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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

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Unemployment and redundancy rates are on the rise in the UK – here are the places most affected

The latest set of economic data released by the National Office for Statistics (ONS) paints a stark picture of the pandemic’s continued impact on the UK economy, with unemployment and redundancies on the rise.

Early indicators for August 2020 suggest that the number of employees on payroll in the UK was down by around 2.4 per cent (or 695,000 people) compared with March 2020, before the impact of Covid-19 had been felt in the economy.

Unemployment has risen to the highest level for almost two years, at 4.1 per cent across the UK, up from 3.9 per cent in the previous quarter. This rise has been driven disproportionately by young people finding themselves out of employment in the last few months, with a record decrease of 146,000 among 18 to 24 year olds in employment.

However, there was an increase in the number of 25 to 64 year olds in employment, with 236,000 people finding work. As a result, despite significant decreases in employment for certain demographics and in certain areas, the overall employment rate has risen slightly in the last quarter.

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Redundancies have also increased significantly, up by 48,000 this quarter. While the ONS notes that redundancy figures were historically low prior to this release, the changes now seen in the redundancy rate both annually and quarterly are the largest increases since recession in 2009 following the global financial crash.

The areas with the highest levels of unemployment

North East: 5.2% (no change)North West: 3.5% (-0.6)Yorkshire and The Humber: 4% (+0.1)East Midlands: 4.4% (+0.7)West Midlands: 4.4% (-0.4)East: 3.7% (+0.1)London: 5% (+0.4)South East: 3.5% (+0.5)South West – 3.8% (+0.8)Wales – 3.1% (+0.1)Scotland – 4.6% (+0.1)Northern Ireland – 2.9% (+0.6)UK – 4.1% (+0.2)

While unemployment rates are currently highest in the North East, followed by London and Scotland, the areas which have seen the largest increases in the unemployment rate over the last quarter are the South West, East Midlands and Northern Ireland.

Though they are still dealing with relatively high rates of unemployment, the North West and West Midlands both recorded notable decreases in the unemployment rate over the last quarter.

Commenting on the ONS statistics, Head of Economics for the British Chamber of Commerce, Suren Thiru, said, “Despite the slight rise in the unemployment rate, the furlough scheme continues to limit the pandemic’s full impact on headline job figures.

“With many firms still facing waves of cash flow problems, rising costs and an uncertain economic outlook, it is probable that unemployment will escalate sharply as government support winds down.

“To help avoid a damaging cliff edge for jobs more must be done to help firms keep staff on through this deeply challenging period.”

By Ethan Shone

Source: News Post Leader

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Will the BoE inject more stimulus into the UK economy?

The BoE is preparing to announce its latest interest rate decision tomorrow, as it closely monitors the UK economy’s rebound from the record 20.4 per cent contraction in the second quarter.

Since then, there have been many positive signs. The economy grew by a huge 8.7 per cent in June and another 6.6 per cent in July. More recently, Britons were enticed to the high street by August’s Eat Out to Help Out scheme.

But there are challenges on the horizon. First and foremost is the worrying rise in coronavirus cases and new restrictions. Inflation also fell to 0.2 per cent in August, well below the Bank’s two per cent target.

That’s a lot for the Bank of England to consider. And analysts are united in saying the BoE will leave interest rates on hold at 0.1 per cent and its bond-buying target at £745bn.

They say that the Bank is more likely to increase stimulus in November after seeing how the economy and inflation fare.

Further stimulus will wait until November

“Even if the Bank felt more loosening was ultimately going to be required, we see little benefit to the Bank announcing it now,” said George Buckley, chief UK economist at Nomura in a note to clients.

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Buckley pointed out that the Bank’s current bond-buying programme is scheduled to be completed around December. So, he said, “why not wait until the November meeting when the MPC [monetary policy committee] will have the luxury of analysing another seven weeks of economic data?”

Howard Archer, chief economic adviser to the EY Item Club, agreed. “There seems little need for further MPC stimulus action – for the time being at least,” he said.

“It currently looks very possible that GDP growth in the third quarter could be around 15 per cent following the record 20.4 per cent contraction in the second quarter.”

Analysts say that if the Bank decides to act in November, as many predict it will, it is likely to increase bond-buying rather than cut interest rates further.

Bank could take a ‘dovish turn’

In August, the Bank predicted economic growth would be better than expected in the near term. Yet it was more pessimistic longer-term, saying the economy would regain its pre-pandemic size at the end of 2021.

Its forecasts were more upbeat than most, however. Jacqui Douglas, chief European macro strategist at TD Securities, said in a note that the Bank therefore could well take a “dovish turn” tomorrow. She predicted there will be “more focus on the downside risks to growth going forward”.

Although the Bank is not publishing any new forecasts, it has tended to enlarge on its decisions in a statement.

Douglas said: “The downside risks to the outlook have come into sharper focus.” She cited “an upcoming wave of job losses to the challenge of controlling Covid outbreaks to Brexit negotiations”.

UK inflation also dropped to 0.2 per cent in August, dragged down by the Eat Out to Help Out discount meal scheme. But that was better than the Bank had expected.

Nomura’s Buckley said that there is a chance Jonathan Haskel or Michael Saunders could vote for more bond-buying during this meeting. They have traditionally been more dovish MPC members, and Saunders recently said it is “likely” more easing will be required.

What has the Bank of England done so far?

The Bank slashed interest rates to a record low of 0.1 per cent from 0.75 per cent in two special meetings in March.

It also beefed up its quantitative easing programme – through which it creates money and buys bonds to keep borrowing costs low – to £645bn in March. The Bank then increased its bond-buying target to £745bn in June.

The MPC has also put negative interest rates in its “toolbox” of possible measures for the first time.

However, at its August meeting it did not sound too keen to actually get them out and use them. It said that “negative policy rates at this time could be less effective as a tool to stimulate the economy”. The Bank added that “the MPC has other instruments available”.

By Harry Robertson

Source: City AM

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UK redundancies rise most since 2009 as Covid-19 takes toll

The number of redundancies in the UK rose in July by the most since 2009 as the Covid-19 pandemic took its toll.

Figures released on Tuesday by the Office for National Statistics showed that 156,000 people were made redundant in the May to July quarter, up 58,000 from the same period a year ago and 48,000 higher than between February and April. The ONS said these were the largest annual and quarterly increases since 2009.

“While redundancies are at their highest level since September to November 2012, the level remains well below that seen during the 2008 downturn,” it said.

Meanwhile, the unemployment rate increased to 4.1% in July from 3.9% the month before. The data showed that the number of employees on payrolls declined by 695,000 in August compared to March and by 36,000 compared to July.

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The claimant count reached 2.7m in August, up 120.8% since March.

ONS director of economic statistics Darren Morgan said: “Some effects of the pandemic on the labour market were beginning to unwind in July as parts of the economy reopened. Fewer workers were away on furlough and average hours rose. The number of job vacancies continued to recover into August, too.

“Nonetheless, with the number of employees on the payroll down again in August and both unemployment and UK redundancies sharply up in July, it is clear that coronavirus is still having a big impact on the world of work.”

By Michele Maatouk

Source: Sharecast