Covid-19 Recovery Brief: Thursday, August 6
Each day, our Public Policy team will be reporting on the latest news in the evolving situation. To view the previous day’s summary, please click here.
The Bank of England has forecasted that the impact of the lockdown on the economy will be less severe than initially predicted
- The Bank said the recovery had been “earlier and more rapid” than it had assumed in May, reflecting a faster easing of lockdown restrictions. It came as the Bank held interest rates at 0.1%.
- Official figures have revealed that UK GDP declined 20% by the end of June than it had been in December 2019. The Bank had initially forecasted a 30% decline.
- It now expects the economy to shrink by 9.5% this year instead of 14%. However this would still be biggest annual decline in 100 years.
- The Bank said spending on clothing and household furnishings was now back to pre-Covid levels, while consumers have carried on spending more on food and energy bills than before the lockdown.
- However the recovery is expected to be slower than initially anticipated. The bank expects the UK economy to grow by 9% in 2021, and 3.5% in 2022, this compares with May growth estimates of 15% and 3% respectively. This means the economy will not get back to its pre-Covid size until the end of 2021 several months later than initially expected.
- This is because leisure spending and business investment remained subdued, which would weigh on the recovery.
- Unemployment is expected to almost double from the current rate of 3.9% to 7.5% at the end of the year as government-funded support schemes come to an end.
- Average earnings are also expected to shrink for the first time since the financial crisis, as more workers faced a pay cut or freeze in 2020.
- Meanwhile a fall in energy prices and the temporary VAT cut for hotels, theme parks and other hospitality businesses means the cost of living is expected to barely rise this year, with inflation expected to fall close to zero by the end of 2020, before gradually rising back to its target of 2%.
- These forecasts are based on the assumption that there is no second wave of the virus and that there is a smooth transition to a new EU free trade agreement at the start of 2021.
- The Bank expects world GDP to shrink by 5% this year, which is not as bad as the 12% contraction projected in May. World GDP is expected to bounce back with growth of 7.5% next year.
The Government has announced £1.3 billion investment to deliver homes, infrastructure and jobs
- The move is part of the Government’s efforts to boost skills and to help fuel a green economic recovery.
- Over 300 successful projects in England are being told they will receive a share of the £900 million Getting Building Fund, which was announced by the Prime Minister in June.
- The investment is expected to deliver up to 45,000 homes, create up to 85,000 jobs and reduce around 65 million kgs of CO2 emissions across England.
- Alongside the announcement, the Government also released details on the new £2 billion Green Homes Grant scheme, which will see the Government fund up to two-thirds of the cost of home improvements of over 600,000 homes.
- Tradespeople must register for TrustMark or Microgeneration Certification Scheme (MCS) accreditation to take part in the scheme, which will cover green home improvements ranging from insulation of walls, floors and roofs, to the installation of low-carbon heating, like heat pumps or solar thermal – measures that could help families save up to £600 a year on their energy bills.
- Details have also been unveiled on how consumers in England will be able to claim the new vouchers worth up to £5,000 for homeowners. Households on low income can receive vouchers covering 100% of the cost of the improvements, up to a maximum of £10,000.
- The Government also released guidance on the Green Homes Grant Local Authority Delivery scheme. Local authorities can bid for funding under this scheme to improve the energy efficiency of low-income households in their area.
The Scottish First Minister, Nicola Sturgeon has reimposed lockdown restrictions in Aberdeen due to a cluster of Covid-19 cases in the city
- The measure include local restrictions on travel, indoor gatherings between households and the closure of indoor and outdoor hospitality.
- Additionally people are being told not to travel to the city and those living in the area should not travel more than five miles for leisure purposes.
- The restrictions will be reviewed in seven days’ time and may be extended if necessary.
- Sturgeon has also hinted that pub crawls could be banned over fears that they allow the virus to spread.
- Businesses in Aberdeen affected by the new lockdown restrictions can put their staff back on furlough up until October when the scheme ends.
Other UK news
- Welsh Ministers have announced an £800m stabilisation package for NHS Wales. The money will go towards increased procurement of PPE and create Wales’ largest ever flu campaign.
- British Business Bank Business Support Schemes have delivered over £50bn of loans to small businesses. As of the 4 August 2020, £34.3bn was delivered on the Bounce Back Loan Scheme; £13.1bn on the Coronavirus Business Interruption Loan Scheme; £3.3bn Coronavirus Larger Business Interruption Loan Scheme and £534m to the Future Fund.
- Working parents or carers who qualify for Tax-Free Childcare or 30 hours free childcare, but have temporarily fallen below the income threshold will continue to receive financial support until the end of October 2020. Critical workers who may exceed the income threshold, as a result of working more during the pandemic will also continue to receive support this tax year.
- Blackburn and Darwen council in Lancashire, the local authority with the highest infection rate in England, has set up its own contact-tracing system after the national programme failed to reach many of its residents.
- Pizza Express is potentially closing 67 outlets, which will equate to 1,100 job losses.
- Mayor of London Sadiq Khan is seeking views on the proposal on give key workers in the capital, which could include nurses, police officers and teachers, priority access to buy or rent homes below market rates. The consultation runs from 4 August to 11 October 2020.
- Welsh Health Minister Vaughan Gething has announced that £22.7 million of funding will be provided to help meet the additional costs adult social care providers in Wales are incurring due to the pandemic. The funding is in addition to the £40 million the Welsh Government made available to local authorities in April.
- The Department of Health and Social Care announced that two new tests – both able to detect Covid-19 and other winter viruses such as flu in 90 minutes – will be made available to NHS hospitals, care homes and labs. The tests do not require a trained health professional to operate them, meaning they can be rolled out in more non-clinical settings.
- A new online and telephone support service for apprentices who have lost their jobs during the Covid-19 outbreak has been launched by the Government. The new Redundancy Support Service for Apprentices (RASSA) will ensure apprentices can access local and national services that provide financial, legal, health and wellbeing support, and help them to find a new job should they need it.
- BEIS has committed £20 million to improve small business’ management, productivity and problem-solving skills through 2 training programmes. The Small Business Leadership Programme will focus on strengthening decision makers’ leadership skills, so they are able to address management challenges The Peers Network Programmewill focus on helping business owners improve their problem solving skills, such as finding new customers and using technology to adapt a business model.
- The Lord Chancellor has announced locations for 10 ‘Nightingale Courts’ which have been set up to tackle the impact of Covid-19 on the justice system. Middlesbrough Town Hall, the Knights’ Chamber within the grounds of Peterborough Cathedral, and the Ministry of Justice’s headquarters in London are among the venues that will soon be in use. The temporary courts will begin hearing cases from next week.
- The Government has extended the Help to Buy scheme. Under the current scheme, new homes would need to have been finished being built by the end of December – the extension will mean the deadline will now move to 28 February 2021. The deadline for the legal completion of the sale will remain the same – 31 March 2021.
- Jaguar Land Rover is planning further cuts after taking a £1.1 billion hit from factory shutdowns and posting a £413 million loss as Covid-19 “significantly impacted” trading.
- Luxembourg has been removed from the list of travel exemptions for the whole of the UK following data showing a significant change in confirmed cases.