Unemployment falls – business news 16 July 2021.

James Salmon, Operations Director.

Unemployment falls and vacancies hit pre-pandemic level, PM offers ‘skeleton’ of levelling-up plan, SMEs have ‘a lot to navigate’ as lockdown ends, Bank of England could step in to curb rising inflation and more business news

Unemployment falls and vacancies hit pre-pandemic level

Office for National Statistics (ONS) figures show that the unemployment rate dropped in the latest quarter. Between March and May the unemployment rate fell 0.2 percentage points to 4.8%, with the employment rate climbing 0.1 percentage point to 74.8%.

The data reveals a month-on-month increase in the number of workers on payrolls, with the total up 356,000 in June to 28.9m. While showing an increase, this remains 206,000 below pre-pandemic levels. Darren Morgan, director of economic statistics development at the ONS, commented: “As the economy gradually reopened, the unemployment rate fell in March to May. This was especially marked for younger people, who had been hardest hit by earlier lockdowns.”

The ONS report also revealed that there are more job vacancies now than there were before the pandemic, with 862,000 roles available in April to June. This is 77,500 above the number recorded in January to March 2020. Annual pay growth in the three months ending in May stood at 7.3% – up from 5.7% in April. The rise was driven by vacancies in hospitality and retailing.

Reflecting on the ONS figures, Chancellor Rishi Sunak said: “We are bouncing back”, adding that with the country approaching the final stages of reopening the economy, “I look forward to seeing more people back at work and the economy continuing to rebound”. Martin Beck, an economic adviser to the EY Item Club, said growth in paid employment had “undone almost 80% of the negative impact on payroll numbers” seen since February 2020.

Yael Selfin, KPMG’s chief economist, said the labour market is “struggling to cope with the pace of reopening”, adding that “demand for new hires appears well ahead of the number of jobseekers.” She expects unemployment to peak at 5.5% once the furlough scheme ends.

PM offers ‘skeleton’ of levelling-up plan
Boris Johnson has said the Government will look to level up the country by spreading power and opportunity more evenly.

In a speech in Coventry, the Prime Minister insisted there will not be “levelling down” in prosperous places, saying: “We don’t think you can make the poor parts of the country richer by making the rich parts poorer.” Pledging to hand more power to local leaders, Mr Johnson said the government wanted to “rewrite the rulebook” on local devolution. This could see county areas in England handed “new deals”, granting them powers currently given to major cities. He urged local leaders to “come to us … with your vision for how you will level up, back business, attract more good jobs and improve your local services”, promising to give them “the tools to make things happen for their communities”.

The County Councils Network welcomed the PM’s comments, with spokesman Martin Hill saying local areas “should be able to decide the most appropriate devolution arrangements for counties”. Responding to criticism that his speech lacked detail on what levelling up is and how it might be achieved, Mr Johnson denied that he had failed to present a “clear strategy”, insisting he had set out “at least the skeleton of what to do”.

SMEs have ‘a lot to navigate’ as lockdown ends
Michelle Ovens, founder of Small Business Britain, says the full unlocking of coronavirus restrictions on July 19 marks “another stage in a complex path for small businesses”, many of which have faced “phenomenal challenges” over the course of the pandemic. She warns that there is “no clear finish line for businesses”, saying they “still have a lot to navigate” and will continue to need support “to weather the ongoing storm”.

Ms Ovens points to research from PayPal’s Business of Change report showing that 69% of small businesses are feeling optimistic about the future and have ambitious plans in place for the coming 12 months, commenting: “Let’s not get in the way of this. Let’s instead look for ways we can support and encourage this.”

Bank of England could step in to curb rising inflation
A Bank of England (BoE) policymaker has warned that surging inflation could prompt the Bank to end its bond buying programme early.

Michael Saunders, a member of the BoE’s Monetary Policy Committee, said that “if activity and inflation indicators remain in line with recent trends”, it might become appropriate to rein in some of the stimulus provided to support the economy “fairly soon”. He said that activity “seems to have recovered a bit faster” than forecast in May’s monetary policy report, going on to suggest that “the question of whether to curtail our current asset purchase program early will be under consideration” at upcoming MPC meetings.

His comments came just a day after Dave Ramsden, one of the Bank’s deputy governors, said he could see inflation – currently at 2.5% – rising to 4% for a period later this year. Departing chief economist Andy Haldane last month said he expects inflation to hit at least 4%.

Mortgages refused for self-employed who received coronavirus grants
Some high street banks are refusing to give mortgages to self-employed people who received government grants during the pandemic. Some lenders are refusing mortgage applications from people who took the Government’s Self-Employment Income Support Scheme (SEISS) grant, while others ask for evidence of the businesses having recovered from the pandemic. BBC News research also found that most lenders will not accept mortgage applications from people currently on furlough. It was also found that many do not include furloughed income as part of their affordability assessment. The report also highlights that self-employed people may have to find larger deposits. Some of these policies seemingly go against assurances from the Financial Conduct Authority, with a spokesperson for the regulator saying coronavirus support schemes “should not, of themselves, prevent people from being able to access credit.”

PM set to back tax to cover social care costs
Boris Johnson is reportedly backing proposals for a new tax to pay for reforms to Britain’s social care system. A Government source has told the Times that the Prime Minister is “comfortable with some sort of tax” to fund universal social care, a move that could help reduce the burden on families. The policy is also likely to include a cap on the amount people have to pay towards their own care. The Times says that the cost of any reform could exceed £10bn and suggests Chancellor Rishi Sunak wants the PM to set out a funding mechanism alongside the policy. While a dedicated social care levy is among options that have been proposed, there is said to be concern over a new tax, with officials believing it risks breaking a manifesto pledge not to raise income tax, national insurance or VAT. Some cabinet ministers believe that unless a wealth tax is introduced, any levy would be an income-tax rise. A minister who has voiced concern said: “We surely don’t want to just borrow more and more to pay for this … So it would mean a broad-based tax, and because of our manifesto that is a problem.” The Times looks at the options open to policymakers, suggesting: an income tax increase; a “social care levy” on income; an over-40s tax; pensioner taxes that could see them paying national insurance and having some benefits means-tested; and an estate tax.

FCA vows to ‘raise its game’
The Financial Conduct Authority has admitted it must “raise its game” after a string of scandals including the collapse of mini-bond firm London Capital & Finance (LCF). The City watchdog said £120m will be invested in improving its data capabilities over the next three years to crack down on fraud and misconduct, with the regulator set to strengthen rules on financial promotions to protect investors, improve standards on pension advice and take a more proactive approach to spot scams and high-risk investments. Chief executive Nikhil Rathi said there are “areas where we need to raise our game considerably”. Insisting that the FCA “must continue to become a forward-looking, proactive regulator”, Mr Rathi added: “One that is tough, assertive, confident, decisive, agile. One that is not only purposeful but that is fit for purpose.” His comments come less than a month after the Treasury Select Committee said the FCA needs a culture change following the LCF scandal.

A fifth of house price rises outstrip local salaries
Booming house prices mean more than one in five properties have made more money in the past year than their owners. The average worker took home £30,500 in the past year, but 21% of homes in Britain have seen values rise by more than this amount, Zoopla estimates. It found that homes in the South West are most likely to be earning more than the average salary in the region. In the past 12 months, 29% of homes in the region increased in value by more than the average regional salary of £29,000. The lowest percentages were in Scotland and the North East, where 9% of homes have gone up in value by more than the average salaries. Zoopla’s head of research Grainne Gilmore said the stamp duty holiday has contributed to a surge in demand, adding that “activity has been so high it has eroded the stock of homes for sale, which has put upward pressure on house prices.”

Commuter and coastal towns see biggest rent rises
Analysis shows that city suburbs, commuter towns and coastal locations recorded the biggest rises rent increases last year. Rightmove’s quarterly survey of rental prices shows that asking rents were 2.6% higher in April to June compared with the first three months of the year – and 6.2% higher than a year ago. The study found that 8 out of 10 of the biggest city centres are seeing higher rents than in June 2020, while rents outside London have risen to an average of more than £1,000 per month for the first time.

London sees strongest IPO performance since 2014
Research from EY shows that the UK remains the most attractive European IPO venue by funds raised. The first half of 2021 saw 10 IPOS raising £3.1bn on the main market and 13 IPOS raising £664m on the Alternative Investment Market (AIM). London also broke a record with the largest ever AIM admission, with Victorian Plumbing Group raising £298m upon listing, with a market capitalisation of £850m. Total funds raised during Q2 were ahead of other European markets at £9bn, bringing the total equity capital raised in London in the first half of the year to £27bn. Listing activity across both markets was driven by the technology sector, EY said. Scott McCubbin of EY said there appeared to be “no let-up in activity in sight” for UK equity markets. Globally, $111bn was raised in 599 deals – making H1 2021 the best six-month listing performance in over 20 years.

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