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Covid cases rise as UK schools return and furlough scheme ends

Posted on Oct 01, 2021

Covid infections rise after schools and businesses return

The number of daily new Covid infections in the UK has risen in the past month after the removal of most pandemic restrictions and as schools and offices reopened, fuelled by the Delta variant. The latest daily figures up to 30 September show that 36,480 people tested positive for Covid-19 across the UK, an increase from the start of the month. The government said a further 137 people had died within 28 days of testing positive for Covid-19 as of Thursday, bringing the UK total to 136,662. Almost 49 million people have had a first shot of a coronavirus vaccine, about 90% of the adult population. Almost 45 million – about 83% – have had a second.

Travel returns to near pre-pandemic levels

Transport levels chart

The number of trips taken on the UK’s roads and on public transport has edged closer to pre-pandemic levels as office workers gradually returned to city centres. According to figures from the Department for Transport, car journeys are only a few percentage points below the equivalent week in 2019. However, despite a rise in national rail and bus journeys, public transport use remains below pre-Covid levels. While the busiest morning since the start of the pandemic was recorded in early September by London Underground, tube and bus usage remains below normal.

China property fears weigh on global markets

Global financial markets have come under pressure in the past month amid investor concern over rising inflation, as central banks consider scaling back their emergency Covid-19 stimulus measures to keep a lid on rapid growth in consumer prices. China’s embattled property developer Evergrande Group has also rattled global markets; investors fear the debt-stricken firm’s troubles could drag down the world’s second-largest economy. In London, the FTSE 100 fell below 7,000 by mid-September before staging a gradual recovery. The blue-chip index remains 0.4% down on the start of the month.

Inflation soars amid unfolding energy crisis

Inflation in the UK made its biggest jump on record in August, adding to pressure on households as the government prepares to cut universal credit benefits and raise taxes on workers. The Office for National Statistics (ONS) said the consumer prices index rose to 3.2% in August, up from 2% in July, to hit the highest rate since March 2012. Driven by rising food and drink prices, as well as distortions caused by the “eat out to help out” scheme in 2020, the 1.2-percentage-point jump between July and August was the largest since records began in 1997. The Bank of England warned that rising energy bills would drive inflation above 4% this winter, with soaring household gas and electricity bills maintaining the pressure until summer. However, the Bank still expects that high inflation will prove temporary.

Shortages sink business activity to weakest since March

Severe shortages of workers and supplies dragged down September business activity in the UK to the weakest levels since pandemic restrictions were eased in March. The IHS Markit/Cips purchasing managers’ index, a closely watched gauge of private sector activity, dropped to 54.1 in September from 54.8 in August. Any reading above 50 indicates expansion. Amid surging transport costs, product shortages and higher staff wages, firms raised their prices at the fastest pace since the late 1990s. Growth also dipped in other advanced economies, although UK output is below levels in the US and the eurozone. Activity in China slumped into contraction on the month.

Job vacancies soar as employers hire after lockdown

Unemployment rate chart

Employers scrambling to hire staff amid widespread labour shortages after lockdown helped to return the number of workers on UK company payrolls to pre-pandemic levels in August. With shortages of lorry drivers, warehouse operatives and care workers as Britain emerges from lockdown, job vacancies soared to more than 1m for the first time since records began in 2001. Firms hiring lifted the number of staff on company payrolls by 241,000 to 29.1 million. However, unemployment remains 0.6 percentage points higher than before the pandemic, at 4.6%.

Supply disruption drags down retail sales

Retail sales in Great Britain fell unexpectedly in August as supply chain disruption hit spending, while households switched from food and drink shopping in supermarkets to pubs and restaurants after the easing of pandemic restrictions. Retail sales dropped by 0.9% in August after a steeper decline of 2.8% in July. While spending remains above pre-pandemic levels, City economists had forecast a rise of 0.5%. Sales fell across a broad range of other categories, including a sharp drop in food sales and at department stores. Britain’s biggest retailers have warned that stock levels are at their lowest since the 1980s because of shortages of workers and supply chain disruption.

Inflation pushes up government debt costs

UK government borrowing increased by more than expected in August as rising inflation pushed up debt interest payments. The ONS said the budget deficit – the gap between spending and income – fell to £20.5bn in August from about £26bn in the same month a year ago. However, gains from a recovery in tax receipts were offset by inflation driving up interest payments on the government debt. City economists had forecast a lower borrowing figure of about £15.6bn. It comes as ministers raise taxes on workers and cut universal credit benefits and Rishi Sunak prepares to set out spending plans at next month’s budget.

Economic recovery slows to stall speed

Britain’s economic recovery from lockdown almost stalled in July despite the end of most pandemic restrictions. The ONS said GDP grew by just 0.1% in July from a month earlier, as weaker retail sales and disruption from the coronavirus Delta variant and “pingdemic” worker shortages held back growth. Service sector activity recorded zero growth on the month, manufacturing was broadly flat, and rising costs and raw material shortages triggered a fall in construction. Growth linked to the return of music festivals and sport was offset by a sharp drop in high street spending and a decline in the legal sector linked to the end of the stamp duty holiday.

House prices soar despite stamp duty increase

The average UK house price reached a record high in August despite annual inflation cooling to a five-month low, after the partial end of the stamp duty holiday in England and Northern Ireland. The latest snapshot from Halifax, Britain’s biggest mortgage lender, showed average property prices rising by 0.7% to £262,954, beating the previous peak of £261,642 recorded in May. It comes despite the stamp duty holiday winding down; the tax relief, which was applied to the first £500,000 on property transactions, will apply only to the first £250,000 from the start of July. It will revert to the pre-Covid level of £125,000 in October. The holiday has already ended in Scotland and Wales.

And another thing we’ve learned this month: millions were still furloughed ahead of scheme’s closure

furlough chart

The last official figures before the end of the furlough scheme on Thursday showed that 1.6m jobs were still receiving emergency wage support at the end of July. Although down from a peak of 5.1m during the winter lockdown, the rate of workers returning to their jobs slowed in July despite the removal of most pandemic restrictions. Rishi Sunak believes record job vacancies will help furloughed workers find jobs. However, business leaders and economists say this is unlikely because of mismatches between the sectors with the most workers on furlough and where jobs are available. Furlough was more heavily concentrated in some sectors and places in Britain. More than half (51%) of all air passenger transport workers were still on furlough, the highest of any industry, in stark contrast to the 5% average for all sectors.