After the March 2021 budget, the rate of unemployment is expected to peak at 6.5% in 2021, lower than previous estimates; however, the latest forecasts from the HM Treasury consensus are slightly more optimistic, with a predicted average unemployment rate of 5.7% for 2021, decreasing to 4.9% over 2022.
Strutt & Parker’s Summer 2021 Market Research Databook reveals that despite the challenges the last year has brought from Covid-19, the economic market – specifically the job market – is expected to make a swift, unexpected recovery by 2022.
The Chancellor had announced an unprecedented package of Government-backed interventions to support businesses and individuals through the current situation, this included:
- A furlough scheme to pay up to 80% of employees’ wages, intended to minimise job losses. As of 31st May 2021, 8% of eligible UK workers were furloughed, rising to 11% of Londoners, with this scheme ending in September 2021
- Mortgage holidays agreed with lenders
- Business rates holidays and loan schemes
- A new six-month Job Support Scheme to protect viable jobs in businesses that are facing low demand due to the virus
- An extension of Self Employment Income Support Scheme
- Over one million businesses will get the flexibility to help pay back loans
- Other measured included are widening access to grants to include 600,000 more self-employed people and additional funding for vaccine distribution.
The speed of the recovery will depend upon latent stressors in the economy, which will not be fully known until all temporary measures are lifted.
The report also reveals that economic growth in the UK is expected to bounce back gradually. Over 2020, the economy is estimated to have contracted by 10%, the most significant yearly fall on record. Although not a vast increase, the June 2021 HM Treasury consensus forecasts an average 6.8% increase for 2021.
For 2022, OBR (Office for Budget Responsibility) projects growth at 7.3%, which is more hopeful than the HM Treasury consensus forecasts of 5.1%.
At the end of June 2021, the value of the Pound to the Euro was c.1.17; 15.3% lower than the 2015 average, and a slight decrease from the previous quarter. However, this value has rallied over 2021, from 1.11 at the end of December 2020