Britain’s economy is set for a pre-Christmas slump with further job losses and shop closures, despite government measures to protect businesses during the latest Covid-19 restrictions.
Surveys of business activity reveal a sharp decline as tough new restrictions were launched across the UK amid the second coronavirus wave, setting the stage for a difficult winter ahead as the economy plunges into reverse.
While the damage to many industries will be less severe than during the first lockdown, the accountancy firm BDO said measures of business confidence and output fell in October for the first time since April.
A separate study by the Chartered Institute of Personnel and Development and the recruitment firm Adecco showed almost a third of UK companies plan to make redundancies over the final months of the year.
Gerwyn Davies, the senior labour market adviser for the CIPD, said: “The best that can be said is that the situation is getting worse more slowly. Employment looks set to keep falling and the relatively weak demand for labour means that it is going to be a long and hard winter, affecting young jobseekers in particular.â€
Although job losses are expected to rise, the survey of more than 1,000 human resources managers suggested the economy outlook was more resilient than during the first wave of Covid-19.
With more companies expected to remain open and after firms have already cut significant numbers of jobs, the CIPD and Adecco said 30% of firms expected to make redundancies in the final months of 2020, down from 33% in the summer. This is still higher than 22% of companies that planned job cuts before coronavirus spread to the UK.
BDO said its index of business output – which is compiled from surveys of more than 4,000 firms – dropped to 77.09 in October from 77.95 in September, on a scale where anything above 95 indicates economic growth. The figure is, however, higher than a record low of 44.9 recorded during the first lockdown in April.
Official figures for Britain’s economy due this week are expected to show the fastest quarterly GDP growth on record in the three months to September, with economists pencilling in a 15.8% growth rate for the summer months.
However, the Bank of England has warned that a return to lockdown amid the second Covid wave would spark a double-dip recession, with GDP expected to fall 2% in the final quarter. Although the Bank still expects an 11% decline in GDP for the year as a whole, the second dip of the 2020 recession is significantly below a 20% plunge in the three months to June.
The renewed signs of an economic slump come as businesses across the UK temporarily close their doors or suffer from severely reduced demand as the second English lockdown and tough measures in Scotland, Wales and Northern Ireland to contain Covid-19 hit the economy.
However, more businesses are expected to stay open under the new controls, which allow pubs and restaurants to offer takeaways and for shops to use click and collect. The construction, manufacturing and property industries also remain open, despite a sharp drop in activity as the wider economy sinks into reverse.
The damage from the second set of restrictions is however expected to exacerbate the hit to companies suffered during the first wave of Covid-19. As many as 5,552 retail outlets enter the new controls after temporarily closing in March without managing to reopen over the summer, according to research from accountancy firm PwC.
It said the amount of floor space nationwide of shops that remain temporarily frozen is equivalent to 888 acres (360 hectares) of land – equivalent to 36 times the size of London Waterloo station – spread across high streets, retail parks and shopping centres nationwide.
Kaley Crossthwaite, a partner at BDO, said: “The green shoots of recovery which started to emerge in May have been dealt a blow by the announcement of a second lockdown.
“While the extension of the furlough scheme until March is welcome news for employees in the immediate term, uncertainty looms over sustainable job security and fears of mass redundancies have merely been pushed back rather than solved.â€
