The State of Britain

UK GDP biggest drop ever and debt just short of 2 trillion as the furlough scheme constrains unemployment; average incomes in Kensington over £50K more than in Nottingham

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This month the ONS published regional household disposal income figures for 2018. Total gross disposable household income (GDHI) in the UK in 2018 was £1.4bn. Of that, 86.3% was in England, 7.6% was in Scotland, 3.8% was in Wales and 2.3% was in Northern Ireland.

The average UK income per head after direct and indirect taxes were taken off was £21,109.  England was the only country above the UK average at £21,609 but growth in incomes was best in Scotland and Northern Ireland at 5.1% and 4.7%. England’s growth was the same as the UK at 4.6%; Wales grew by 4.4%.

At a regional level, London had the highest GDHI per head where, on average, each person had £29,362 available to spend or save; the North East had the lowest at £16,995 which compares with a UK average of £21,109.

At a local level, Kensington and Chelsea and Hammersmith and Fulham had the highest GDHI per head at £63,286 with Nottingham the lowest at £13,138. All the top 10 local areas were in London or the South East with the bottom 10 within the North West, Yorkshire and The Humber, East Midlands, West Midlands, and Northern Ireland regions.

In terms of regional GDHI growth, the largest increase was in London at 5.2% with the smallest in the East Midlands at 3.6%.

At a local level, Kensington & Chelsea and Hammersmith & Fulham was best again in the UK with growth of 7.6% whereas Luton was the worst and only grew by 0.9%.

Separate data on earnings showed London had the highest average of £847 and the lowest average of £537 was recorded in Northern Ireland. Earnings in the NE increased the most in the UK by £60 per week whereas the biggest drop in wages was £37 in Scotland.

UK stats

The UK public sector deficit in May was £55.2bn, £49.6n more than in May 2019, the highest borrowing in any month since records began. Debt at the end of May 2020 was £1,950bn which was 100.9% of GDP, an increase of £173bn or 20.5% on May 2019; the largest year-on-year increase in debt as a percentage of GDP since monthly records began in March 1993. This is the first time that debt as a percentage of GDP has exceeded 100% since the financial year ending March 1963.

UK GDP fell by 10.4% in the three months to April 2020 with GDP declining by 20.4% in April itself. Over the quarter, services were down by 9.9% construction fell by 18.2% and production was down by 9.5%.  Year on year the contraction was 1.7%.

The drop in GDP is the biggest the UK has ever seen, more than three times larger than in March and almost ten times larger than the steepest pre-covid-19 fall. In April the economy was c25% smaller than in February.

According to Eurostat, GDP fell by 3.6% in the euro area and by 3.2% in the EU27 during the first quarter of 2020. This meant that annually GDP fell by 3.1% in the euro area and by 2.6% in the EU27.

Key European economies are now feeling the effects of the April shutdown, with the shocking data now flowing through. Over the quarter the data showed that the German economy fell by 2.2%, France contracted by 5.3%, with Italy also shrinking by 5.3%. Annually, Germany contracted by 2.3% and France by 5.0% with a 5.4% decline recorded in Italy. The Swedish economy contracted by 0.1% over the quarter which meant annual growth was +0.4%.

Due to the furlough scheme. the UK labour market was largely unchanged in May, with the level of employment stable at 32.99m and the level of unemployment similar at 1.33m or 3.9%.

The effects of lockdown though can be seen in the vacancies figure. There were an estimated 476,000 vacancies in the UK in March to May 2020; this is 342,000 fewer than the previous quarter and 365,000 fewer than a year earlier.

The euro area unemployment rate was 7.4% in May 2020, with the EU27 rate at 6.7%. The lowest unemployment rate in May 2020 was 2.4% in the Czech Republic and the highest was 14.5% in Spain.

UK inflation was 0.5% in May 2020 down from 0.8% in April. Key downward contributions came from motor fuel with the biggest risers being food and non-alcoholic drinks.

Euro area annual inflation was 0.1% in May, down from 0.3% in April. European Union annual inflation was 0.6% in May 2020, down from 0.7% in April. A year earlier, the Euro area rate was 1.6%.