Today’s monthly figures for May show GDP is still down 25 per cent since the start of the year, with only a slight rebound in May of 1.8 per cent, undermining any notion that a “V-shaped” economic recovery from the pandemic is inevitable.
An industry perspective
Looking at contributions to the slight gains in May, construction and production both saw growth between April and May (8 and 6 per cent respectively), with manufacturing growth of 8.4 per cent driving production. However, all still remain far below pre-lockdown levels, with construction 38.8 per cent below February 2020 and production and manufacturing down 19 and 22 per cent respectively since February.
Services saw a more beleaguered performance, with growth into May of only 0.9 per cent following a decline of 18.9 per cent in April and 7.5 per cent in March. This is particularly worrying given that services account for 80 per cent of the economy.
We already knew service sector gains were driven by wholesale and retail, which saw 12.9 per cent growth owing to the re-starting of trade as lockdown restrictions lifted and a record proportions of retail sales took place online.
But these gains were largely offset by little or negative growth in other service industries. As the chart below shows, following unprecedented falls in March and April (yellow and purple), many service industries continued to struggle into May (pink). Information and communication services and professional, scientific and technical activities acted as a particular drag on any gains into May.
Mass unemployment is the biggest threat facing the UK
The fall in GDP over recent months is unprecedented, but not surprising. Shutting down large parts of the economy was always going to see a sharp reduction in GDP.
What is vital now as lockdown eases, is targeted support to struggling sectors, backed up by a real plan for a green economic recovery and driven by the creation of decent jobs and investment in vital services and infrastructure. TUC research suggests that investment could create 1.24 million jobs in the next two years. Without it, the UK is facing a crisis of mass unemployment not seen since the 1980s.
Forecasts suggest unemployment could reach 4 million (11.7 per cent) without decisive, strategic action to protect industries and create decent jobs. We know many people have already lost their job or seen a drop in income – universal credit applications have soared, with over 3 million declarations between March and June.
More needed in the wake of the summer statement
As we have previously argued, the chancellor’s Summer Statement, including a job retention bonus of £1000 per worker, falls far short of what is required to help businesses and workers survive this crisis.
In the same week as the chancellor announced the ‘Eat Out to Help Out’ incentive, the ONS released the latest results from its Coronavirus and Social Impacts on Great Britain survey, which showed that 6 in 10 adults would feel uncomfortable or very uncomfortable with sitting in and eating at a restaurant. This begs the question whether the voucher scheme can really be effective in supporting the food and hospitality industries which have seen some of the highest rates of furlough throughout this crisis.
Missing from the statement was any mention of extending or targeting support for self-employed people working in sectors that are unlikely to re-open in the coming weeks and months, or for the child care sector, without which many working families, and particularly women, will struggle to return to work. There was no plan for extra investment in public services, no plan to fill the 200,000 NHS and social care vacancies, and nothing on improving Statutory Sick Pay to enable workers to isolate should they need to.
A budget is due in the autumn but the constant stream of grim job loss announcements, from large manufacturers such as Air Bus and Jaguar Land Rover to well-known high street brands like Boots and John Lewis, is a daily reminder of the speed and scale at which the jobs crisis is unfolding. The day after the chancellor’s summer statement, 10,000 job losses were announced in just one morning.
Autumn may be too late. The government must step in now to save and create jobs and help us work our way out of recession. We must create jobs by investing in public services, new homes, childcare, faster broadband, better transport and green tech - giving sector-specific support to those hardest hit by the virus. The economic shock of the pandemic was inevitable, the long-term damage to the economy and working people’s lives does not have to be.
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