Recovery Runs Out Of Steam in Great Britain in September, Ahead Of New Restrictions
The economic recovery loses some steam in September in the United Kingdom, suggests the PMI index on activity in the private sector on Wednesday, at a time when new restrictions on activity in England to fight against the coronavirus could weigh even more on the restart.
The British Government Announced New Measures to Counter the Resurgence Of the Virus
According to a first estimate published by the economists, the composite PMI index (industry and services) stood at 55.7 points this month against 59.1 in August, its lowest level in three months, testifying to a slight shortness of breath after the acceleration recorded this summer after the confinement period.
August had been particularly good thanks to the government program to subsidize meals taken in restaurants in order to revive one of the sectors most affected by the health crisis. Many companies interviewed by Economists explain that lack of consumer confidence and disruption in their activities given the pandemic have weighed on the restart of their activity.
The survey also shows that the number of jobs continues to decline rapidly, especially in the service sector, at a time when employers are making redundancies in anticipation of the withdrawal of the partial unemployment scheme at the end of October.
Chris Williamson, economist at IHS Economists, nevertheless expects a strong rebound in growth throughout the third quarter, after a historic plunge of 20.4% in gross domestic product between April and June. The resumption of the summer could however come to a halt in the last quarter, in view of new restrictive measures unveiled by the government on Tuesday to counter the resurgence of the virus.
Pubs and restaurants will have to close at 10 p.m. from Thursday in England and the government is encouraging employees to again favor teleworking. The range of measures could be tightened if the rapid spread of covid-19 is not stopped.
The Ministry of Finance is preparing new mechanisms to support the economy, in particular to replace short-time working, as requested by unions, employers and the Labor opposition, as well as an extension of guaranteed loan programs.
Bank of England (BoE) Governor Andrew Bailey has urged Finance Minister Rishi Sunak to “rethink” the short-time working arrangement. Mr. Sunak had promised to be “creative” in the matter. One of the avenues mentioned by the Financial Times and The Guardian would be for the government to share with the company the payment of wages for employees who would be forced to work part-time for lack of sufficient activity.
This mechanism would be much less expensive than partial unemployment which benefits 9.6 million employees at a cost that already exceeds 39 billion pounds.