Number of people on UK payrolls drops by 600,000 as Covid-19 crisis hits – business live

Only two companies on the FTSE 100 has fallen in the first half hour of trading (insurer Admiral Group and pharma group Hikma).

And the risk-on move spurred by the Federal Reserve’s bond purchase plans has now pushed the FTSE up by 2.6%.

Digger rental company Ashtead is the top gainer, up 14% after it retained its dividend – there had been some doubt from investors after a slew of cancellations and cuts. That optimism on industrials has also helped CRH, the building materials company.

Many of the other top gainers (airlines, cruise ship liner Carnival, engineering groups Rolls-Royce and Melrose) have been hit hard during the crisis – so a risk-on move like the one today will help them.

Greggs will reopen 800 shops for takeaway purchases on Thursday, but the bakery chain will push for rent reductions amid expectations of lower sales.

Investors appear to have welcomed the news, with shares up by 3.6% on Tuesday morning. But it is not all good news by any means for the sausage roll maker.

It said:

We are not able to predict the impact of social distancing on our ability to trade or on customer demand. However, our capacity to operate will be restricted by size of shop and we must anticipate that sales may be lower than normal for some time.

Many shop workers will remain on furlough, while the number of products on sale will be limited, allowing it to keep a proportion of its manufacturing workers on furlough as well.

There has been some good news for bank note printer De La Rue this morning: the Serious Fraud Office (SFO) has dropped an investigation without taking action.

The SFO had been looking into “suspected corruption” in the embattled company’s dealings with South Sudan, after the world’s youngest country seceded in 2011. De La Rue designed and printed its new currency.

De La Rue had warned about its survival at the end of last year as it launched a turnaround plan to tackle a mounting debt pile and a loss.

The SFO said:

Following extensive investigation and a thorough and detailed review of the available evidence, the SFO has concluded that this case did not meet the relevant test for prosecution as defined in the Code for Crown Prosecutors.

De La Rue said:

De La Rue is pleased that the SFO has closed its investigation and that the SFO is taking no further action in respect of this matter.

Today is a good exemplar of the disconnect between dire economic data and financial markets, with the promise of corporate bond purchases from the US Federal Reserve pushing stock markets to strong gains this morning.

The FTSE 100 is up by 1.8% in early trading, while the FTSE 250 has gained 2%.

In Europe there have also been strong gains, with the broad Stoxx 600 index up by 1.3%. Germany’s Dax has gained 2.2%, France’s Cac 40 is up 2.3% and Spain’s Ibex was up by 2% in the first exchanges.

The total number of weekly hours worked in the three months to April 2020 was 959.9m, down a record 94.2m hours on the previous year – an 8.9% decrease.

The drop in the number of hours worked is telling, because it shows the drop in activity that is masked by the furlough scheme. Workers on the government scheme, which pays 80% of wages up to £2,500 per month, are classed as employed but are not allowed to work. Many of them will return to work, but equally many will not.

Pay also fell in real terms for the three months to April 2020 for the first time since January 2018.

Ruth Gregory, senior UK economist at Capital Economics, said:

It was abundantly clear in every other indicator [apart from the unemployment rate] that the labour market has weakened dramatically. Since furloughed employees weren’t working, the total number of hours worked slumped by 8% 3m/3m. And the 20% pay cuts for workers that have been furloughed meant that the headline (three-month average of the annual) growth rate of regular average weekly earnings slumped from 2.7% in March to 1.7%, a five-year low.

Overall, then, despite the apparent stability of the actual unemployment rate, the labour market data were still pretty awful. And some of this will surely start to filter through into the actual unemployment figures as the government’s job furlough scheme is wound down from August.

The headline unemployment figure of 3.9% means the number of people out of work remains at a historically low level – if that number is to be believed.

In fact, it is clear that there is more going on below the main unemployment rate, the experts suggest.

Neil Carberry, CEO of the Recruitment and Employment Confederation, said:

The headline figures may not show it, but a lot has changed since April – with the claimant count rising to 2.8m , the unemployment rate is likely to be much higher than 3.9% now.

But with the lockdown being eased and the economy opening up, hiring should grow. The scale of the growth in unemployment through the rest of the year will depend on consumer confidence and how employers react to the winding down of the furlough scheme.

Good morning, and welcome to our live coverage of business, economics and financial markets.

The number of people on UK payrolls dropped by 612,000 between March and May, according to early data from the Office for National Statistics and HM Revenue and Customs that is starting to show the depth of the hit to the economy from the pandemic.

The government’s furlough scheme (paying 80% of workers’ wages) has sustained employment in the UK, but the signs of the coming crisis are building – despite the lack of a rise in the official unemployment data.

The UK unemployment rate for the three months to April 2020 was estimated at 3.9%, 0.1 percentage points higher than a year earlier but largely unchanged on the previous quarter.

Yet other indicators paint a different picture:

Early estimates for May 2020 from Pay As You Earn Real Time Information (PAYE RTI) indicate that the number of payroll employees fell by 2.1% (612,000) compared with March 2020.

The number of claimants for employment benefits (including the low paid and the jobless) reached 2.8m in May.

Neil Birrell, chief investment officer at Premier Miton, said:

UK jobless claims remained over 500,000 in April which was higher than expected but lower than March’s number which was revised up to a whopping 1.32 million from 856,000. It’s important for the UK economy that these numbers start falling quickly as shops open and lockdown eases or else the UK will be in bad shape.

Markets have been boosted across the world after the Federal Reserve on Monday said it would kick its secondary market corporate credit facility (SMCCF) into action on corporate bonds.

The Fed will “begin buying a broad and diversified portfolio of corporate bonds to support market liquidity and the availability of credit for large employers,” it said in a statement.

The agenda

• 10am BST: Germany and Eurozone Zew economic sentiment index (June)
• 1:30pm BST: US retail sales (May)
• 2:15pm BST: US industrial production (May)
• 3pm BST: US Federal Reserve