UK vacancies halve and pay falls as Covid-19 lockdown hits economy – business live

Over in Washington, US treasury secretary Steven Mnuchin has predicted that America’s economy will recover in the second half of 2020.

But in testimony to the Senate, Mnuchin also predicts large unemployment numbers and other negative economic indicators during the second quarter.

He says:

“Working closely with governors, we are beginning to open the economy in a way that minimizes risks to workers and customers.

We expect economic conditions to improve in the third and fourth quarters.”

America’s labor market has been hit particularly hard since the pandemic began, with 36 million people filing new ‘initial jobless claims’.

The Covid-19 lockdown is buffeting troubled high street chain French Connection.

French Connection, which closed all its 68 stores and concessions in March, says it will run out of cash within the next few months unless it secures a cash injection or sees an improvement in sales soon.

Compass Group, the world’s biggest catering firm,has unveiled plans to raise £2bn from investors to shore up its finances, as the schools, offices and sporting venues it previously supplied with food remain largely closed.

After soaring yesterday, European stock markets are a more mixed picture today.

The UK’s FTSE 100 has dropped by about 0.5% to 6020 points, having surged over 4% on Monday. Italy and Spain’s markets have dropped by around 2%

Yeterday’s rally was driven by biotech firm Moderna reporting early Covid-19 vaccine success, and Germany and France surprisingly backing a new €500bn rescue fund backed by collective borrowing.

Bill Blain, market strategist at Shard Capital, argues that this European recovery fund isn’t big enough to tackle the economic crisis in the region.

What the agreement is…. is a commitment by France and Germany to allocate the European Union budget in the form of grants to the “worst-hit regions and sectors.” What €500bnn of budget looks like – is a significant underspend.

If the US is spending upwards of $3 trillion, then the years of austerity damage to Europe’s soft underbelly require a similar, if not greater amount.”

Chris Giles of the Financial Times has picked out the key warning signs in today’s UK unemployment report – namely the drop in vacancies and hours worked.

Housing and homelessness charity Shelter has warned that the huge jump in unemployment benefit claims in April will be followed by a spike in evictions.

Shelter fears that many of the 857,000 people who joined the claimant count list are now struggling to pay their rent.

Under the government’s emergency legislation, tenants who fall into rent arrears are protected from eviction until late June – but campaigners say more protections are needed.

Polly Neate, chief executive of Shelter, says the government must increase benefit levels quickly, or face a surge of evictions:

“With a huge surge in people applying for benefits and early warning signs of major job losses to come, it’s clear that Covid-19 is going to send shockwaves through our economy like never before.

“We know from our services that thousands of renters are suddenly scrambling to stay afloat, and for those who’ve become unemployed, the furlough scheme is no help at all. Many are turning to Universal Credit in a desperate bid to pay their rent but are quickly finding out housing benefit levels are too low to break their fall.

“People paying average rents face huge shortfalls and many are racking up serious debts that put their homes at risk. Without more support, they will be swept up in a tidal wave of evictions when the government ban lifts. To prevent this, housing benefit must be increased to cover average rents and the benefit cap lifted – to give people a fighting chance.”

Newsflash: Budget airline easyJet has suffered a cyber attack affecting nine million of its customers.

In a statement to the City, easyJet says that a “highly sophisticated source” accessed its systems, exposing the email addresses and travel details of approximately 9 million people.

They are now being contacted by the airline over the next week.

In addition, the credit card details of 2,208 customers were also accessed. EasyJet has already contacted these customers to alert them, and offer support.

The airline says:

There is no evidence that any personal information of any nature has been misused, however, on the recommendation of the ICO [Information Commissioner’s Office], we are communicating with the approximately 9 million customers whose travel details were accessed to advise them of protective steps to minimise any risk of potential phishing. We are advising customers to continue to be alert as they would normally be, especially should they receive any unsolicited communications. We also advise customers to be cautious of any communications purporting to come from easyJet or easyJet Holidays.

We’re sorry that this has happened, and we would like to reassure customers that we take the safety and security of their information very seriously.

NIESR, the think tank, has predicted that UK pay packets will fall in the months ahead as the Covid-19 pandemic continues, particularly in the private sector.

They’ve analysed this morning’s unemployment data, and found signs that the government’s furlough scheme is limiting job losses, but leading to pay cuts:

In the final week of March, the total number of hours worked was around 25% smaller than in other weeks within the quarter. This reflects the large number of people being furloughed. Furloughing has helped to limit the rise in unemployment. The unemployment claimant count rose by 850,000 to 2.10 million in April. The number of vacancies fell to 351,000 in April, from 750,000 in March.

By early May a quarter of paid employees had been furloughed, with 80 per cent of their pay (up to £2,500 per month) being met by the government. This will mean that measured average earnings will fall in the short term, reflecting the lower pay of those who have been furloughed. An early sign of this was that median monthly pay fell by £55 in April to £1789 per month.

Pay growth had been running at over 3% per annum, but the 2.5% month-on-month drop in April shows that earnings are now falling (although not yet on an annual basis)

Garry Young, Deputy Director of NISER, explains:

“The extent of the economic fallout from Covid-19 is becoming clearer. Many businesses are under severe financial pressure and are only able to retain staff because of the government’s furlough scheme which is currently supporting 7½ million jobs.

Despite this, claimant unemployment rose above two million in April, the highest level since 1996, and it is very likely that we will see falls in pay in the months ahead.”

NIESR also predict that private sector employees will be hit harder than the public sector, where many essential workers are employed.

By June, total private sector pay (including bonuses) could be falling by 4.5% per year, it estimates, while public sector pay will be broadly flat.

UK luggage brand Antler has fallen into administration, making it the latest corporate victim of the Covid-19 crisis.

Antler, which was founded in 1914, has suffered a slump in demand for its suitcases, carry-on bags and travel sets since travel restrictions were imposed.

Antler employed nearly 200 people, but 164 have been made redundant by restructuring firm KPMG which took control of the firm.

Will Wright, partner at KPMG and joint administrator, says the shutdown on the high street and the cancellation of most flights triggered Antler’s collapse.

“Although the business was trading well prior to the virus outbreak, restrictions imposed at the start of the lockdown period prompted the closure of Antler’s retail and wholesale outlets, while the impact on international travel has also significantly affected sales,” said

“With uncertainty over the lifting of travel restrictions placing further financial strain on the business, the directors concluded that they had no option but to appoint administrators.”

The UK’s unemployment problems have deepened this morning with Ovo Energy, Britain’s second biggest energy supplier, announcing 2,600 job cuts and several office closures around the UK.

The move is at least partly driven by the pandemic, which has forced Ovo to stop checking customers’ energy meters, for example.

But it also follows Ovo’s recent acquisition of SSE’s household supply division in a £500m deal.

My colleague Julia Kollewe explains:

The decision comes just four months after Ovo bought SSE’s retail division for £500m, instantly increasing its customer base from 1.5m to 5m homes.

Announcing the cuts on Tuesday, Ovo said the Covid-19 pandemic had accelerated a shift in customer behaviour, with more people going online, which had permanently reduced the need for some functions and roles.

The job losses will affect gas engineers, electricians, meter readers, and call centre staff and the company will close its offices in Glasgow’s Waterloo Street, Selkirk and Reading. Jobs are also expected to go at offices in Perth, Cumbernauld and Cardiff.

The GMB union accused Ovo of betrayal, saying it had promised that there would be no job losses after the takeover of SSE’s retail business.

Peter Briffett, CEO of the income streaming provider Wagestream, fears the UK is heading for “seventies-style unemployment”, with vacancies vanishing just as more people seek work.

“Not only are people losing their existing jobs, but the prospect of finding a new job is decreasing sharply as employers dig in for a turbulent few years ahead.

The claimant count soaring to over 2m suggests a new generation are facing a potentially long time without work or, as people during the latter stages of the 20th Century referred to it, on the dole.

“Unsurprisingly, the hospitality sector has been hit especially hard, and could take many years to recover from the impact of Covid-19.”

Resolution Foundation have tweeted a handy thread of the key charts from today’s UK labour market report, including the drop in employees, the rise in the claimant count, the plunge in vacancies, and the drop in pay last month.

They also flag up that younger workers have been hit hard by the downturn:

Here’s our economics correspondent Richard Partington on today’s UK unemployment report:

The number of people claiming unemployment benefits increased by the most since records began in April to reach almost 2.1 million, according to official figures capturing the onset of the coronavirus crisis.

The Office for National Statistics said about 856,500 people signed up for universal credit and jobseeker’s allowance benefits in April, driving up the overall UK claimant count by 69% in a single month.

Economists said the surge marked the biggest monthly increase since comparable records began in the early 1970s, while the overall number of people claiming for benefits due to unemployment had risen above 2 million for the first time since 1996.

The first official attempts to gauge the economic fallout from the coronavirus crisis also revealed the number of employees on company payrolls plunged by 450,000 at the start of April, in a reflection of staff being let go and reduced hiring. The number of vacancies posted by companies looking for new staff also halved.

More here:

Amid all the gloom, we shouldn’t forget that the UK unemployment rate did dip to 3.9% in January-March (nearly its lowest levels since the 1970s).

The employment rate hit at a joint-record high of 76.6% in the first quarter of 2020 too, the ONS reports.

That may feel like another age, before Covid-19 hit the global economy. But minister for employment Mims Davies MP argues it’s an encouraging sign, as the UK looks to recover from the coronavirus shock.

Here’s her take on today’s unemployment figures:

“Clearly these figures are behind on our current struggle but the impact of this global health emergency is now starting to show – and we’re doing everything we can to protect jobs and livelihoods.

“What these statistics do highlight is that heading into the pandemic, we had built strong foundations in our economy, which will be crucial as we gradually move forward as the lockdown eases and look to bounce back.”

You can read more about the drop in vacancies here on the ONS website [Figure 2 shows how they halved in April].

The drop in pay in April is covered here [in the “Median monthly pay” section]