s recovery after the Brexit deal was agreed was “disappointingly limited”, but that it has further scope for gains in the next few days as traders adjust their positioning upon their return from holiday.

Leuchtmann was less bullish on sterling’s longer-term outlook, however.

“For market participants with a long-term outlook the concern that Brexit might constitute the beginning of renewed economic decline in the UK is more likely to dominate,” he said.

Sterling-dollar implied volatility gauges with one-month and three-month maturities, which spiked in December and then fell when the Brexit deal was agreed, have edged up again in the past few days, suggesting traders still expect price swings.

In bad news for sterling, COVID-19 cases in Britain are at record levels. Prime Minister Boris Johnson said on Sunday that tougher lockdown restrictions were probably on the way.

RBC Capital Markets analysts wrote in a note to clients that negative interest rates are likely to remain a possibility for the UK because, although a chaotic no-deal Brexit has been avoided, rising COVID-19 infections will have an impact on the Bank of England’s outlook for the economy.

Market participants are pricing in negative rates in the UK by May 2021.

Reporting by Elizabeth Howcroft

Source: UK Reuters

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UK economy shrank by close to 11% in 2020, says Deutsche Bank

The UK economy likely shrank by close to 11% in 2020, according to Deutsche Bank, marking the worst annual contraction in three centuries.

The bank said growth prospects for 2021 on the other hand remained positive on the whole.

“While tighter restrictions and some Brexit disruption will likely further disrupt the UK’s recovery in the first quarter of 2021, an earlier-than-expected rollout of vaccines should support the UK’s journey toward normalcy next year,” it said.

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DB said that while it’s early days, it expects the recovery to firmly begin from the second quarter of this year.

“We see growth coming in closer to 5% next year,” it said, adding that risks to its forecasts are firmly tilted to the upside.

By Michele Maatouk

Source: Sharecast

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Almost 300,000 redundancies since Covid pandemic hit UK

The UK’s unemployment rate soared during 2020 as some of the country’s largest businesses were forced to lay off hundreds of thousands of staff, with some of the biggest casualties in the retail, hospitality and travel sectors.

This year the PA news agency tracked nearly 280,000 announced redundancies or jobs that were put at risk since March 23, when the first lockdown started.

It is a clear demonstration of the cost to people of the economic chaos caused by coronavirus.

Some of the cuts, including 5,500 at Cineworld, are likely to be temporary, but the PA figures also hide a large number of job losses, many among smaller companies.

The Office for National Statistics said this month that the number of employees on payrolls had fallen by 819,000, most of which were at the beginning of the pandemic.

According to PA’s analysis, June was the worst month, with nearly 75,000 redundancies or possible job losses announced. However, this included HSBC and BP, whose plans for 35,000 and 10,000 possible redundancies were global, and not just limited to UK jobs.

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The fewest number of job losses announced in a full month was in April, shortly after lockdown started on March 23.

Retail jobs were the hardest hit, according to PA’s analysis, with more than 85,000 potential redundancies. Hospitality and travel companies both announced more than 42,000 losses.

The Bank of England said in November that it expected unemployment to peak at 7.75% next year, far ahead of the current 4.9%.

The Government hoped its furlough plan would save jobs, and has paid £46billion to cover up to 80% of the salaries of 9.9 million people at some point.

But between August and October, as the scheme was being phased out, redundancies reached a record high, at 370,000 in that quarter alone.

The furlough scheme, which was meant to come to an end in the autumn, was extended until April as more restrictions hit the economy.

A Government spokeswoman said: “We have put in place one of the world’s most comprehensive economic responses, spending over £280bn to protect jobs, incomes, and business throughout the pandemic.

“Our Plan for Jobs continues to support people of all ages to get back on the jobs ladder, levelling up the nation as we build back better. We’re doubling the number of Work Coaches across our jobcentres ensuring those in need have access to bespoke support, creating hundreds of thousands of opportunities for young people through our Kickstart Scheme and our SWAPs (sector-based work academy programmes) are helping people retrain for new industries.”

By Daniel Smith

Source: Wales Online

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UK economy may be 6% smaller in early 2021 than initially forecast

The UK economy could be up to 6% weaker in early 2021 than expected in initial forecasts.

The latest report from the Resolution Foundation found that due to the new Covid-19 restrictions to stop the rising infection rate it is likely that the country’s economy for 2021 will be negatively impacted.

The report said that the duration of those restrictions will determine the effect on the economy.

The report said that a possible path for the economy, takes the Office for Budget Responsibility’s November forecast and assumes that monthly output remains at its November level (reflecting the fact that Tier 4 is the equivalent of repeating the second lockdown) until Easter before returning to its forecast path (which included the impact of some ongoing restrictions).

This would see the economy being 6% smaller by Easter than forecast by the OBR just last month and reduce growth for 2021 as a whole from 5.5% to 4.3%.

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Sectors reliant on social consumption, specifically hospitality, leisure and non-essential retail, will remain hardest hit and government support should be focused on them, said the Resolution Foundation report.

The thinktank also said that widespread vaccination in 2021 would lead to a swift drop in deaths from coronavirus and enable a gradual return to normality. It assumes that those over 65 will be vaccinated by Easter.

The report said spending will bounce back very quickly once normality is achieved and it should lead to a big labour market boost. The report believes this improvement will be noticeable towards the second half of 2021.

Nevertheless, “2021 is going to be a rough ride. The early months of the year will try the patience of a nation fatigued by the trauma that was 2020. And with unemployment rising and incomes possibly falling in 2021, it certainly won’t be roaring for everyone”, said the report.

By Caoimhe Toman

Source: ShareCast

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Analysis: Brexit trade deal sparks relief but UK market will bear scars

Britain’s trade agreement with the European Union removes a 4-1/2-year old fear of crashing out of the bloc without trading arrangements in place, but it will take UK financial markets years to lose their Brexit-inflicted scars.

The “no-deal Brexit” risk has weighed on Britain’s growth and investment prospects since June 2016, when citizens voted to sever ties with the country’s biggest financial services customer that accounts for $1 trillion of bilateral commerce a year.

So Thursday’s deal, seven days before the deadline, is an undoubted relief. Analysts are urging clients to snap up undervalued UK stocks, the worst performing of any major market since 2016 and many say they been buying sterling, which is near 2-1/2-year highs above $1.36..

But those hoping the deal will allow British assets to catch up with high-flying overseas markets may be disappointed.

The bare-bones nature of the deal leaves Britain far more detached from the EU than was thought likely in 2016. Further negotiations are inevitable in 2021 to flesh out the agreement.

It all means the discount that has dogged UK assets since 2016 will not vanish soon.

“Brexit does mean that the UK will likely lose some of its sheen,” said Seema Shah, chief strategist at Principal Global Investors.

While the news could lend some traction to British markets it would not protect the economy from long-term scarring, inflicted by a combination of Brexit and COVID-19, she said.

“Being excluded from the world’s largest single market area will see jobs, people, and capital flows trickle away from the UK, in search of destinations which instead embrace globalisation,” Shah added.

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Ilustrating the discount, UK stocks have underperformed since 2016 and lagged the global recovery since March that has sent rival indexes to record highs.

The British currency remains around 20% below its long-term fair value. Few expect it to recover fully in the near term.

The underperformance is largely driven by foreign investors dumping UK assets. Financial data provider eVestment estimates European and U.S.-domiciled investors have pulled more money than they have added into UK stocks almost every quarter between the referendum and the third 2020 quarter.

And because the size of the UK market has shrunk as a percentage of the global index, to 4% from 10% pre-referendum, foreign investors no longer need to hold as many UK stocks, said Caroline Simmons, CIO, UK, at UBS Global Wealth Management,

British equities may perform well against a backdrop where other markets look expensive – Simmons says UK shares trade at a 30% discount relative to global markets against a typical 10% discount.

But she does not expect them to recover fully.

“As for the Brexit discount, I do think some of it goes away but will it completely disappear? The drag on cumulative UK GDP as a result of Brexit is still sizeable,” she said.

COVID-19 COMPOUNDS BREXIT

As further shadow on the outlook, Britain’s economy, already weakened by Brexit uncertainty, has suffered the worst damage of any major country from the COVID-19 pandemic, with the second-quarter of 2020 witnessing the worst recession in 300 years.

That has forced the government to lift its borrowing to a peacetime record.

Economic recovery is complicated by weak “bricks-and-mortar” foreign direct investment. The net value of foreign direct investment (FDI) into the United Kingdom dropped to 49.3 billion pounds in 2018, a quarter of 2016 levels, official data shows.

This year will have seen 30%-45% fewer FDI projects than 2019, consultancy EY estimates, mostly because of the pandemic.

Hinesh Patel, a portfolio manager at Quilter Investors, said the Brexit deal “could unblock the backlog of international investment that has been waiting for some sort of outcome before institutions begin investing in UK plc once again.”

Others are less optimistic and say the watered-down ties with Brussels will inflict lasting damage.

“There’s a bit of short term versus long term story here,” Morgan Stanley head of cross asset strategy Andrew Sheets said, speaking before the deal announcement.

Removing the no-deal risk will raise average asset prices, Sheets said, but said: “It doesn’t fix the underlying economic challenges…You are facing a negative shock to services which are a large majority of the UK economy.”

Source: UK Reuters

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ONS: UK Government borrowing hits record for November at £31.6bn as country battled Covid-19

OFFICIAL figures today show UK Government borrowing surged to a record £31.6 billion in November as efforts were ramped up to support the economy through the second wave of the pandemic.

But numbers from the Office for National Statistics also show, that in the third quarter, the economy grew by 16 per cent, more than the initial estimate of 15.5 per cent, as it bounced back from the deepest economic hit in more than 60 years. This new figure represents the fastest quarterly increase since records began in 1955.

The ONS said last month’s borrowing – excluding state-owned banks – soared by £26bn year on year and marked the highest seen in November and the third highest in any month since records began in 1993.

The latest estimate saw public sector net debt reach a new all-time high of £2.1 trillion at the end of last month.

It means the UK’s overall debt is now around 99.5% of gross domestic product, which is a measure of the size of the economy; a level not seen since 1962.

Borrowing has hit £240.9bn for the first eight months of the financial year; £188.6bn more year on year and breaking yet more records.

Recent official forecasts from the Office for Budget Responsibility predict borrowing could reach as high as £393.5bn by the end of the financial year in March, which would be the highest seen since the Second World War.

It comes after the Government launched more than 40 schemes across the UK to help households and businesses through the coronavirus crisis.

One of the costliest has been the furlough scheme for workers, which was last week extended again until April 2021.

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The most recent figures from HM Revenue & Customs showed another £3.4bn worth of claims were made between November 15 and December 13, taking total claims to £46.4bn with 9.9m furloughed jobs.

The ONS said borrowing rose as tax and National Insurance receipts fell by £38.3bn, some 8.6%, year on year in the eight months to November.

But Government support for individuals and businesses during the pandemic contributed to a 30% or £147.3bn hike in central government spending.

The ONS’s new figure of 16% growth for Q3, while the fastest on record, was still not enough to make up the ground that the UK had lost in the preceding three months.

Between April and June, GDP dropped by 18.8%, revised down from earlier estimates of 19.8%, as the effects of the Covid-19 pandemic hit the economy. The first lockdown was launched on March 23.

Taken together, it means that the level of UK GDP was still 8.6% lower in the third quarter than it had been at the end of 2019.

The UK has also proven to be the worst-hit country among some of the world’s biggest economies.

When compared to other Group of Seven members, the UK economy was twice as badly hit.

It fell by 21.2% in the second quarter compared to the end of 2019. Only France at 18.9% and Italy at 17.8% came close to the hit that the UK took during that quarter.

The recovery in France and Italy has also seemed to be speedier than the UK, the ONS showed.

It suggested the differences between countries could be a reflection of how the virus spread and how the lockdowns were implemented in the countries in question. The official body pointed out some impacts could be measured differently in different countries.

Countries where the economy was heavily based on face-to-face interaction could also be more likely to be economically impacted by the virus.

By Michael Settle

Source: Herald Scotland

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UK economy saw partial recovery in Q3, recession risks ahead

Britain’s economic recovery from its coronavirus crash was quicker than previously thought in the third quarter, according to official data, but new lockdowns are threatening to cause a another recession.

Tuesday’s data also showed government borrowing sped up last month to pay for the mounting cost of the coronavirus crisis.

Gross domestic product grew by a record 16.0% from July to September, revised up from a previous estimate of 15.5%.

But that still did not make up for its 18.8% slump in the second quarter, when much of the economy was shut down.

Britain’s economy was hit harder by the pandemic than most others as it went into a longer lockdown. Only Italy has recorded more deaths in Europe.

Now London and nearby areas are back under tough restrictions as the government tries to slow the spread of a new variant of the virus that spreads more easily.

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Capital Economics, a consultancy, said a double-dip recession was a clear possibility if the latest COVID-19 restrictions continue into 2021.

The economy almost ground to a halt in October and is expected to shrink again in the fourth quarter as worries about the Dec. 31 deadline for a Brexit trade deal with the European Union compound the damage from COVID-19.

But Capital Economics said a high savings rate among households “provides optimism that as long as vaccines are effective and widespread, GDP will stage a strong rebound in the second half of next year.”

Tuesday’s data showed the economy was 8.6% below where it was at the end of 2019.

It also showed household incomes grew in the third quarter as workers returned from temporary layoffs. Consumer spending rose by almost 20%.

The Office for National Statistics also said Britain borrowed a record 241 billion pounds ($323 billion) in the first eight months of the financial year, nearly 190 billion pounds more than in the same period a year earlier.

Borrowing in November alone reached 31.6 billion pounds, up more than 40% from October as the government extended its job- retention scheme to cover workers hit by the latest lockdowns.

The deficit is on course to widen to about 400 billion pounds in the 2020/21 year, close to 20% of GDP, double the hit from the global financial crisis.

Public debt stood at almost 2.1 trillion pounds or 99.5% of GDP, the highest ratio since 1962.

Finance minister Rishi Sunak reiterated his pledge to tackle the huge shortfall, but not immediately.

“When our economy recovers, it’s right that we take the necessary steps to put the public finances on a more sustainable footing,” he said.

The International Monetary Fund has said Britain will probably need to raise taxes after the pandemic to fill the gap.

Britain’s current account deficit – one of the economy’s weak spots – widened to 15.7 billion pounds, or 2.9% of GDP.

($1 = 0.7462 pounds)

Reporting by Andy Bruce

Source: UK Reuters

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Pound traders brace for tense week as Brexit talks continue

Sterling traders are gearing themselves up for another nervy week amid fears that a collapse in Brexit talks could spark a sharp sell-off in the pound.

Negotiations are ongoing, but noises from both camps suggest they remain stuck on fishing rights and competition policy.

British health secretary Matt Hancock this morning told Sky News that the European Union was making “unreasonable” demands.

France appears to be taking a tough stand on fishing rights, arguing that it will not take a sub-standard deal.

The pound is currently trading at around two year highs of around $1.35. Yet it slipped back from even higher towards the end of last week as doubts about a Brexit deal emerged.

No-deal Brexit: Pound could hit $1.15 or lower

Economists at consultancy Capital Economics said last week that the pound could tumble to $1.15 in the event of a no-deal Brexit.

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Such an outcome would lead to disruption for businesses as well as higher tariffs for certain sectors. The UK’s budget watchdog has said it could knock two per cent off the economy next year.

Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said no deal could see sterling fall to $1.23. He said it could fall to about €1.04 against the euro, from its current price of €1.103.

Nomura currency analyst Jordan Rochester said the pound could even plunge to $1.01 in a worst-case scenario where “capital markets struggle to function” amid financial disruption.

However, Tombs said the pound was “less vulnerable” than in 2016, when it dropped sharply after the Brexit referendum.

He said it is now less dependent on external finance thanks to a lower current account deficit. And he said the Bank of England also has less scope to cut interest rates, which would hurt the pound.

Analysts and investors are torn on whether the UK and EU will reach a deal. Analysts at UBS said that if a deal is struck and vaccines aid the economy then sterling could hit $1.37 by the end of 2021.

By Harry Robertson

Source: City AM

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FTSE 100 falls and pound plunges as Tier 4 lockdown puts UK economy back into hibernation and Brexit talks drag on

The FTSE 100 was set to fall nearly 1% in early trading today as sterling plunged following Boris Johnson’s shock U-turn on Covid-19 lockdowns at the weekend.

The sudden and dramatic change of government rules over swathes of the South East wrongfooted investors and chief executives alike, sending early calls on the FTSE down 54.6 points to 6462 on the IG Index spread betting platform.

That fall would have been deeper were it not for sterling also plunging – a factor that generally helps FTSE shares because big company earnings are largely generally in dollars, so a weak pound makes them stronger when translated back into pounds.

The pound fell 1.2% this morning during Asian trading with both the lockdown measures and continuing stalemate on the Brexit trade talks hitting the market’s view of Britain’s economic prospects.

The pound fell to $1.3360, further pressurised downwards by dollar strength on the back of a deal from Washington politicians over a $900 billion covid stimulus deal to boost the US economy.

Relief that a deal had been struck after so many months of stalling negotiations meant markets could now focus on Brexit trade talks and the West’s varying response to Covid.

As borders closed to UK travellers over fears of the British mutant strain of the disease, share prices were expected to plunge as trade was set to be jammed at UK ports.

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Freight transport was already backing up badly at Dover on Saturday due to traders’ attempts to stockpile ahead of the end of the Brexit transition period next week, but that was worsened by border stops by Germany, France, Italy, Belgium, Austria, Ireland and the Netherlands.

Dover usually handles 10,000 trucks a day but France yesterday put an immediate 48 hour ban on entry, jamming the crucial Dover-Calais route.

Half of all goods traded between the UK and EU and 90% of truck traffic cross on that route.

The hope is that the EU will have formulated a response to the UK mutant virus by tomorrow, involving Covid tests prior to departure from Britain.

While hauliers were still allowed to enter the UK, truck companies from the continent were delaying shipments for fear that they may not be allowed to return.

Eurotunnel, Port of Dover and Eurostar all shut the UK-France route yesterday.

Shares in easyJet, British Airways owner IAG and Ryanair were all expected to fall sharply, along with hoteliers such as InterContinental and Premier Inn owner Whitbread.

However, investors with longer term horizons still believe the vaccines will make 2021 a strong year for economic growth and company profits, so any short-term share price falls are likely to be leaped upon by bulls seeking bargains.

Further concerns over TalkTalk’s lowball takeover by Toscafund were heightened today as The Times revealed that the hedge fund had told its investors in the summer that it would make strong returns on its investment in the firm at a far higher price than it is offering to buy it for.

By Jim Armitage

Source: Evening Standard

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