The State of Britain

A £1.6bn Stronger Towns Fund looks to the North, a new record of 32.7m employed with the jobless rate the lowest since 1975, the public finances in good shape and living standards and the economy continue to defy expectations

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The headline regional policy development this month was HMG’s £1.6bn Stronger Towns Fund. The Fund will be broken down over seven years into £600m, available in any part of England, and £1bn, allocated to North West: £281m, North East: £105m, Yorkshire and the Humber: £197m, West Midlands: £212m, East Midlands: £110m, South-west England: £33m, South-east England: £37m, East England: £25m. At the time of writing, how these funds are distributed has not been revealed but allocation is based on a combination of productivity, income, skills, deprivation metrics and proportion of the population living in towns. More than half of the money will go to the north of England and the Midlands, targeting funding at those places with economies that are performing relatively less well to the England average. London is not on the list, but towns within Greater London can bid for a share of the £600m pot. The Department of Housing, Communities and Local Government said there will be additional announcements for Wales, Scotland and Northern Ireland. The Department also stated that communities would be able to draw up plans for their town with the support and advice of their Local Enterprise Partnerships. It is likely that those areas missed by the City and Growth Deals initiatives will benefit. This fund does not replace EU structural funds and the Government has said it will come up with a Shared Prosperity Fund to replace EU money. The Stronger Towns Fund is dwarfed by EU funding, which might have increased post 2020 when the EU produces its new aid map; which will show that the poorer parts of the UK have slipped further behind the EU average and will therefore qualify for more state aid.

Defying expectations the UK economy grew by 0.2% in the three months to January, driven by a pick-up in activity that month when the economy expanded by 0.5%. Growth in the IT, health services and wholesale trading sectors – probably due to Brexit stockpiling – outweighed falls in the manufacturing of metals and cars, and construction repair work. The ONS said the services sector – 80% of the private sector – grew by 0.5% of which 0.3% was in January after a 0.2% fall in December.

ONS figures this month also showed the number of employed people in the UK was at a new record of 32.7m; at 76.1%, it is the highest since records began in 1971. Unemployment fell by 35,000 to 1.34m; with the jobless rate of 3.9%, the lowest since 1975. Also weekly earnings increased by 3.4% – down by 0.1% on the previous month – outstripping inflation which is at 1.9% and boosting living standards. The regional figures showed the south-west of England employed most at 79.9% with an unemployment rate of 2.9%, comparing favourably with the UK’s highest unemployment rate of 5.2% in the North East; the North West saw the biggest drop in unemployment from 4.1% to 3.6%.

During the month ONS statistics also showed which occupations are at highest risk of being automated. The ONS said around 1.5m jobs or about 7.4% of the workforce are at high risk; notably waiters, bar staff, catering assistants, sales assistants, pharmacists, theme park staff, security guards, printing machine assistants, bus drivers, automobile assemblers, sewing machinists, coal miners and road construction operatives.

Inflation – measured by the Consumer Prices Index – rose to 1.9% from 1.8% in January; the first rise since August 2018. The ONS said that a rise in food and alcohol prices were offset by lower price rises in clothing and footwear. On food, there was an uplift in bread, cereals and vegetables and additional duty on rose wine and some ciders announced in the Autumn Budget increased alcohol.

Given the political furore, economic conditions are reasonably benign and although the MPC looks two years ahead it is difficult to see a rate rise this year. Not so in the Eurozone where the ECB triggered an unexpected fresh round of stimulus pushing cheap loans at banks to help revive the economy. Growth in the zone is now forecast to be 1.1% this year (versus 1.7%) and inflation is expected to be 1.2% (versus 1.6%.); the ECB said growth was 0.2% in the final quarter of 2018.

In his Spring Statement the Chancellor said the OBR forecast that the UK economy will grow at 1.2%. The government is expected to borrow £22.8bn this financial year,£3bn lower than the £25.5bn predicted by the OBR in the October Budget. The State’s debt at the end of February was £1,785.6bn or 82.8% of GDP; 1.4 % lower than a year ago. With public finances in good shape he pledged to spend £26.6bn to stimulate the economy if MPs vote to leave the European Union with a deal.

In March, the ONS said UK house prices rose by an annual 1.7% – the smallest increase since June 2013 -.largely driven by a 1.6% fall in London house prices.
House prices in the East of England also fell on an annual basis by 0.2% for the first time since October 2011, this compared with the East Midlands and Northern Ireland where prices rose by 4.4% and 5.5% respectively. The North West and Yorkshire and the Humber also showed strong annual house price growth, of 3.4% and 2.9% respectively