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UK economy bounces back from the pandemic with fastest growth since August

Business activity is growing at the fastest rate in seven months as UK economy bounces back from the pandemic.

Despite the continuing lockdown, firms recovered at the quickest pace since last August, according to a closely-watched survey from IHS Markit and CIPS.

But in a sign of the damage done to the economy, inflation slipped to 0.4 per cent in February from 0.7 per cent at the start of the year, figures from the Office for National Statistics showed.

Prices were driven down by clothing and footwear, and arts and recreation, as households remained locked indoors.

Experts were cheered by March’s pick-up in activity, and said it suggested the UK economy was finally on the path to recovery.

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Thomas Pugh, UK economist at Capital Economics, said: ‘Once the Covid-19 shackles start to be released next month, activity will probably rebound even more rapidly.’

The rise was driven by the services sector, where the purchasing managers’ index (PMI) reading rose to 56.8 from 49.6 in February.

Anything above 50 indicates expansion. The manufacturing PMI hit a 40-month high of 57.9, up from 55.1 in February.

Chris Williamson, of IHS Markit, said: ‘Companies reported an influx of new orders on a scale exceeded only once in almost four years, and business expectations for growth in the year ahead surged to the highest since comparable data were first available in 2012.’

By LUCY WHITE

Source: This is Money

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UK economy to face ‘enormous strains’ following lockdown

Rishi Sunak is expected to include a host of actions to kickstart the UK economy in Wednesday’s Budget.

Chancellor Rishi Sunak has warned that Britain’s public finances will face “enormous strains” in the wake of the latest national lockdown.

Ahead of Wednesday’s Budget announcement, Mr Sunak told the Financial Times a bill for the government’s £280bn investment in coronavirus support will eventually have to be paid, with low interest rates leaving the nation’s finances “exposed”

Mr Sunak said: “We now have far more debt than we used to and because interest rates… at least a month or two ago were exceptionally low, that means we remain exposed to changes in those rates.

“That’s why I talk about levelling with people about the public finances [challenges] and our plans to address them.”

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While Mr Sunak did not reveal any details on specific tax measures, the Budget is expected to include a swathe of actions aimed at kickstarting the UK economy as lockdown eases over the coming months.

These include a £126m boost for traineeships and a mortgage guarantee scheme aimed at helping aspiring homeowners with small deposits on to the property ladder.

He plans to incentivise lenders to provide mortgages to first-time buyers, and current homeowners, with just 5% deposits to buy properties worth up to £600,000.

Mr Sunak added that while there is a challenge facing the nation’s economy, he believes the Budget will be a much-needed boon for those hit hardest by the pandemic.

He said: “I stood up at the beginning of this [coronavirus] thing and said I will do whatever it takes to protect the British people through this crisis and I remain committed to that.

“We went big, we went early, but there is more to come and there will be more to come in the Budget. But there is a challenge [in the public finances] and I want to level with people about the challenge.

“Some 750,000 people have lost their jobs and I want to make sure we provide those people with hope and opportunity. Next week’s Budget will do that.”

Source: Sky News

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Sunak: UK economy will get worse before it gets better

RISHI Sunak has warned that the UK economy will “get worse before it gets better” given the latest Covid-19 lockdown as he came under fire over post-Brexit trading rules which had brought the export of fish and seafood to a “grinding halt”.

In a Commons update on the economy, the Chancellor cautioned the “road ahead will be tough” for the UK in its recovery from the pandemic, telling Conservative colleagues he would “bear in mind” their calls to extend business rate relief and provide further support for the hospitality sector at the Budget in March.

The told MPs: “Even with the significant economic support we’ve provided, over 800,000 people have lost their job since February.

“And while the new national restrictions are necessary to control the spread of the virus, they will have a further significant economic impact. We should expect the economy to get worse before it gets better.”

Mr Sunak defended the Government’s “comprehensive economic plan”, noting the fiscal stimulus amounted to more than £280 billion.

Anneliese Dodds, his Labour Shadow, said the Chancellor “was nowhere to be seen” when Boris Johnson announced the latest lockdown and that in his economic update he appeared to be “out of ideas, urging us to look towards the sunny uplands but providing nothing new”.

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Alison Thewliss for the SNP denounced the “shambolic” Conservative Government and upbraided Mr Sunak for not honouring the Treasury commitment to give the Scottish Government an extra £375 million as a Barnett consequential to last week’s multi-billion pound aid package for business across the UK.

The Glasgow MP asked why were “Scotland’s businesses not entitled to the many thousands of pounds English businesses will receive”.

But the Chancellor hit back, pointing out that the UK Government had “front-loaded” funding for Scotland at the request of Edinburgh in a so-called £8.6 billion Barnett Guarantee to help it plan its strategy to fight the coronavirus.

“The point about doing that is to provide upfront certainty but it is also right to keep a tally on the various announcements as they are made about the additional sums they do trigger for Barnett against that guarantee and over time that guarantee will be adjusted.”

Downing St has pointed out that on Christmas Eve the Treasury handed over £400m to the Scottish Government as more front-loaded funding.

Mr Sunak questioned whether or not Edinburgh was promising a similar grant of up to £9,000 for individual businesses. The Scottish Government was asked for a response on this point.

Meanwhile, Alistair Carmichael, the MP for Orkney and Shetland, took the Chancellor to task over his assertion that the UK-EU trade deal meant businesses could do things differently and better, saying they would have been “heard with total incredulity by anyone whose business involves the export of seafood”.

The Liberal Democrat MP denounced the new procedures for export as a “bureaucratic mess” that had brought export trade to a “grinding halt”.

The former Scottish Secretary explained: “One local fish trader told me this morning that a single consignment now has to go with no fewer than 17 different attachments and another told me on Friday that he had lost £50,000 on a single consignment that he had been unable to export.”

Mr Sunak responded by insisting the deal provided UK firms with tariff-free access to European markets and pointed out how “over time” the Government was looking to “streamline and improve all our processes,” having invested a huge amount of resource in IT systems and support for businesses which needed help filling out “various customs forms and meet[ing] new procedures”.

By Michael Settle

Source: Herald Scotland

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250,000 small UK firms seen closing without more financial aid

An industry group says at least 250,000 small firms in the United Kingdom could close unless the government gives them more financial help.

The Federation of Small Businesses’s (FSB’s) warning on Monday comes after authorities imposed renewed lockdown measures to contain a highly infectious strain of coronavirus and as the UK heads towards its second recession in as many years.

Lobby groups say the 4.6 billion pounds ($6.2bn) announced by Chancellor Rishi Sunak as emergency aid at the start of the lockdown is not enough.

“The development of business support measures has not kept pace with intensifying restrictions,” said FSB Chairman Mike Cherry in a statement. “We risk losing hundreds of thousands of great, ultimately viable small businesses this year, at huge cost to local communities and individual livelihoods.”

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The FSB’s quarterly survey, the Small Business Index (SBI), found confidence at the second-lowest level in its 10-year history. Slightly less than 5 percent of the 1,400 firms questioned expect to close.

Government data show that there are about 5.9 million small businesses in the UK employing about 16.8 million people.

The SBI confidence measure is at minus 49.3, down 27 points year-on-year, the second-lowest in SBI history, after the one recorded in March 2020. Of those surveyed, 80 percent said they do not expect their performance to improve over the next three months; 23 percent said they have laid off staff over the last quarter, up from 13 percent at the beginning of last year; and 14 percent said they will be forced to cut numbers over the next three months.

Moreover, the proportion of small businesses that expect profits to shrink in the upcoming quarter has shot up from 38 percent a year ago to 58 percent now, an all-time high.

The UK is in lockdown until at least mid-February, prompting Bloomberg Economics to predict a 4.5 percent contraction this quarter. Output probably fell in the final three months of 2020, capping the worst year for the economy in three centuries.

“This government can stem losses and protect the businesses of the future, but only if it acts now,” the FSB’s Cherry said, adding that the support mechanisms at the start of the first national lockdown were “an exceptionally good starting point” while the measures announced for this second lockdown are “a whimper”.

Source: Aljazeera

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As the furlough scheme comes to an end but a national lockdown looms again, Britain braces for a new tsunami of job losses

Major companies have culled nearly 200,000 British jobs already as they struggle with the devastating impact of the coronavirus pandemic, a Mail audit has found. 

As shops and eateries face growing curbs, and international travel is hit by a collapse in demand, leading firms from Marks & Spencer and British Airways to Rolls-Royce and Debenhams have slashed around 183,900 roles across the UK this year. 

But experts and business leaders warned this is just the tip of the iceberg – far worse is to come as fresh Covid-19 lockdowns slam the brakes on the economic recovery. 

The Government’s furlough scheme – which supported 9m jobs at its height – comes to an end today and will be replaced by a slimmer jobs support scheme.

Employers have warned it will not be enough to stave off more redundancies if restrictions tighten further, as businesses face tumbling visitor numbers or being forced to close altogether. Unemployment has already risen to a three-year high of 4.5 per cent, with the Bank of England predicting it could rise to 7.5 per cent by the year’s end, potentially leaving 2.6m out of work.

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And this week the Resolution Foundation estimated the UK is facing the highest level of youth unemployment since the 1980s, after a survey found 20 per cent of 18 to 24-year-olds could soon be jobless.

In a fresh warning yesterday, the Federation of Small Businesses (FSB) called on ministers to make sure that firms ‘have the support they need to make it through the next few months’.

Mike Cherry, the group’s national chair, said: ‘With new restrictions being imposed in every part of the country, many of which are set to get tighter in the weeks to come, small businesses face huge difficulties over the winter months ahead.

‘Our latest small business index found that 30 per cent of employers expect to make some staff redundant in the next three months.

‘That is the scale of concern and uncertainty that small firms are faced with for their businesses, with many letting staff go for the very first time.’

Pubs have warned that lifeline grants promised by Chancellor Rishi Sunak will not reach them unless state aid rules are changed – putting 1m jobs at risk. The British Beer & Pub Association, British Institute of Innkeeping and UK Hospitality warned that with – out action some 20,000 venues in areas hit by Tier Two and Three lockdowns will be starved of the desperately-needed cash. They said: ‘If action is not taken, thousands of businesses might not survive to the spring.’ Jobs at other leisure sector businesses, such as nightclubs, have also taken a sharp hit.

The UK’s largest nightclub owner, The Deltic Group, had already cut around half its staff before it put itself up for sale yesterday. The Treasury has insisted that its jobs support scheme and job retention bonus – awarded to firms for keeping on staff who were previously furloughed – will together cover 95 per cent of total wage costs for the average furloughed employee until February.

Around 9.6m people used the furlough scheme in total, though the most at any one time was 8.9m. Sunak said the programme had supported ‘9.6m jobs through some of the most challenging economic times’.

But he added: ‘It’s right that as we move towards a more targeted approach to tackle the virus, our support becomes more targeted too. The jobs support scheme will continue to protect jobs through – out the difficult months ahead and is part of our comprehensive plan for jobs.’

By MATT OLIVER

Source: This is Money

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Loan ‘holidays’ extended to six months after new English lockdown

The UK financial regulator has told mortgage, loan and credit card borrowers they may seek further repayment holidays following the government’s announcement of a second lockdown in England to contain the coronavirus.

The Financial Conduct Authority said on Monday that further relief would now be offered to struggling mortgage borrowers, and set out a similar package of measures for users of consumer credit.

Although the government said the new lockdown in England would be reviewed on December 2, the FCA has also instructed banks to extend payment deferrals to mortgage borrowers for up to six months.

Customers who did not take a mortgage holiday after the spring lockdown was introduced may now seek a break from repayments of up to six months, if they are in financial difficulty. Borrowers who have already had one payment holiday of less than six months will be allowed to extend that deferral up to the maximum half-year period.

But the FCA said borrowers who have already taken a full six-month payment holiday this year and need further help will have to speak to their lenders to agree an alternative form of “tailored support”. Customers who foresee longer-term financial difficulties are advised to do the same.

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Guidance over the summer from the regulator suggested tailored support could involve accepting reduced payments or restructuring a mortgage term.

Consumer groups welcomed the extension of support. “With a tough winter ahead for many consumers, we called for financial support measures to be extended, and it’s good to see the regulator taking action,” said Gareth Shaw, head of money at Which?. However, he called for “normal credit reporting” to be suspended, so that consumers’ future creditworthiness was not adversely affected.

Industry data show that 2.5m mortgage repayment holidays have been granted since the start of the Covid-19 pandemic, but only 162,000 were still in force last month.

Users of consumer credit products — including personal loans, credit cards, motor finance, rent to own, buy-now pay-later, pawnbroking and “payday” lending deals — were also told on Monday that payment deferrals could now be extended to six months.

New applicants may seek payment holidays of up to six months, while those who took a three-month payment deferral under the FCA’s July guidance may apply for a second deferral. About 1.9m of these initial three-month repayment holidays have already been claimed.

Peter Tutton, head of policy at debt charity StepChange, also demanded a longer-term strategy to avoid over-indebtedness. “Household debt built up due to the pandemic had soared to more than £6bn in May, a figure almost certain to have swelled further in the past five months,” he said. “We need to see short-term fixes replaced by a long-term, cross-government strategy that supports struggling households and prevents the build-up of unmanageable debt.”

UK Finance, the banking trade body, said that lenders would tell borrowers how to apply for new payment holidays in coming days. “Customers seeking to access this support do not need to contact their lenders yet,” explained Eric Leenders, managing director of personal finance at UK Finance. “Lenders will provide information after today on how to apply for this support.”

By Matthew Vincent

Source: Financial Times

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Mortgage holders to face a ‘very challenging period’ in the event of a second lockdown

MORTGAGE holders are set to struggle in the coming months if another national lockdown is introduced. New research that families with credit card debt, mortgage repayments or childcare costs may face dire consequences if more stringent rules are introduced in the winter.

Mortgage repayments and other debt obligations have been offered a reprieve in recent months as the government launched payment holidays for a number of assets. However, many of these holiday schemes will be coming to a close soon and there are fears that a second lockdown could make situations very difficult for families.

On this, comparethemarket.com produced a survey of 2,093 adults based in the UK which revealed that many are worried for the future.

Around a third of families with children detailed they would find it difficult to pay their bills and 33 percent would struggle to afford to look after their families if another national lockdown were imposed.

Additionally, over a fifth (22 percent) of families with children expect to take a pay cut or reduce their hours in the near future, with 27 percent expecting their jobs to become endangered in the event of a second lockdown.

Worryingly, 23 percent detailed they would have to take on additional debt to afford the costs of lockdown, with a quarter explaining that they’d have to take out, or extend, a payment holiday (for mortgages and/or credit cards) to keep afloat.

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This lowers to 11 percent and eight percent respectively amongst households without children at home.

Fortunately, families with children are taking steps to protect their finances as much as possible in the event of a lockdown.

Around a fifth (19 percent) are putting more money aside in case something happens to their job, with 60 percent trying to save more and spend less, and a quarter are actively looking for additional sources of income, such as another job.

John Crossley, the head of money at comparethemarket.com, provided the following comments along with the research: “When the UK went into lockdown during March, the financial repercussions rippled across the country but were felt the most amongst those families with children at home and those with more mouths to feed.

“Although the economy has now largely reopened, the prospect of a second wave of infections, and even another national lockdown, is clearly causing significant financial anxiety.

“Parents are caught between the prospects of higher costs on the one hand and diminished income on the other, particularly as the furlough scheme comes to an end.

“Our data shows that 22 percent of parents expect to take a pay cut or reduced hours in the near future and over a quarter believe another nationwide lockdown could put their job at risk.

“Banks and financial services providers have responded very positively during the last several months.

“All the signs point towards them needing to continue to be flexible in the coming months. “Payment holidays and deferred payments will be an important means of helping UK families stay afloat in what unfortunately looks to be a very challenging period ahead.”

This week, the Prime Minister introduced new coronavirus themes restrictions but in a statement made in the House of Commons, Mr Johnson stressed that the new changes were not the start of a second lockdown but should instead prevent one.

As he confirmed: “The Government will introduce new restrictions in England, carefully judged to achieve the maximum reduction in the R number with the minimum damage to lives and livelihoods.

“I want to stress that this is by no means a return to the full lockdown of March.

“We are not issuing a general instruction to stay at home.

“We will ensure that schools, colleges and universities stay open – because nothing is more important than the education, health and well-being of our young people.

“We will ensure that businesses can stay open in a Covid-compliant way.

“However, we must take action to suppress the disease.

By CONNOR COOMBE-WHITLOCK

Source: Express

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Second local lockdown could cost London more than £2bn

London could face annual costs of more than £2bn if fresh curfew measures are implemented in the capital, according to a new report.

Leading think tank the Centre for Economics and Business Research (CEBR) today warned that 10pm curfews introduced elsewhere in the UK could reverse the country’s economic recovery if slapped on London venues.

It predicted that new lockdown restrictions would decimate a return to health for Britain’s pubs and restaurants, and would likely dent the British economy by more than £250m a day.

The CEBR added that new restrictions could cause GDP to sink between three and five per cent in the final three months of the year compared with the third quarter, when the UK economy plummeted to its deepest recession on record.

The think tank said that though a full second national lockdown is unlikely, partial lockdowns may eradicate progress in the hospitality sector brought about by chancellor Rishi Sunak’s Eat Out To Help Out scheme.

The scheme, which offered diners half price meals from Monday to Wednesday during August, helped shrink UK inflation to 0.2 per cent after providing more than 100,000 discount meals last month.

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Douglas McWilliams, deputy chairman of the CEBR, said that a second national lockdown could “knock the stuffing out of consumer and business confidence”, causing widespread business collapse and unemployment.

“Whereas the first lockdown was bearable on the assumption that it was temporary, a second lockdown will make many people lose confidence in a recovery in the foreseeable future,” he added.

McWilliams said the winding down of the furlough scheme — which sees the UK government pay a portion of workers’ salaries — may also result in wide scale job losses.

“Tens of thousands of businesses are hanging on by a thread and likely to run out of cash,” he said.

It comes as London mayor Sadiq Khan over the weekend warned that the capital is only “two or three days behind” coronavirus hotspots in the north of England.

More than 10m people across the UK are currently living with tougher restrictions as the government attempts to clamp down on a new bout of infections sweeping the country.

Khan said it is “increasingly likely” that lockdown restrictions will soon be introduced in London, adding that it was his “firm view” that action should be taken sooner rather than later.

By Poppy Wood

Source: City AM