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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.

Read CEBR reports here.

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.

Read the analysis here (PDF).

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.

Read the full report here.

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.

Access the series here.


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.

Read the report