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Economic second wave to hit first?

Published: Wednesday 12th August 2020

Piggy bank wearing a face mask, highlighting the risk of a second economic wave to hit first

The country continues to worry about a second wave of COVID-19. However, UK economists are warning of a possible economic second wave to hit first. The Office for National Statistics (ONS) has revealed that UK GDP fell 20.4% in the second quarter of 2020. The ONS described the fall as “the biggest recession on record in the UK”. The decline is double that of Germany and the US. Despite this, the UK economy appears to be fighting back, growing 8.7% in June. Other positive stats include unemployment remaining below 4% and employment only falling 220,000 from January. This has led to claims that the worst is over. However, such hope may be misplaced.

Young & elderly worst affected

Some industries such as pharmaceuticals are reporting an upturn in production. However, many others are not. Construction output fell 35% in the last quarter, while hospitality output dropped around 75%. Paid employment numbers also continue to fall. Approximately 730,000 workers left company payrolls between march and July. The ONS also revealed reductions in regular pay, bonuses and hours worked. Job losses and reduced working hours have affected young people and those over 65 the worst . The ONS also reported zero-hour contracts have increased 156,000 to 1.05 million people, the highest on record.

World cloud based around the word Furlough to highlight the risk of a second economic wave

Economic second wave to hit furloughed workers first?

Job vacancies recovered slightly in July, particularly among small businesses and sectors such as hospitality. Furthermore, the number of workers on furlough has dropped. However, economists are pointing to the remaining 7.5 million people on furlough as a potential economic second wave to hit the UK economy first. Many are claiming that without furlough many of these people would have lost their jobs. With the furlough scheme soon ending, some are warning of bigger problems in the future.

Adding to the issue are claims government unemployment figures are wrong. In the UK, someone is only classed as unemployed if out of work and actively looking for a job. However, economists say the lockdown has meant people are not doing this. This is because most businesses are closed and there has been a 50%+ drop in vacancies. This means people are being classed as ‘inactive’ not ‘jobless’. Experts say the government’s claimant count is a better indicator of the job market. The number of people claiming unemployment benefits has doubled since lockdown. There are now 2.7 million people in the UK claiming unemployment benefit. Economists are now waiting to see what happens to this figure once furlough ends in October.

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