As Britain emerges from the fallout of the pandemic the UK economy has seen a consistent fall in unemployment over the past 4 months. Unemployment has fallen from 4.9% to 4.8%. Furthermore, UK job vacancies have hit their highest level since the beginning of the COVID-19 pandemic.
This is largely attributed to the successful vaccine rollout by the Conservative government with more than 36 million UK residents receiving their first vaccine. This has enabled the UK government to continue with the proposed roadmap out of lockdown significantly boosting confidence.
As UK business and shops reopen, firms have seen a large spike in demand for labour as consumers wish to spend their large amounts of savings accumulated during the pandemic. Thus causing the amount workers on payrolls to rise by 97,000 between March and April.
In the February-to-April period, there were 657,000 vacancies, up about 48,400 from the previous quarter. This signals a positive outlook for the UK economy as businesses welcome customers back into their stores prompting the increased demand for labour in the retail industry.
As the UK roadmap continues the hospitality and entertainment industry has seen the largest growth in jobs. Consumers wish to spend time in pubs that have reopened to allow for outdoor drinking. As of the 17th of May restaurants and pubs have been allowed to finally open their indoor areas to customers who wish to enjoy a meal or a cold pint.
Due to the reopening of indoor dining, it is likely the hospitality sector will see further acceleration in job growth. Other key entertainment venues such as cinemas which reopened on the 17th are also likely to benefit from increased demand.
Consumers have missed the long-awaited opportunity to watch their favourite upcoming movies with family and friends. This is likely to create increased revenues for entertainment firms benefiting from the reopening of the economy, likely creating jobs for young workers who have disproportionately suffered from youth unemployment during the pandemic.
Furthermore, the increase in employment to 4.8% signals an increase in demand for goods and services in the retail and entertainment industry as firms increase their factor inputs to meet demand. The top 4 UK banks announced UK consumers had saved £200 billion through the pandemic. This saved money is likely to be spent in the UK economy as firms reopen and the last of the lockdown restrictions are lifted increasing consumption making up 66% of UK aggregate demand leading to an increase in real GDP.
The increase in real GDP due to rising consumer spending may help the UK economy bounce back as the UK economy shrank by 8.7% since the beginning of the pandemic. As economic activity increases in the UK economy and more goods and services are produced the UK government will see an increase in tax revenue through VAT, Income tax as employment increases and Corporation tax.
Increased revenues for the UK government may allow for the growing national debt which is currently 100.2% of national GDP to be reduced over time. This means that the government will be able to sustainably fund the £30 billion recovery program which aims to foster job security and in the long run reduce the debt to GDP ratio. This is likely to provide financial stability to the UK economy after the government has fulfilled its objective of recovering the UK’s GDP levels.
However, UK employers have expressed concerns over worker shortages as firms begin to reopen. Many UK workers are still hesitant over returning to work or joining the workforce over fears of catching COVID-19. Public health remains a primary concern in the UK economy specifically with rising concerns over the Indian COVID-19 variants' possibility of becoming the dominant strain. This threatens public health as the new variant has an increased transmission rate along with the WHO raising concerns of increased lethality leading to increased deaths and hospital admissions.
Hesitancy over returning to work may result in the demand for labour outstripping the available supply of labour in the UK economy forcing firms to raise wages to incentivise workers to return to the workplace. Rising labour costs for struggling business after the pandemic may force firms to pass increased operating costs onto consumers in the form of higher prices. Despite this having a regression effect on low-income consumers, businesses need to recuperate losses that occurred from the forced government lockdown during the pandemic. Increased prices may help secure jobs and prevent further businesses from closing.
Despite significant increases in employment in the entertainment and retail sector, employment levels remain almost 128,000 below their pre-pandemic level in the January-to-March quarter of 2020. Additionally, there are still over four million workers on the furlough scheme, these workers count as employed distorting the real UK employment figure which is likely to be much higher. Many of these workers may become unemployed once the furlough scheme ends, increasing the UK’s unemployment rate.
Overall the UK economy is on track for a strong recovery post-pandemic due to the success of the vaccine scheme. However, the economy still has a long road ahead to recovery with high debt levels and no accurate measure of the current unemployment rate. Despite this consumer confidence is on the rise with likely increases in consumer spending helping bolster the UK economy during the summer months as consumers make their way to holidays and enjoy the reopening of previously cherished activities such as restaurants, pubs and cinemas.
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Written by Charlie Riley