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UK economy – a tale of two fates

Published: Wednesday 16th September 2020

UK redundancy figures released this week show monthly job losses increased the most since the 2009 financial crisis. The Office for National Statistics (ONS) revealed that 156,000 people lost their jobs between May and June. This was a jump of 48,000 job losses, the highest quarterly increase in eleven years. The news comes as other sectors see record growth, creating a tale of two fates for the UK economy.

The news comes after HMRC reported 700,000 people have left company payrolls in the UK since March. Many of these job losses have been in the retail, hospitality and leisure sectors which closed during shutdown. It has also been revealed that an estimated 2.7 million people are now claiming jobless benefits. This is a 121% increase since March.

A lifebuoy on a beach to reflect the UK economy - tale of two fates reflecting the help needed by UK industry.

When the music stops?

Bloomberg News reports such figures are putting increasing pressure on the government to extend furlough. However, the scheme is scheduled to end this month. There are more than 5 million people currently on furlough in the UK. Concerns are rightly growing regarding what will happen to unemployment once furlough ends.

Suren Thiru, head of economics at the British Chambers of Commerce, says companies need more help. He said, “With many firms 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.” Regarding how companies could be supported, he suggests possible reductions in employer National Insurance contributions. He also states more support is needed for companies placed under local shutdowns.

Despite such warnings, the UK government remains committed to withdrawing furlough at the end of September. Prime Minister Boris Johnson has said extending the scheme would only serve as a delay, calling it “suspended animation.” Chancellor Rishi Sunak has confirmed this. He says firms will instead now receive £1,000 for every furloughed worker still employed at the end of January.

 

Young plant growing in the sun to highlight the current UK economy - a tale of two fates.

Not all doom and gloom?

However, the UK economy is now seeing a tale of two fates. Domino’s Pizza, the UK’s largest pizza delivery chain, this week announced the creation of 5,000 new jobs. These roles include chefs, delivery drivers and customer service staff. This is in addition to the 6,000 new jobs it has created since the pandemic began. Domino’s chief executive, Dominic Paul, said, “It was a privilege to keep our stores open during Covid-19 and to now be in a position to offer thousands more people the opportunity to become a Domino’s team member.”

Another company seeing significant growth during the pandemic is online grocery retailer, Ocado. Following news of its recent partnership with Marks & Spencer, the company announced a 27% rise in retail revenue growth over last year. Such growth has been seen across the entire UK online shopping sector. This has led to all big supermarkets expanding their delivery services to meet the demand caused by the pandemic.

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