Economic impact
Coronavirus and the latest indicators for the economy and society: ONS 21 January 2021
The Office for National Statistics (ONS) has released its early experimental data on the impact of the coronavirus (COVID-19) on the UK economy and society, which reveals consumer spending and company turnover is down.
ONS’s latest data estimates UK spending using debit and credit cards, utilising Clearing House Automated Payment System (CHAPS) to provide an indicator of UK companies’ sales. According to the Bank of England’s CHAPS data, aggregate UK debit and credit card purchases were 35% below their February 2020 average in the week to 14 January 2021. See Section 3
According to the Business Impact of Coronavirus (COVID-19) Survey, over a quarter (26%) of UK businesses currently trading said that turnover had decreased by more than 20% compared with what is normally expected for this time of year. See Section 4
According to the latest Opinions and Lifestyle Survey, in the week ending 17 January 2021, the proportion of working adults in Great Britain who travelled to work in the last seven days stayed the same as the previous period at 48%. See Section 5
According to Adzuna, between 8 and 15 January 2021, the volume of online job adverts decreased across all UK regions, except for Yorkshire and The Humber. See Section 9
According to the Department for Transport (DfT), on Monday 18 January 2021 the volume of all motor vehicle traffic remained unchanged when compared with the Monday of the previous week. See Section 10
You can see the full ONS release here.
Cebr on the world economic recovery
According to the Centre for Economics and Business Research (Cebr), the world economy is recovering at its fastest rate since 1976; the UK since 1941. It claims that tourism, hospitality, tech and pharma will come roaring back in the second half of the year. But we should watch out for inflation …
Below is an extract from their press release:
Daniel Defoe in his Journal of the Plague Year points out that: ‘One mischief always introduces another. These terrors and apprehensions of the people led them into a thousand weak, foolish, and wicked things….and this was running about to fortune-tellers, cunning-men, and astrologers to know their fortune’.
So much for forecasting. As far as I can see the only forecasts which we got right in last year’s Top Ten were the results of the Israeli and Taiwanese elections, both of which took place within a few days of our Top Ten being published, and the cancellation of the Hong Kong elections that had been planned for September (though the official reason given for the cancellation was different from that which we had assumed).
Cebr has been widely acknowledged, however, as being one of the earliest accurate predictors of the economic impact of the pandemic. Even before the end of January we warned of the risk of a world recession and by March our forecast for the decline in world GDP was of ‘4% or more’ which is essentially what has happened with an estimated 4.4% decline.
We wrote in September that three things could make 2021 a better year: the discovery of a vaccine, the emergence of a Brexit deal and the voting out of Donald Trump. All three of these have now happened. So will 2021 be a return to normal?
In some ways yes. But in other ways, things will never be the same. Here are our Top Ten for 2021:
- As vaccinations spread, much of the world will start to return to normal. Indeed pent up demand could create price rises and shortages in many areas, especially in services where supplies might be limited. We expect world GDP to rise by 5.3% in 2021. Growth was last that high (also 5.3%) in 1976.
- The UK economy had a bigger hit than average from Covid with a fall in GDP in 2020 estimated at 11.4%, though some of the impact reflects the way in which our statisticians measure the public sector. Partly because of the greater measured fall and partly because of the high propensity to consume in the UK, we expect that spending boosted by the £200 billion of savings built up during the pandemic could lead to growth around 8% in 2021. We have tracked UK economic history back to 1930 and the only years recording comparable or higher growth were 1915 (8.0%); 1927 (8.1%); 1940 (10.0%) and 1941 (9.1%). Three of these were in the exceptional conditions of wartime, the other registered the recovery from 1926’s General Strike. Growth at this pace will probably prove inflationary, even though it leaves GDP for the year lower than in 2019.
- 2021 could be the year of travel. Many of those denied holidays in 2020 and missing out on their skiing and winter breaks at the beginning of 2021 will be desperate to travel, while others will want to visit their loved ones. It seems likely that the best destinations, flights and hotels will be booked out by the second half of the year. And prices will rise, partly because costly social distancing precautions are likely to persist and partly because those facing unprecedented demand will be seeking to rebuild profits to offset the losses made over the previous 18 months. Tourism is normally 10% of world GDP so this recovery will provide a welcome boost to the world economy .
- ‘Eat Out to Help Out’ is unlikely to be repeated. Whereas in August 2020 the Chancellor was keen to encourage a public unwilling to visit restaurants, it now appears that the public is rather more willing to dine out and go to bars than the government is to let them do so. When restrictions end, bars and restaurants are likely to be fully booked.
- In a normal year there would be few elections in major economies in 2021 other than in Japan and Germany . In Japan the new government of Yoshihide Suga has a commanding lead in the opinion polls. In Germany Mrs Merkel has promised to stand down but the likely successor is as yet unknown … And there are some elections that have been postponed because of the pandemic – e.g. in London and other UK municipal elections and in Hong Kong .
- 2021 will be a year of tech. As restrictions are relaxed, many people will return to their workplaces. but look out for advances in solutions that support working from home. We expect a proportion of the workforce will work from home rather more than they had done pre pandemic and the tech will advance to match the growing demand.
- Pharmaceutical companies made giant strides in their work to find a coronavirus vaccination in 2020. There was a discontinuity between the time taken to develop the vaccination and the time taken to test and review. No one wants untested vaccines foisted on the public. But regulators should have learned from their 2020 experience and we look forward to increasing pharmaceutical activity. Moreover, at a time when antimicrobial resistance is growing, vaccines may start to replace antibiotics.
- The cessation of various forms of economic activity reduced pollution and built up the pressure for a greener future. Governments are accelerating the movements away from fossil fuel usage, particularly for cars. Look out for an acceleration of green technologies.
- Cities had a bad time in 2020 with the communal facilities that make them successful often shut down. Much of the decline in activity will return by the second half of 2021. But there are areas like San Francisco, Los Angeles and Silicon Valley where high taxes and increasingly unpleasant living conditions seem to be encouraging companies to move away. In London, increased transport restrictions have created serious traffic jams which may damage the long term future of the city as builders, delivery people and essential services find it hard to reach their destinations.
- Most of the sporting events planned for 2020 were postponed so many of the sporting predictions merely need to be repeated. It’s an Olympic Games year, in Tokyo for the first time since 1964. The theme is ‘Requiem and Rebirth’.
Read the full release here.
Government research
ONS Business Impact Research (covering 19 October to 1 November)
The latest wave of research from the Office for National Statistics (ONS) on the impact of coronavirus on UK businesses again highlights how the tourism and hospitality industry continues to be the sector suffering the greatest impact. The research, which was conducted prior to the second national lockdown, found that:
- Half of all businesses experienced a decrease in turnover.
- The accommodation and food service activities industry had the highest percentage of businesses with no or low confidence that their businesses would survive the next three months, at 34%.
- In the manufacturing sector, 90% were currently trading, with only 8% currently closed or with trading paused.
- 84% of transportation and storage businesses were trading.
- However, only 63% of accommodation and food services businesses were trading.
- Almost 80% of accommodation and food services businesses and 72% of arts, entertainment and recreation businesses report that trading has declined, compared to just 50% of all businesses.
- 25% of businesses in the accommodation and food service activities industry expecting to close a business site temporarily or permanently in the next two weeks, compared to just 7% of UK businesses as a whole.
- 44% of accommodation and food businesses have less than three months cash reserves.
- Just 18% of accommodation and food services businesses have more than six months cash reserves.
The full report and statistics can be found here.
CEBR analyses latest ONS data
Centre for Economics and Business Research (CEBR) analyses the ONS data (see below) relating to the economic recovery, which slowed in August, as the impact of the newest restrictions looms
UK gross domestic product (GDP) grew by 2.1% in August, according to data released by the Office for National Statistics (ONS) on 9 October. This marks the fourth consecutive month of growth but represents a significant slowdown compared to growth rates of 9.1% and 6.4% seen in June and July, respectively. Furthermore, output still remains 9.2% below February levels, revealing how the UK economy continues to suffer from the economic effects of the pandemic.
It should be noted that single month estimates of output can be quite volatile and are subject to revision. Looking at the three-month growth rate, GDP grew by 8.0% in June to August compared to March to May, highlighting the underlying trend of recovery.
The recovery witnessed over the past four months of data has come about as restrictions have eased and the government has made efforts to stimulate economic activity. August was marked by the introduction of the Chancellor’s Eat Out to Help Out scheme in an attempt to support the hospitality sector
Restaurants claimed £522 million from the government through the scheme, for 100 million meals. The scheme caused a significant rise in the number of people eating at restaurants and cafes, with data from OpenTable showing that restaurant reservations rose by 53% compared with Monday-to-Wednesdays in August 2019.
The success of the Eat Out to Help Out scheme is reflected in 9 October data when breaking it down by sector. Output in the accommodation and food services sector grew by 71.4% month-on-month, making it by far the biggest contributor to growth in August. The education sector also saw notable growth of 6.5% in August, as many prepared to return to school for the first time since March.
The data also reveals some struggling sectors. Relative to recent months, August saw only modest growth in manufacturing output. Some parts of the service sector also continue to struggle, in particular travel and also arts and entertainment. According to the ONS, output in the information and communication sector contracted in August, though estimates of IT output have often been underreported.
This data has come as a disappointment to many who had expected to see more of a pick-up in activity in August, which saw relatively few social-distancing restrictions. September saw a ramping up of restrictive measures, as coronavirus cases began to rise, meaning next month’s data are likely to provide further cause for concern. Looking ahead to the coming quarters, the latest CEBR forecasts point to a slowing rate of quarterly growth, falling to just 0.4% in Q1 2021, with output not returning to pre-crisis levels until the mid-2020s.
Nearly half of businesses experienced decrease in turnover, ONS says
8 October 2020
In Wave 14 (7 to 20 September 2020) of the economic impact of coronavirus survey, the Office for National Statistics (ONS) reports 86% of businesses were currently trading, compared with 66% in Wave 7 (1 June to 14 June 2020).
- 47% of businesses experienced a decrease in turnover, compared with 65% in Wave 7 (1 to 14 June 2020).
- Of businesses currently trading, 43% experienced a decrease in profits compared with what is normally expected for this time of year, while 7% experienced an increase.
- 9% of the workforce were on furlough leave, compared with 30% in Wave 7 (1 June to 14 June 2020).
Of businesses not permanently stopped trading, 26% had more staff working from home as a result of the coronavirus (COVID-19) pandemic and 19% intended to use increased homeworking as a permanent business model going forward.
Of businesses not permanently stopped trading, 3% intended to permanently close business sites in the next three months.
Read the full ONS bulletin released on 8 October here.
British Chambers of Commerce survey finds nearly half of firms report sales decrease
Nearly half of firms report UK sales decrease as businesses endure sustained cash crunch, the British Chambers of Commerce’s Quarterly Economic Survey (QES) finds. This is the UK’s largest independent survey of business sentiment and an indicator of UK GDP growth.
The survey found that business conditions remained weak in the third quarter of 2020, despite much of the economy reopening.
The bellwether survey of 6,410 firms, employing over 580,000 people across the UK, revealed that, while key indicators have improved from historic lows in Q2, they remain significantly lower than before the pandemic struck. Business to consumer firms, including hospitality, fared worst.
Key findings:
- Almost half (46%) of firms reported a decrease in domestic sales, while just 27% reported an increase on the previous quarter
- Two-thirds (66%) of respondents in hospitality and catering saw decreases in sales and bookings
- Indicators, including cash flow, remain at levels comparable to the 2008-09 recession for firms in the services sector.
Business conditions
Overall, while this quarter has seen an improvement compared to the unprecedented percentage of firms reporting decreases in domestic and export sales in Q2, the majority of firms continue to report decreases or no change in sales in Q3.
- Nearly half of firms (46%) reported decreases in domestic sales, down from 73% in Q2.
- 27% of firms reported an increase in domestic sales. 27% reported no change
- 47% of firms reported decreases in export sales, down from 72% in Q2 but still substantially worse than Q1, where only 21% of firms reported a decrease
- Nearly a quarter (24%) of firms reported increases in export sales, up from 9% in Q2
Business to consumer (B2C) firms, particularly those from the hospitality and catering sectors, saw the weakest performance, with two-thirds (66%) of respondents in hospitality and catering reporting decreases in sales and bookings in the last three months, compared with 46% overall.
In the manufacturing sector, the balance of firms reporting increased domestic sales increased to -15% in Q3 2020, up from -59% in Q2 2020. The balance of firms reporting increased export sales increased to -26% from -52% in Q2.
Read more from the survey here.
UK GDP falls by 19% in the three months to May 2020
Gross domestic product (GDP) fell by 19.1% in the three months to May 2020, according to the Office for National Statistics (ONS). This follows falls of 10.8% in April and 2.2% in March.
All the main sectors in the economy also saw falls in the most recent reported period. The biggest drop – unsurprisingly – was in accommodation and food services, which fell by -71.7%. Manufacturing fell by -18%.
Commenting on today’s GDP figures, Jonathan Athow, Deputy National Statistician for Economic Statistics, said:
“Manufacturing and house building showed signs of recovery as some businesses saw staff return to work. Despite this, the economy was still a quarter smaller in May than in February, before the full effects of the pandemic struck.
“In the important services sector, we saw some pickup in retail, which saw record online sales. However, with lockdown restrictions remaining in place, many other services remained in the doldrums, with a number of areas seeing further declines.”
Read the full ONS report here.
Impact of COVID-19 on working household incomes – analysis from HM Treasury
HM Treasury has published its analysis on the estimated short-run change in working households’ net incomes between two points in time, plus government interventions that have a direct, quantifiable impact on households.
The greatest impact is seen on higher income households. NB It does not capture the potential long-run impacts of the pandemic.
ONS releases GDP quarterly national accounts: January to March 2020
Revised quarterly estimates of gross domestic product (GDP) for the UK were released on 30 June.
UK gross domestic product (GDP) in volume terms fell by 2.2% in Quarter 1 (Jan to Mar) 2020, revised downwards by 0.2 percentage points from the first quarterly estimate. This is the largest fall in UK GDP since Quarter 3 in 1979.
When compared with the same quarter a year ago, UK GDP decreased by 1.7%. This release captures the first direct effects of the coronavirus (COVID-19) pandemic, and the government measures taken to reduce transmission of the virus.
The report also examines output and production for Q1 – read the full report.
Next release date: 12 August
ONS research into social impacts of coronavirus
The Office of National Statistics (ONS) has published a new piece of research on the social impacts of coronavirus, covering the period 18 June to 21 June 2020. The main findings are that:
- Over one-quarter (26%) of people who had left their home this week did so to meet with people in a personal place, such as visiting family and friends at home; this has increased from 13% last week.
- The proportion of working adults who reported they had travelled to work in the past seven days increased to 44% this week from 41% last week.
- Almost half of adults (43%) reported that there were some aspects of their lifestyle that had changed for the better since the coronavirus (COVID-19) pandemic.
Of those who reported that some aspects of their lifestyle had changed for the better, over half (56%) said that they were now able to spend more quality time with people they lived with, while 50% were enjoying a slower pace of life and 47% preferred that they were spending less time travelling.
The full report can be read here.
ONS reports UK GDP fell by 10.4% in the three months to April 2020
Official statistics from the Office for National Statistics (ONS) showed Gross Domestic Product (GDP) fell by 10.4% in the three months to April, as government restrictions on movement dramatically reduced economic activity. This is the UK’s worst monthly GDP fall on record, as coronavirus damaged the economy.
ONS figures also showed GDP growth fell by 20.4% in April, following a 5.8% fall in March. The monthly decline in GDP in April, when the country was in full lockdown, is three times greater than the fall experienced during the 2008 to 2009 economic downturn and was worse than economists had forecast.
The retail, travel and hospitality industries were all hit hard, as was manufacturing and construction. The figures show the huge task facing the UK economy as the government seeks to ease lockdown restrictions.
The ONS said the economy had suffered a huge shock since the start of the cornavirus pandemic in March when the country was forced into lockdown.
Household spending prevented during lockdown, according to ONS
More than one-fifth of usual household spending has not been possible during the lockdown, the Office for National Statistics (ONS) analysis revealed (11 June 2020).
In the financial year ending March 2019, UK households spent an average of £182 per week on activities that have since been largely prevented by government guidelines (such as travel, holidays and meals out).
This is equivalent to 22% of a usual weekly budget of £831, money that households could be saving, spending in other areas or using to cover any loss of income.
Across all households, more than half (53%) of usual spending covers “non-discretionary” (essential) items such as food and housing costs.
Younger households, those who are renting and those living in London spend a lot proportionally on essentials and relatively little on goods and services that have been unavailable under lockdown.
Coronavirus and the latest indicators for the UK economy
The Office of National Statistics (ONS) released its latest Coronavirus, the UK economy and society faster indicators on 28 May. This rapid response survey uses new data and experimental indicators to research the UK economy and society.
The headline points are:
79% of businesses in the UK had applied for the Coronavirus Job Retention Scheme, whilst 42% of businesses had less than six months of cash reserves.
Of the 14% of businesses who reported they had paused trading but are intending to restart trading in the next two weeks, they expect 31% of their workforce will return from furlough leave.
There was a fall in the proportion of people in Great Britain staying at home (other than leaving for work, exercise, essential shopping or medical need) from 81% between 14 to 17 May to 73% between 21 to 24 May.
Online job adverts declined by more than 50% from the start of March to the start of May 2020.
Overall, prices of items in the high-demand products (HDP) basket decreased by 0.1% between the week ending 17 May 2020 and the week ending 24 May 2020.
The full report can be read here.
Analysts opinion
PwC offers practical advice to keep your business resilient
PwC has uploaded a series of podcasts which “explore the latest developments” and give “practical advice to help keep your business resilient”.
As the world responds and adapts to COVID-19, their podcast series invites industry experts to look at the steps businesses can take.
The podcasts cover subjects such as ‘Protecting your working capital’ and ‘Leading through a crisis’ – they are available on desktop or mobile devices. You can subscribe to keep up-to-date with all the latest episodes.
State of the economy – report from the Scottish Government
The Scottish Government’s Chief Economist has published a report on recent developments in the global, UK and Scottish economies, and provides an analysis of the performance of, and outlook for, the Scottish economy.
The section on the tourism industry notes that the impact of Coronavirus on Scotland’s tourism sector has been rapid. Industry feedback indicates the shock has created significant challenges for businesses’ operating conditions.
Read the report below:
Savills’ second Global Market Sentiment Survey
In its second Global Market Sentiment Survey, Savills measures the change in market sentiment over the first half of April.
The survey, which provides a snapshot of current market conditions across 31 global country markets, reveals:
- Market activity is returning in China
- Global transaction activity is no longer falling as sharply.
- Rents remain unchanged across 60% of sectors and countries globally, supported in part by the extensive use of concessions.
- Government assistance such as reduced property taxation or temporary bans on evictions were reported in 59% of the countries surveyed.