Yael Selfin, Chief Economist in the UK discusses the continued impact on the UK economy as COVID-19 cases rise and restrictions are increased.
We entered the autumn in a gloomier mood, with rising numbers of COVID-19 cases and increasing restrictions to control the pandemic. A range of high frequency data point at a weaker fourth quarter.
Journeys to the workplace remain well below pre-pandemic levels; they were down 35% by 21 September in the UK as a whole. Major cities have tended to register below-average levels, as workers are reluctant to use public transport. These cities also host to a larger share of office workers whose work is often easier to be done remotely.
Among major UK cities, Edinburgh has shown a persistently lower level of work-related travel than elsewhere in the UK. While all cities saw a mild drop in journeys to the workplace in recent weeks, they seem less related to the imposition of new restrictions. In fact, journeys have picked up slightly in some cities in recent weeks.
Source: Google Mobility report. September 21 was the Autumn Public holiday in Edinburgh, and September 28 in Glasgow.
A deceleration in workers’ return to their workplace will prove a blow to those businesses that rely on commuters’ footfall or provide workplace services. There is a risk that more businesses that are fundamentally viable could be lost in the short term while others will need to be agile and adopt to a new way of working post COVID-19.
August saw a major boost to restaurants as the government’s Eat Out to Help Out scheme of discounts on meals lifted the number of people choosing to dine in restaurants and cafes. Across the UK, the last day of August (which was a bank holiday) saw nearly 3.5 times the usual number of people dining out.
Early September saw the number of diners stabilise at levels close to those seen a year ago. This suggests the scheme persuaded diners to venture out bringing about a quicker recovery in revenues. However, latest data shows a renewed fall in patron numbers, with reservations down 10% for the week commencing 28 September compared to a year ago, as new restrictions and a resurgence of the disease keep diners away.
Source: Google Trends
Local lockdowns and rising infections are increasing the concern around jobs as data from Google searches reveal an increase in searches for the term ‘redundancy’. This could reflect the end of the Job Retention Scheme (JRS) in November. The government’s replacement for the JRS, announced in the ‘Winter Economy Plan’, is unlikely to have similar effects because employer contributions for unworked hours rise significantly. The scheme also has a more limited coverage in terms of wages and the requirement for workers to work a third of their hours, which is not applicable to businesses that are shut. This could lead to limited uptake of the new scheme and the prospect of a sharp increase in the unemployment rate.
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