The State of Britain

The economies of the devolved nations and London contract the quickest and UK debt exceeds 2 trillion for the first time

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A nowcast for the UK ‘regions’ for the 12 months ended June 2020 on a rolling 4 quarter basis has been published by the Economic Statistic Centre of Excellence (‘ESCoE’).

Over the period the East Midlands was ‘best’ with a fall of 4.5%, with London’s contraction the ‘worst’ at 7.4%; the UK’s decline according to the Office for National Statistics (‘ONS’) figures was 5.3%. Wales contracted by 6.8%, Northern Ireland fell by 6.7% and Scotland declined by 6.1%

ESCoE is a partnership of research institutions and the ONS and has highlighted that during these unprecedented times, 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 December 2019

Official ONS figures for six months earlier, the year to December 2019, which reflects Brexit uncertainty rather than Covid 19 turmoil, show London again topping the table with growth of 5% whilst UK growth over the same period was 0.9%. The West Midlands was again the worst performer and contracted by 2.7%. The North East, Wales, East Midlands and the North West were the other ‘regions’ in the UK to suffer a decline.

In the same report, the ONS’s figures highlighted that the South West of England was top with quarterly growth of 0.8% whilst the North East was bottom, posting a drop of 1.3%.

UK stats

UK GDP fell by 20.4% in the three months to June 2020 although GDP grew by 8.7% in June itself. Over the quarter, services were down by 19.9% (Q1 -2.3%), construction fell by 35% (Q1 -1.7%) and production was down by 16.9% (Q1 -1.5%).  

Household consumption fell by 23.1%, the biggest drop on record. Annually GDP fell by 21.7% which took the size of the economy back to 2003.

According to Eurostat, GDP fell by 12.1% in the euro area and by 11.7% in the EU27 during the second quarter of 2020. This meant that annually GDP fell by 15% in the euro area and by 14.1% in the EU27.

Key European economies came out of lockdown earlier than the UK and are recovering more quickly. Over the quarter the data showed that the German economy fell by 10.1%, France contracted by 13.8%, with Italy shrinking by 12.4%. Annually, Germany contracted by 11.7% and France by 19% with a 17.3% decline recorded in Italy. The Swedish economy contracted by 8.6% over the quarter which meant an annual contraction of 8.6%.

The UK labour market, supported by the Job Retention Scheme, does not yet reflect lockdown and was largely unchanged, with the level of employment falling by 220,000 to 32.92m and the level of unemployment stable at 1.34m or 3.9%.

Vacancies are showing increases in the latest period, driven by smaller businesses, some of which are reporting taking on additional staff to meet COVID-19 guidelines, but the Claimant Count reached 2.7m in July 2020, an increase of 116.8% since March 2020.

The euro area unemployment rate was 7.8% in June 2020, with the EU27 rate at 7.1%. The lowest unemployment rate in June 2020 was 2.6% in the Czech Republic and the highest was 15.6% in Spain.

UK inflation was 1% in July 2020 up from 0.6% in June. Key upward contributions came clothing, rising prices at the petrol pump, and furniture and household goods.

Euro area annual inflation was 0.4% in July, down from 0.3% in June. European Union annual inflation was 0.9% in July 2020, up from 0.8% in June. A year earlier, the Euro area rate was 1%.

The UK public sector deficit in July was £26.7bn, £28.3bn more than in July 2019, the fourth highest borrowing in any month on record (records began in 1993). Debt at the end of July 2020 was £2,004bn which was 100.5% of GDP, an increase of £227.6bn or 20.4% on July 2019; this is the first time debt has exceeded £2 trillion.