Rishi Sunak eyes jobs-led recovery as study finds no major pandemic hit to UK economy

Chancellor is 'cautiously optimistic' about country's recovery

Chancellor of the exchequer Rishi Sunak is bullish on the outlook for the UK economy. Reuters
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Chancellor of the Exchequer Rishi Sunak is eyeing a jobs-led recovery for Britain as a new report finds unemployment, real earnings growth and living standards held up against the pandemic.

Mr Sunak said he felt “cautiously optimistic” as the country reopens and it should feel confident as the economy moves "up a gear”.

“This time last year we faced a potential tidal wave of job losses with the UK on the brink of a financial crisis like no other in history,” Mr Sunak said on Thursday.

“But we made a Plan for Jobs, we stuck to that plan and it’s working, supporting more than 14.5 million jobs to date and helping people ... across the UK gain the skills they need to get back into work.”

Britain’s unemployment rate dipped to 4.7 per cent in April as the number of employees on company payrolls surged by a record 197,000 staff as coronavirus restrictions were eased gradually

The government has shelled out £352 billion in Covid support since the start of the crisis. However. with the furlough scheme starting to unwind from this month, there is concern unemployment will drift upwards again.

Under his Plan for Jobs, Mr Sunak said the government knows their work is “not yet done”, with the programme continuing to focus on helping those in need get back to work and reskill.

To date, 11.6 million people have been protected through the government’s furlough scheme, while 2.9 million self-employed people have received £25.2bn in grants.

While official data for April showed that economic output was still 3.7 per cent below its pre-pandemic level, the Bank of England forecasts the economy will return to its pre-pandemic size by the end of the year with growth of 7.25 per cent.

Despite predictions of high unemployment levels in 2021, the jobless rate, real earnings growth, unpaid bills and reliance on food banks were all at pre-pandemic levels by the start of this year, an “astonishing outcome” given the scale of the disruption, according to a new report from the Institute of Fiscal Studies,

However, the analysis highlighted “stark” differences between barely-affected higher-income households and those on low incomes.

People who were already suffering in-work poverty when the pandemic struck were among the hardest hit with some self-employed people failing to qualify for state job support.

One in 10 poor households were behind on their bills, slightly above pre-pandemic levels, and 13 per cent expect their financial situation to get worse in the coming months.

Meanwhile, businesses and workers are increasingly frustrated by the the continued need for 10 days of self-isolation if they come into contact with someone infected with Covid-19.

Britain's government will lift capacity restrictions on pubs, restaurants and other public events on July 19, despite a surge in the number of infections.

These are big changes that mean we will have a huge degree of freedom back.
Rishi Sunak

"I appreciate people's frustration with this. It's part of what I and the prime minister call a balanced approach. We want to make sure we see an appropriate degree of caution," Mr Sunak.

"These are big changes that mean we will have a huge degree of freedom back. I appreciate people’s frustration but I would also urge them to look at the positives as well."

Separately, the government’s Office for Budget Responsibility warned earlier this week that longer-term labour shortages may signal scars on the economy both from Covid-19 and lower levels of immigration following Britain’s exit from the European Union.

The UK is experiencing a hiring boom as it eases out of the pandemic, with some British companies raising wages more rapidly to overcome difficulties in attracting staff, adding to upward pressures on inflation.

Starting salary increases approached a seven-year high, with all regions of the UK experiencing rapid rises, according to data from the Recruitment and Employment Confederation, KPMG and IHS Markit. The jobs site Indeed said hospitality companies in particular were lifting wages, with some offering sign-on bonuses to entice workers.

“We are seeing wage inflation directly linked to demand,” said Niki Turner-Harding, senior vice president of the recruitment specialists Adecco UK and Ireland. She said those hiring many people quickly find that raising pay is the “only option.”

Meanwhile, England reaching the final of the Euro 2020 football championship will further boost the rebound in consumer confidence, Mr Sunak said.

"I think the football just adds to it: consumer confidence has already returned to pre-crisis levels and things that make us feel good are good for the economy," he said.

Updated: July 08, 2021, 10:24 AM