An 18% pandemic induced economic contraction but wages increase the most in the UK

Reading Time: 3 minutes

A nowcast for Wales for the 12 months ended December 2020, published by the Economic Statistic Centre of Excellence (‘ESCoE’), has estimated that the country’s economy contracted by 12.5%. This ranked Wales eleventh in the UK.

Over the same period the East Midlands was ‘best’ with a fall of 8.9%, with London’s 12.9% contraction the ‘worst’.

ESCoE also gave estimates of regional growth over a longer period. Over the last five years, London, the East of England and the West Midlands have grown relative to the other parts of the UK despite experiencing some of the largest declines in activity in 2020.

At the bottom of the table, the North East of England is an outlier in terms of weak economic performance and the devolved administrations have also posted below average results with Wales ranked eleventh.

ESCoE is a partnership of research institutions and the Office for National Statistics (‘ONS’) and has highlighted that during these unprecedented times, with differing lockdowns, there is no historical data that their model can use to fully understand how the pandemic will impact regional economies. Consequently the partnership emphasises the uncertainties that exist with their nowcast at this time.

ONS GDP to June 2020

Official ONS figures for an earlier period which reflects the full effect of the first lockdown show the country’s performance relative to other parts of the UK.

These stats are for the period six months before ESCoE’s estimates shown above and compare GDP in the quarter ended June 2020 with the same quarter a year earlier. These showed that Wales’s growth was -18.3% compared with -3.8% the previous quarter. This placed Wales third (previous ranking seventh) out of the twelve UK ‘regions’.

London topped the table with growth of -16.3% whilst UK growth over the same period was -20.7%. The West Midlands was bottom, posting growth of -24.7%.

In the same report, the ONS’s figures for the standalone quarter to June 2020 showed Wales post growth of -15.1% compared with -2.4% in January to March 2020.

This placed Wales second (previous ranking fourth) out of the twelve UK ‘regions’. Northern Ireland was top with quarterly growth of -13.6% whilst the West Midlands was bottom, posting growth of -21%. UK growth was -18.8%.

Labour

Data from the ONS showed the Job Retention Scheme continued to mitigate unemployment across the UK. Unemployment in the country was 2,000 lower at 68,000 between October and December; the drop of 0.2% took the rate to 4.4%. At 7% London was the highest; Northern Ireland had the lowest rate of 3.6%, with the UK rate at 5.1%.

The South East had the highest employment rate at 78.6%, this compared with 69.4% in Northern Ireland and 72.2% in Wales where 1.4m are employed; the UK rate was 75%.

Public sector employment in Wales increased by 2.9% to 302,000, which was 21.8% of the workforce. At 25.3% Northern Ireland had the highest level of public sector employment which compared to 14.3% in London which was the lowest.

In December, average earnings in Wales increased to £624 per week. London had the highest average earnings of £862 and the lowest average earnings of £555 were recorded in North East.

Earnings in Wales increased the most in the UK by £44 per week whereas the biggest drop in wages was £27 in Yorkshire and the Humber. The rate of annual pay growth was 4.7% for total pay and 4.1% for regular pay. In real terms, total pay is growing at a faster rate than inflation at 3.8%, with regular pay growth at 3.3%.

The finance and business services sector saw the highest estimated growth in total pay, at 6.8%. All sectors saw positive growth, although construction (1.9%) and manufacturing (1.5%) had smaller growth than the other sectors. This is an improvement on the growth rates in April to June 2020, the three-month period with the biggest falls in average pay, when all these sectors except for the public sector had negative growth rates. Public sector pay growth is now 4.3%.

Housing

Wales’s average property price increased by 2.3% in December 2020 to £184,195. The drop took the annual increase to 10.7%. In comparison, UK prices grew by 1.2% to £251,500 during September, an annual growth rate of 8.5%.

Leave a Comment

Your e-mail address will not be published. Required fields are marked *