COVID-19: Weekly Economy Summary – 6 May

The Economy Summary is part of our Weekly COVID-19 Bulletin, sent every Thursday. You can sign up to receive your copy here.

Older workers during the coronavirus (COVID-19) pandemic 

While the impact of the coronavirus (COVID-19) pandemic has been greatest for younger workers, recent ONS statistics showed that older workers aged 50 years and over have been affected to a greater extent than those in the middle age groups. From December 2020 to February 2021, those employees aged 50 years and over were more likely to report working fewer hours than usual (including none) in the past week because of the coronavirus than those aged under 50 years, with those aged 65 years and over the most likely to say they had worked reduced hours. Among older employees working reduced hours, the 65 years and overs were the most likely to receive no pay and the least likely to receive full pay. 

Over a quarter of furloughed employments are people aged 50 years and over (1.3 million),  with 3 in 10 of older workers on furlough thinking there is a 50% chance or higher that they will lose their job when the scheme ends. Moreover, older people who become unemployed are more likely to be at risk of long-term unemployment than younger people. In December 2020 to February 2021, 29.9% of unemployed 50 years and overs were long-term unemployed compared with 18.9% of those aged under 50 years (seasonally adjusted). Previous research has shown that the more time spent out of work, the less likely someone is to return to employment, and the likelihood of returning to work decreases with age. 

UK’s rising debts ‘can be coped with’ 

The Institute of Economic Affairs (IEA) has said no emergency measures are needed to pay off the UK’s £2 trillion debt, with the think tank advising Treasury officials to focus on controlling spending and introducing measures to boost growth. In a report published on Monday, the IEA said debt incurred during the coronavirus pandemic “can be coped with” and argued against trying to reduce it too quickly. Inflation is a real danger, but an “honest government” can work to protect against this eventuality. The authors of the report state: “Clearly steps should be taken by government to curb spending and behave extra prudently. Our central point is that large-scale debt is far from unknown in our economic experience. And it would be misguided and futile to jump to tax-raising measures. The debt can be coped with and the best way of doing that is to encourage economic growth.”  

Economy and society indicators  

The Office for National Statistics (ONS) has published research on the impact of the coronavirus (COVID-19) on the UK economy and society between April and May. It showed that the percentage of businesses currently trading has increased from 77% in early April to 83% in late April 2021. This is now at a similar level to that seen in mid-December 2020 (Business Insights and Conditions Survey (BICS)).  

For retail footfall, it found in the week to 1 May 2021, UK retail footfall saw a slight weekly decrease of 2% but remained much stronger than the levels seen earlier in the year, and at 74% of its level in the equivalent week of 2019. The recent rise in retail footfall is in line with the easing of lockdown restrictions in England on 12 April 2021, which allowed non-essential shops across the country’s high streets and shopping centres to reopen.   

The number of people traveling to work has also increased. The proportion of working adults that had traveled to work in the last seven days was 60%. This proportion has been gradually increasing since mid-February (44% in the period 10 to 14 February 2021). 

Another ONS release on the coronavirus pandemic UK businesses and the economy, has found the proportion of businesses’ workforce on furlough leave has fallen from 17% in late March 2021 to 13% in mid-April 2021, as a result of coronavirus restrictions continuing to be relaxed across the UK. The wholesale and retail trade industry expects the highest percentage of its workforce to return from furlough to the normal workplace in the next two weeks, at 29%. 

It also found that the main challenge reported by currently trading businesses for exporting and importing continues to be additional paperwork, at 37% and 42% respectively. The larger business reported more exporting challenges, while smaller businesses had more importing challenges. 

Interest rates 

The Bank of England (BoE) will set interest rates today amid the backdrop of an economic recovery as the country slowly emerges from lockdown. Reuters predicts that the BoE will say Britain’s economy is heading for a much stronger recovery this year than it previously expected and it might start to slow its pandemic emergency support. The BoE forecast in February that the world’s fifth-biggest economy would grow by 5% in 2021, having slumped by 10% in 2020. That was a bigger hit than in most other European economies after Prime Minister Boris Johnson was slower to impose a coronavirus lockdown and had to keep it in place for longer in an economy heavily reliant on face-to-face consumer services. But many economists say Britain is now set to grow by more than 7% this year, boosted by its fast COVID-19 vaccinations.