June has seen both businesses and individuals pick themselves up and dust themselves down as the brunt of Coronavirus gradually recedes from everyday life. Although daily figures for new cases are still in the thousands, fatalities continue to decline thanks to a greater understanding of how to treat the virus with widely available drugs such as Dexamethasone. As we phase into the new normal, ContractingWise takes a look at what the latest stats say about the current state of play.
Covid-19: Summary of Economic Impact
As expected, June has seen employees returning to work from the first raft of those who were furloughed in March – particularly in construction, manufacturing, and accommodation & food services. Although an extension of the scheme will run until October, from the 1st July the government will introduce a flexible furlough scheme with businesses contributing to CJRS payments as many staff go back to work part-time. Statistics show the CJRS was the most common government scheme applied for, with 81% of all businesses applying. Across all industries, 30% of the workforce was furloughed under the terms of the CJRS, with 42% of businesses now providing top-ups to furloughed workers’ pay.
The Office for Budget Responsibility (OBR) estimates that the JRS will ultimately lead to £58 billion of government borrowing. Yet without the JRS many of those furloughed would have become unemployed, incurring substantial welfare costs. From March to May, the number of people claiming work-related benefits rose 126% to 2.8 million. That’s around an extra 20,000 claims per day than before Covid. In comparison, the peak of the financial crisis in 2009 only saw an extra 7,000 average daily claims to Job Seekers Allowance.
Economists warn unemployment could surge this year as businesses struggle to recover from the lockdown and wage support schemes end. A swathe of businesses have already announced job cuts, including British Airways (12,000) Rolls Royce 9,000 and The UK’s biggest builders’ merchant, Travis Perkins (2,500). Last week, official jobs data showed the number of workers on UK payrolls fell by more than 600,000 between March and May. The share of employees and self-employed actively working remains comparable at 67.0% and 79.9% respectively.
Of the number of UK businesses continuing to trade, 65% reported their turnover has been lower in June than normal. With businesses restructuring to survive and the switch to a platform model, fewer jobs are being advertised. The current stock of vacancies is now over 40 per cent lower than before the start of the crisis. Hospitality/catering, administration, consultancy, and HR/recruitment continue to be the occupational categories with the largest percentage drop, reflecting areas of the economy highly affected by the ‘shut down’. However, June has seen tentative signs of an uplift in the recruitment market, including a 10% increase in the volume of online job adverts in wholesale and retail in anticipation of non-essential retailers reopening.
There has also been an increase in vacancies in areas such as education, health and social care. The largest categories of job vacancies are in healthcare and nursing, teaching, IT and social work. Pre-crisis IT was the largest category followed by healthcare and nursing. Social work vacancies are the only category where job vacancies have continued to hold up at similar levels to before the crisis began. Despite health and nursing vacancies falling since the beginning of the crisis, they continue to make up 1 in 5 available vacancies. Roles in these sectors, therefore, represent the most security across a range of future scenarios.
Covid-19: Personal & Social Impact Summary
An estimated 12.5 million people say their households have been affected financially by the impacts of the coronavirus. There are also some signs of increasing economic inequality, with more people on lower personal incomes reporting reduced income. Around 20 unemployed workers are chasing every job vacancy in poorer parts of the UK, with that number rising to 50 in the areas worst affected by coronavirus job loss, such as tourist hotspots, some university cities and manufacturing hubs like the Midlands. Parents were also more than twice as likely to report reduced income and were more likely to have been furloughed than adults without children in the house, with over 20% finding childcare impacting their work.
Through the peak of the coronavirus pandemic and as the lockdown was extended, average anxiety levels flattened out and now remain at 75% of those seen in the first week of lockdown. People adapting to lockdown conditions contributed to decreased stress, as did some of the measures put in place, such as furloughing, mortgage relief and increased community support. Nearly half of all working adults continued to work from home, with just 2% returning to their normal workplace in June.
Further stabilising factors include the overall prices of high demand items remaining steady between the week ending 7 June 2020 and the week ending 14 June 2020, following earlier fluctuations with some items in May. National morale also received a boost when last week’s weekly surveillance report from Public Health England showed that, for the first week since mid-March, the number of people who died in this country, in total, from coronavirus or anything else, was no higher than is normal at this time of year.
While this has helped to improve daily wellbeing, our life satisfaction has remained subdued since 20 March 2020. As average anxiety has fallen, the time people think it will take for things to return to normal has increased. Recent survey evidence suggests people have become more pessimistic about the country’s economic situation. The outbreak of a second wave of the virus in other countries, added to the human toll of the crisis also weighs heavy, with the UK having the third-highest number of recorded coronavirus deaths in the world.
Global Impact of Coronavirus on the UK
The global impact of the crisis has been severe with a stock market crash on the 12 March as countries all over the world went into lockdown. Although there’s been talk of a “V” shaped recovery – a steep decline followed by a rapid recovery – a recent Financial Times article suggests the global impact will mean more of a trough with gradual recovery over 3-4 years.
Many economists say that coronavirus has merely hastened the onset of an impending recession. The impact of the crisis has been worsened by weak economic growth in many European countries and the collapse of oil prices following the Russia – Saudi price war. As China’s manufacturing sector recovered from lockdown, the impact on this overstretched supply chain highlighted the need for western companies to diversify their geographic sources to safeguard against future scenarios.
In the UK, economic growth was already hampered by uncertainty around the economic effects of Brexit. In 2019, many businesses left the United Kingdom to move into the EU, which resulted in trade loss and economic downturn. There’s now pressure on No 10 to agree concessions with Brussels to secure a Brexit deal amid the economic damage caused by the pandemic. Economists warn that a no-deal Brexit would significantly damage the UK’s potentially fragile recovery from its deepest recession in almost a century.
Despite an initially uncertain outlook, there’s a growing opinion among economists that the impact of the recession will be relatively short-lived before we begin to experience some economic uplift. Previous recessions have shown that business restructuring can result in greater innovation and diversification. Contractors can also benefit from an uncertain market by shifting their skills to meet market demand. As the hospitality sector gears up for reopening in July and the IT sector is challenged with digitising the business sector, there are many new opportunities opening up for contingent staff. If you’re starting a contacting role, ContractingWISE have access to a wide range of hassle-free services that can help you with setting up a limited company or finding the right umbrella company for you. To talk to a member of our team, call: 0203 642 8679