Archive for: Political Services

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.

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

Labour calls for NHS rescue plan  

New analysis from the Labour Party has revealed the huge increase in waiting lists over the past 12-months, with hundreds of thousands of people waiting more than the 18-week maximum for treatment and thousands more waiting over a year. Over 366,194 patients are waiting more than a year for treatment. In January 2020, the number waiting over a year was just 1,643. Overall, the number of people waiting more than a year for treatment now compared to before the pandemic hit has risen over 200 per cent. The Party has called for an NHS rescue plan that would see patient care prioritised in the recovery from the Covid pandemic, it includes a quarterly plan on the actions being taken to bring down waiting lists, increased planning on staff and equipment, and a strengthening of the NHS constitution to eliminate waits over 52-weeks and offer a cast-iron guarantee. 

NHS Providers have called Labour’s analysis ‘concerning’. It said: ‘Trust leaders are deeply worried about the size of waiting lists, not just for operations and diagnostic testing but for all types of care including mental health services. Despite how quickly trusts are working to deliver for all patients, there are signs that tackling the backlog could take between three to five years on current trajectories.’ 

Covid-19 vaccine roll-out 

42 and 43-year-olds were invited to get their Covid-19 jab this week as Health Secretary Matt Hancock praised the continuing vaccine roll-out. Speaking to the Downing Street press conference, Hancock highlighted that uptake of the first dose among the over 50s is ‘phenomenally high’, at over 95%. The effectiveness of the vaccine is also strong with Office for National Statistics showing that 7 in 10 adults have protective Covid-19 antibodies.   

Additionally, encouraging data from Public Health England published this week shows that one dose of the COVID-19 vaccine reduces household transmission by up to half. It highlights that those who become infected 3 weeks after receiving one dose of the Pfizer-BioNTech or AstraZeneca vaccine were between 38% and 49% less likely to pass the virus on to their household contacts than those who were unvaccinated. 

Moreover, it has been confirmed that the Government’s Vaccines Taskforce has purchased an additional 60 million doses of the Pfizer/BioNTech vaccine. The extra doses have been secured to help support the booster Covid-19 vaccination programme beginning from Autumn. It is expected that the booster programme will be to protect the most vulnerable ahead of winter.  

NHS Confederation’s Chief Executive Danny Mortimer has said that the news on the vaccine rollout gives us ‘another source of hope and offers reassurance’. However, he said that we must not overestimate public protection against the virus and the tragic scenes in India show that ‘no country can be an island in tackling the pandemic’, as Covid-19 variants still spread.  

Social care reform  

An open letter, from 26 signatories including Care England, Age UK and the NHS Confederation, to the Prime Minister has called for a 1948 moment for adult social care to establish a long-term and sustainable future that will be to the benefit of all citizens and the economy. It highlighted that social care has been on the front line of the COVID-19 pandemic with a tragic number of deaths in care homes, over 30,000, and staff, nearly 900. It says that the social care sector is ‘on its knees’ following the pandemic, and is in desperate need of reform.  

Likewise, health and care think tanks, Health Foundation, The King’s Fund and Nuffield Trust have sent a joint letter to The Times which calls for social care reform proposals to be brought forward in the Queen’s Speech. It says that social care reform requires a long- term strategy and investment. The underpaid workforce must also be fairly rewarded, expanded and supported to develop new skills whilst thousands of overstretched care providers will also need stable funding.  

Health inequality in Wales 

 36 organisations from across health, social care, transport, and housing, including the Academy of Medical Royal Colleges in Wales, Shelter Cymru, the British Medical Association have signed up to a joint paper that calls for urgent Welsh Government action on health inequalities. This comes just a week before the Senedd election on May 6^th. It argues that the incredible hardship inflicted by the COVID-19 pandemic has not been equally felt by individuals, families, and communities across Wales. The paper calls on the next Welsh Government to (1) publish an ambitious cross-government strategy and delivery plan to tackle inequalities, (2) invest in long-term prevention across all sectors, especially housing, education, health, energy, and transport, and (3) work in partnership with people and communities to change lives for the better. 

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

Pandemic response

The Covid-19 vaccine rollout has continued with momentum this week. On Monday the Government confirmed that 1 in 5 adults have received both doses of the vaccine after more than 10 million people received their second dose. Announcing the news, Prime Minister Boris Johnson said: ‘Vaccines offer us the best possible protection from the virus, so it is fantastic that 10 million people have now received their second dose. This is another remarkable milestone in our vaccination programme, which has already saved thousands of lives.’ 

Antivirals Taskforce 

On Tuesday, the Government launched a Antivirals Taskforce to roll out innovative Covid-19 treatments this autumn. The taskforce will search for the most promising novel antiviral medicines that can be taken at home. It will support the development of the antivirals through clinical trials to ensure they can be rapidly rolled out to patients as early as autumn. It is aimed that the Taskforce will be a vital tool to combat any future increase in infections and limit the impact of new variants, especially over the flu season later this year.  

Sir Patrick Vallance, Government Chief Scientific Adviser, said: ‘Antivirals in tablet form are another key tool for the response. They could help protect those not protected by or ineligible for vaccines. They could also be another layer of defence in the face of new variants of concern. The taskforce will help ensure the most promising antivirals are available for deployment as quickly as possible.’ 

The Pharmacy Collect service 

90% of community pharmacies in England now offer free, rapid tests for home use. This follows the launch of the ‘Pharmacy Collect’ service, which provides an additional route to regular testing, making it as easy as possible for people without Covid-19 symptoms to access testing twice a week. It is hoped that testing will form a crucial part of the pandemic response as society reopens from lockdown.  

Pandemic Preparedness Partnership launched 

The Government launched a new Pandemic Preparedness Partnership (PPP) this week to protect against future diseases and prevent another global pandemic. The PPP will advise the UK G7 Presidency on how to meet the Prime Minister’s ambition to slash the time to develop and deploy high quality vaccines for new diseases from 300 to 100 days. The Partnership will also provide recommendations for therapeutics and diagnostics, looking at greater global co-operation on research and development, manufacturing, clinical trials, and data-sharing. 

£16m of funding to Coalition for Epidemic Preparedness Innovations (CEPI) will support global vaccine supply and development. CEPI’s work to coordinate research, development, and manufacturing of vaccines will aid efforts to have millions of doses of vaccine available for emergency use 100 days from a variant of concern being identified. 

Healthcare backlog in the NHS 

NHS Providers have laid out a ‘bold transformative approach’ to address the ‘concerning’ backlog in the health service following the pandemic. Their approach is based on 5 elements: increase physical and workforce capacity, build capacity, improve NHS efficiency and productivity gains, reconfigure hospitals to deal with future waves of COVID-19 and winter pressures and rapidly adopt new ways of treating patients. Chief Executive Chris Hopson said: ‘Early work by trust leaders shows there is a huge backlog to clear. Trust leaders are going as fast as they can in tackling the most urgent cancer, surgery, and other cases. They are only too aware of the impact of delays. The scale of the backlog ahead is very worrying.’ 

This comes as research published by the Royal College of Physicians last week showed that 59% of their members think it will take at least 18 months for the NHS to recover from the pandemic with 69% of doctors reporting feeling exhausted and 31% demoralised. 

In a Westminster Hall debate this week the Minister for Health Edward Argar said that the Government and NHS are working very hard to reduce the backlog in elective care, which now stands at 4.7million. The Government has laid out additional funding for the NHS, including £6.6 billion to support the recovery over the next 6 months. 

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

Vaccine programme target hit   

Vaccination efforts have continued this week as the Government hit its target to offer everybody in phase 1 of the vaccination programme a jab. More than 32 million people have been given their first dose of a COVID-19 vaccine with jabs offered to everyone aged 50 and over, health and care workers and the clinically vulnerable. This group accounts for 99% of all COVID-19 deaths during the pandemic, so it is hoped that the most vulnerable are now protected.

Celebrating the ‘remarkable achievement’ Health and Social Care Secretary Matt Hancock said: ‘I’m delighted that across the UK, we’ve met our target to offer a vaccine to everyone in the top nine priority groups, ahead of the deadline of 15 of April.’ 

Data from Public Health England’s real-world study shows that both the Pfizer and Oxford/AstraZeneca vaccines are highly effective in reducing COVID-19 among older people aged 70 years and over. It estimates that over 10,400 deaths have been averted as a result of the COVID-19 vaccination programme up to the end of March 2021. 

Phase 2 of the vaccine rollout  

Phase 2 of the Government’s vaccine rollout commenced this week, with people aged 45 to 49 invited to book their appointments. This comes as the Joint Committee on Vaccination and Immunisation (JVCI) advised that the continued vaccination rollout is based on age. It has also said that unvaccinated individuals who are at increased risk of severe outcomes from COVID-19 on account of their occupation, male sex, obesity or ethnic background are likely to be vaccinated most rapidly by an operationally simple vaccine strategy. The NHS Confederation has called this approach ‘reassuring’ and called for more operational guidance for primary care teams.  

It has also been confirmed that the Moderna vaccine, approved by the Medicines and Healthcare Products Regulatory Agency in January, will also be deployed in England across more than 20 vaccination sites. NHS medical director Professor Stephen Powis said: ‘The Moderna rollout marks another milestone in the vaccination programme. We now have a third jab in our armoury and NHS staff will be using it at more than 20 sites from this week, with more coming online as supplies expand.’ 

Chris Hopson, the Chief Executive of NHS Providers, has welcomed the successes of the vaccination programme but called for caution in the ongoing Covid-19 pandemic. He highlighted that the under 50s and the most vulnerable not yet vaccinated must receive their jabs. As society opens up this week, with non-essential shops, gyms, and beer gardens opened on Monday, he said: ‘We need to balance celebration with caution. The underlying reality of this horrible virus remains the same – as we increase social contact, the rates of transmission will go up as well.’ 

NHS England waiting lists  

Statistics from NHS England, published this morning, highlight the ongoing backlog in NHS services, particularly for routine hospital care with a waiting list now at 4.7 million people. The number of people waiting for a key diagnostic test at the end of February was 1,151,200.  

The Health Foundation responded to the statistics: ‘The Government and NHS leaders now need to be clear and realistic with the public about how they intend to get the NHS back to full strength. This includes dealing with the backlog of care, achieving the ambitions to modernise the NHS as set out in the long-term plan and anticipating the effects of long COVID and an expected rise in poor mental health. There will need to be significant investment at the next Spending Review if we are to see improvement on waiting lists and plugging staff shortages, which are holding back progress.’ 

NHS England has published a statement on the statistics where it highlighted that: ‘NHS staff completed almost two million operations and other elective care in January and February while also providing hospital treatment for almost 140,000 Covid patients.’ 

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

Reopening economy
At a Downing Street briefing early this week, the Prime Minister said he plans to stick ‘like glue’ to his plans for easing current measures. He confirmed that step two – where shops, hairdressers and beer gardens can reopen – will go ahead on 12 April as planned. 

Analysis from Springboard indicated there was ‘pent up demand’ from consumers for bricks-and-mortar shops, with the firm predicting a 48% increase in sales after the next stage of lockdown easing on 12 April. On a similar note, data from Barclaycard showed that spending on leisure and entertainment increased by 136% last week. 

Business insights and impact on the UK economy
The percentage of businesses currently trading has increased gradually from 71% in early January 2021 to 75% in late March 2021. This is a similar level to that seen in July 2020, but lower than the 84% seen in mid-December 2020.  

The percentage of currently trading businesses experiencing a decrease in turnover, compared with normal expectations for this time of year, has fallen from 46% in January 2021 to 40% in mid-March 2021. 

Prior to August 2020, when the first lockdown restrictions in response to the coronavirus pandemic were in place, the percentage of currently trading businesses experiencing a decrease in turnover, compared with normal expectations for this time of year, was consistently above 50%, reaching 65% in early June 2020 (when comparable estimates began). When compared with the 40% of businesses experiencing a decrease in turnover in the most recent estimates, this suggests current lockdown restrictions do not seem to be having the same scale of impact, perhaps because of businesses adapting. 

The proportion of businesses’ workforce on furlough leave increased from 11% in early December 2020 to 19% in mid-March 2021. This level was last seen in late July 2020, when coronavirus restrictions were easing after the first national lockdown in the UK. The 19% of businesses’ workforce on furlough leave in mid-March 2021 equates to approximately six million people. 

Signs of a recovery in the jobs market have emerged with recruiters reporting that permanent hiring activity reached a six-year high in March. The latest labour survey by KPMG and the Recruitment and Employment Confederation recorded that month-on-month growth in permanent placements was the highest since April 2015. Demand for temporary staff rose at the fastest rate since November 2017.

Business support
A new Government-backed loan scheme launched this week to support firms through the gradual reopening of the economy from Covid-19 lockdown measures. The Recovery Loan Scheme follows on from the previous support offered by lenders via the Bounce Back Loan Scheme (BBLS), Coronavirus Business Interruption Loan Scheme (CBILS), and Coronavirus Large Business Interruption Scheme (CLBILS). Under the new scheme, businesses can apply for loans between £25,000 and £10 million which are 80% guaranteed by the Government. 

Recovery
Stronger recoveries from the Covid-19 pandemic in the US, the UK and other rich western countries will result in faster than expected growth for the global economy this year, the International Monetary Fund (IMF) has predicted. The IMF suggested that the UK will be the fastest growing advanced economy in 2022 as a result of the successful vaccination scheme and Treasury spending, with it likely to return to its pre-pandemic level of activity in late 2022. 

According to accountancy and business advisory firm BDO, the UK economy may see a significant boost to its recovery as close to 86% of UK mid-tier businesses told BDO they are looking to recruit more staff over the next six months, with over half (54%) planning permanent appointments. More than a third (36%) of business leaders said they would now hire apprentices as a direct result of the Government’s £3,000 apprenticeship grant announced in the Budget. This came as part of a larger 70% of businesses planning to recruit in this area regardless of the incentive.

Investment plans also received a boost in the March budget. Nearly half of businesses (47%) are planning new investments following the ‘super deduction’ initiative, which allows companies to cut their tax bill by up to 25p for every £1 they invest. According to the data from accountants at BDO, three-quarters of the UK’s medium-sized businesses state that 2021 is the time to invest, and 26% of them are already planning to invest in new locations or M&A.

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

Roadmap 
This week saw the next phase of the Government’s Roadmap out of lockdown restrictions. As of Monday, the public is allowed to meet six people outdoors and do outdoor exercise. Speaking at the Downing Street Press Conference, the Prime Minister said that despite infections falling to the lowest number in six months, ‘we must proceed with caution’.  

Vaccination hesitancy and uptake  
While positive vaccine sentiment has increased to 94% in the latest period (17 to 21 March 2021), from 78% when the data were first collected (10 to 13 December 2020), there are higher levels of hesitancy among some groups, including young people (12%), Black or Black British (22%) and those living in the most deprived areas (12%).  

Research from the Office for National Statistics published this week on the Covid-19 vaccine highlights the uptake across the population. It showed the percentage of people vaccinated was lower among all ethnic minority groups compared with the White British population; the lowest vaccination rates were observed among people identifying as Black African and Black Caribbean (58.8% and 68.7% respectively). Those living in deprived areas were also less likely to have taken up their offer of a vaccine. While people who have a disability also had lower rates of vaccination at 86.6%, compared with those who were non-disabled at 91.0%.  

The NHS Confederation has argued that the results show there is ‘more work to do’. It has said that we need to ensure that the vaccine is equitable, and we need to overcome vaccine hesitancy, ‘as marginalisation clearly plays a major part in pushing uptake down.’ 

Poor mental health among emergency responders
Data from a survey of more than 250 staff and volunteers across police, fire and ambulance services in Wales has laid bare the scale of poor mental health within the emergency responder communities. The online survey found that mental health has worsened across 999 services, with ambulance staff worst affected.

Only one in three (33%) ambulance staff reported their current mental health as very good or good compared to two in five police (44%) and almost one in two (49%) survey respondents working within the fire service. Ambulance staff were the most likely (72 %) to say their mental health has worsened since the start of the coronavirus pandemic, compared to police (56%) or fire (61%). 

The highest proportion of respondents saying they had poor mental health were within the ambulance service, at almost one in three (30%). This compares to just under one in four (22%) respondents from the police service and just under one in ten (11%) within the fire service who rated their mental health as poor currently. 

Mental health support
Over the weekend, the Government announced a £500m Mental Health Recovery Action Plan to respond to the impact of the pandemic. The plan will support the expansion and improvement of mental health services, including NHS talking therapies and community services. The funding forms part of the Government’s plans to level up mental health and wellbeing across the country.

Announcing the plan, the Health and Social Care Secretary Matt Hancock said: ‘As part of our response to this global pandemic we not only want to tackle the public health threat of coronavirus but ensure our clinicians have the resources to deal with the impact on people’s mental health.’  

Responding to the Mental Health Recovery Action Plan, Paul Farmer, chief executive of Mind said: ‘As we continue to deal with the effects of the pandemic and the economic recession, the true scale of the nation’s mental health is only beginning to emerge. It could be many months or even years before we fully recognise the pandemic’s toll on our collective wellbeing. That’s why we welcome the UK Government’s recovery plan, which will need to see departments working more closely than ever to deliver on its promises given the multiple social challenges we face.’ 

Office for Health Promotion
The Government has announced more information on its reform to public health, following its decision to dissolve Public Health England last year. The new Office for Health Promotion, which will lead the country’s efforts to improve and level up the health of the nation, it set to be established in the Autumn.  

The Office’s remit will be to systematically tackle the top preventable risk factors causing death and ill health in the UK, by designing, implementing and tracking delivery policy across Government. It will focus on areas including, obesity and nutrition, mental health across all ages, physical activity, sexual health, alcohol and tobacco.

Announcing the plans, the Prime Minister said: ‘Covid-19 has demonstrated the importance of physical health in our ability to tackle such illnesses, and we must continue to help people to lead healthy lives so that we can all better prevent and fight illnesses.’   

The Health Foundation has welcomed the cross- departmental approach to address the wide determinants of health. However, it raised concern about funding the new Office and highlighted that this year’s public health grant allocations represented a 24% cut in real terms per capita – equivalent to £1bn – compared to 2015/16.

It said: ‘The pandemic makes it all more urgent that we prioritise keeping people healthy. The Government faces a crucial window of opportunity in which to create a public health system equipped to take on the major health issues facing the country including rising obesity, a mental health crisis and a growing gap between the health of the richest and poorest’.  

The King’s Fund welcomed clarity on public health reform, but argued: ‘today’s announcement does not add up to a compelling vision for creating a healthier society and needs to be swiftly followed by a clear plan for improving the health of the nation.’

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

The UK’s debt has reached a new high as Government borrowing hit £19.1bn last month as it continues to battle the coronavirus pandemic and the economic fallout of lockdown. The Office for National Statistics (ONS) said the public sector had borrowed more last month than during any other February since records began in 1993.

The debt owed by public bodies has increased by £333bn since the start of April, the first month of full lockdown in the UK. It brings the total debt to £2,131.3bn or around 97.5% of GDP, the ONS said.

Central Government bodies are believed to have spent around £72.6bn running their day-to-day activities in February, a rise of £14.2bn compared with February 2020. This came as the Bank of England’s (BOE) Monetary Policy Committee voted unanimously to maintain the Bank Rate at 0.1%.

The BOE expects inflation to return quickly to its 2% target but has played down concerns about rising borrowing costs and fears of rapid inflation. The strong vaccine rollout, coupled with a lower fall to GDP in January than expected, have led to cautious optimism from the BOE regarding the overall economic outlook.

The BOE has also indicated it will likely revise its forecast for unemployment down to match the 6.5% peak figure forecast by the Office for Budget Responsibility.

The UK unemployment rate, in the three months to January 2021, was estimated at 5.0%, 1.1% higher than a year earlier and 0.1% higher than the previous quarter. However, the bigger picture is one of stability in the last few months, after the labour market deteriorated through the autumn.

The furlough scheme has stopped the effects of lockdown feeding into falling employment in the latest months. In fact, the number of payrolled employees has now increased for three months in a row, although since February 2020, the number of payroll employees has fallen by 693,000.

While the headlines are encouraging, data again underlines the impact of the crisis on young workers. Payrolled employment in February was down 11% on pre-crisis among under 25s, compared to being down 1% among other age groups.

The Centre for Economic and Business Research released analysis of the cost of coronavirus to the UK economy. The report suggests that COVID-19 has been the predominant cause behind a £251bn reduction in the UK’s gross value added over the past year, a fall roughly equivalent in size to the entire annual output of the South East of England in pre-pandemic circumstances and nearly twice the output of Scotland.

Business confidence has returned to its highest level since 2018, with 65% of firms confident about their growth prospects over the next three years, according to the Santander Trade Barometer.

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

Office for National Statistics (ONS) data for January suggests that the economy was hit less by the renewed lockdown than expected. UK GDP is estimated to have fallen by 2.9% in January 2021 compared to the predicted 5%. The output approach to GDP shows that January’s level was 9% below that seen in February 2020 and was 4% below levels seen in October 2020 – the initial recovery peak. 

The National Institute of Economic and Social Research (NIESR) said that January’s smaller than expected fall in GDP means that it now estimates a contraction of 2.4% in the first quarter of 2021. This would leave GDP in the first quarter of 2021 around 9% lower than its level in the last quarter of 2019, before the pandemic struck. 

Real-time data and NIESR analysis imply that GDP is likely to resume its growth in February and March, by 0.3% and 1.1% respectively, on the back of higher contribution from Government services and improving consumer confidence as infection rates come down. As a result, the first quarter of 2021 is likely to see a smaller contraction than widely anticipated. However, the pace of recovery from the second quarter will crucially depend on how the opposing effects of the vaccine roll-out and lifting lockdown affect the path of Covid-19, as well as how consumers and businesses react. 

Bank of England governor Andrew Bailey said that the UK economy should recover to its pre-pandemic size by the end of this year. Speaking in an interview with BBC Radio 4’s Today Programme on Monday morning, Mr Bailey said the Bank was ‘not out of firepower’ in defending the economy as it recovers from the pandemic, adding that it was looking at ‘new tools’ which could include negative interest rates. However, he warned that new variants of the virus could still pose a risk to the economic recovery. The Bank of England governor also remarked that the economic effects of the pandemic had been ‘very unequal’, with women, ethnic minorities and the low-paid all disproportionately impacted.  

OBR committee member and former Bank of England deputy governor Sir Charlie Bean said last week to the Commons Treasury Committee that he does ‘not expect households to go out and blow [their savings] all within the next quarter or two’ but it will be ‘spread out over several years’. According to a recent report by the Centre for Economics and Business Research, UK households will go on an estimated £50bn spending spree once lockdown restrictions are lifted. It warned that ‘if interest rates are kept low, there is a real threat that inflation could rise rapidly above the Bank of England’s 2% target and be difficult to control.’ 

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

During last week’s Budget, the Chancellor tried to balance the support provided to the economy with the need to begin the work of fixing our public finances. As expected, the Chancellor extended existing support, such as the job support schemes, the Universal Credit uplift, business rate holidays and VAT cuts to reflect the cautious reopening of the economy set out in the roadmap.

While some argued that the Universal Credit uplift should have been extended beyond the six months announced, others welcomed the increase in generosity of the self-employed scheme. Given the different impact on different sectors of the economy, the targeted Restart Grants to the sectors worst hit by restrictions have been much welcomed by small firms in the hospitality industry with cash problems. The Chancellor also announced a new Recovery Loan Scheme that will provide lenders with a guarantee of 80% on eligible loans.

Further ahead, in April 2023, the rate of corporation tax paid on company profits will increase to 25% on profits over £250,000. To soften the blow, the Chancellor announced that for the next two years, companies can reduce their tax bill when investing via a ‘super deduction’ of 130% of the cost. He also froze income tax thresholds from next April for four years, which is considered a good way for the Government to raise revenue without causing economic distortion.

The Office for Budget Responsibility (OBR) thinks the economy will ‘bounce back’ in the near-term as restrictions are eased. The OBR expects growth to return from Q2 2021, with GDP forecast to reach pre-Covid levels earlier than previously expected and unemployment to be better than forecast.

When Commons Treasury Committee members talked about the huge stimulus package in the US and asked if the Chancellor did enough to stimulate growth, the OBR committee member and former Bank of England deputy governor Sir Charlie Bean explained that the size of the output gap is difficult to measure because the response to the pandemic has involved pushing down on both demand and supply in roughly equal measure. As the restrictions are eased, he expects both of them to come back.

In its central forecast, the OBR does not think there is that large a margin of spare capacity, the output gap is quite small, so it would not make sense to have a large demand stimulation. He mentioned that in respect to the Biden plan in the US, many economists who are generally in favour of greater use of fiscal policy think the size of the stimulus is far too big relative to the likely size of the output gap.

If you are considering supporting demand, it is not obvious that there needs to be substantial policy stimulus at this point. It might turn out that this is wrong, and that demand does not recover as quickly as supply, in which case it will be sensible for either the Bank of England or the Chancellor to add additional stimulus. But as things are at the moment, the margin of spare capacity is expected to be quite small during the reopening phase of the economy.

While the Financial Secretary to the Treasury previously said that if the economy is strong, they might not need to raise taxes to fix public finances, Sir Charlie Bean told MPs on the Commons Treasury Committee that the important thing here is not so much slightly faster growth next year but really the scarring assumptions. If they do not see a high level of scarring, then the same sort of fiscal consolidation is not needed in the medium-term. Equally, if the scarring turns out to be greater than they expect, potentially more consolidation will be required. OBR’s central assessment is 3% medium-term scarring, but that number could go either way.