UK construction growth accelerates, but job cut fears rise – as it happened

Graeme Wearden

from on 2020-10-06 14:15 (#58TWR)

Rolling coverage of the latest economic and financial news, as the chancellor of the exchequer warns that many more jobs will be lost before the Covid-19 crisis is over

Latest: IMF says Covid-19 calamity isn't over
Hospitality sector warns of major job cuts looming
UK construction boomed in September...
...but employment levels fell again
Sunak: Priority is protecting employment
Chancellor wants sustainable public finances... won't say which taxes might rise

3.14pm BST

Time for a recap

UK chancellor Rishi Sunak has downplayed suggestions that taxes may rise soon to pay the cost of Covid-19. In a series of media interviews, Sunak insisted that his priority was protecting jobs, or helping people adapt into new areas.

What's happening in our economy is significant and severe. Many people are losing their jobs.

So the focus of all my attention in the short term is doing what we can to support as much employment as possible.

The strongest performing category was home building, where firms registered a sharp expansion in activity for the fourth month running. Work undertaken on commercial projects also rose strongly, increasing at quickest pace for over two years.

Meanwhile, civil engineering activity fell for the second month running and at the sharpest rate since May.

2.50pm BST

Over in New York, the Dow Jones industrial average has nudged a three-week high, as investors look for signs that a new US stimulus package could yet be hammered out.

The Dow gained 55 points at the start of trading to 28,204, a rise of 0.2%, having jumped by 465 points on Monday.

BREAKING: New CNN poll has Biden leading Trump by 16 points nationally pic.twitter.com/6l3mZmDi1J

2.27pm BST

Here's our news story on the IMF's warning about the steep, rocky road to recovery:

2.14pm BST

More trade news! The World Trade Organization has upgraded its forecast for trade in goods this year.

But, the WTO still expects that global merchandise trade would fall by 9.2% this year - a hefty decline - up from a previous forecast of between 13% and 32%.

Strong trade performance in June and July have brought some signs of optimism for overall trade growth in 2020. Trade growth in COVID-19 related products was particularly strong in these months, showing trade's ability to help governments obtain needed supplies. Conversely, the forecast for next year is more pessimistic than the previous estimate of 21.3% growth, leaving merchandise trade well below its pre-pandemic trend in 2021.

The performance of trade for the year to date exceeded expectations due to a surge in June and July as lockdowns were eased and economic activity accelerated. The pace of expansion could slow sharply once pent up demand is exhausted and business inventories have been replenished. More negative outcomes are possible if there is a resurgence of COVID19 in the fourth quarter.

Trade shows signs of rebound from COVID-19, recovery still uncertain #WTOforecast #WTOStats #GlobalTrade https://t.co/f4Zeyb67Ci pic.twitter.com/ziz3ULXLe3

2.03pm BST

America's US trade deficit has surged to its highest level since 2006, due to a jump in imports.

The Commerce Department has reported that the gap between US imports and exports rose $67.1bn in August, a jump of almost 6%, and the biggest in 14 years.

The US trade deficit deepened substantially in August to $67.1 billion after deepening substantially in July to $63.4 billion. pic.twitter.com/8ycCmpYpJ7

1.49pm BST

Heads-up: Rishi Sunak has robustly rejected the claim that he thinks arts workers should retrain, and insisted the government is supporting the industry (as flagged up earlier).

ITV have now corrected their earlier piece too. Reminder, you can see the ITV interview here, in which he talks about the need to adapt to Covid-19.

An earlier @itvnewspolitics tweet falsely suggested I thought people in arts should retrain and find other jobs.

I'm grateful they have now deleted that tweet. I care deeply about the arts which is why our 1.57bn culture package is one of the most generous in the world. https://t.co/raEXxXUMqx

1.44pm BST

IMF managing director Kristalina Georgieva adds that the Fund's projections for future growth would be much brighter' if a working Covid-19 vaccine were rolled out.

A vaccine would help the global economy emerge from its health crisis, she explains, but adds:

Vaccines or no vaccines, we came into the crisis with low productivity, low growth, high productivity.

We have to exit in a better shape, so we are more resilient for future shocks.

1.19pm BST

IMF chief Kristalina Georgieva also warns that Covid-19 is hitting the developing markets particularly hard.

She says:

In low-income countries, the shocks are so profound that we face the risk of a lost generation'.

In some cases, global coordination to restructure sovereign debt will be necessary, with full participation of public and private creditors.

1.12pm BST

Newsflash: The head of the International Monetary Fund has said the Covid-19 crisis is far from over', despite the world economy looking a little better than feared.

Speaking on an London School of Economics event, IMF managing director Kristalina Georgieva is warning that the recovery will be long and bumpy, and that countries should expect setbacks.

My key message is this: The global economy is coming back from the depths of this crisis.

But this calamity is far from over. All countries are now facing what I would call the long ascent' - a difficult climb that will be long, uneven, and uncertain. And prone to setbacks.

LIVE: IMF Chief @KGeorgieva discusses the global economy & policy priorities ahead of the 2020 #IMFmeetings in a conversation with @LSE Director Minouche Shafik, moderated by @CNBC's @SaraEisen. https://t.co/akpBzdVHWj #LSE125 https://t.co/QJyjmZgnXI

1.00pm BST

The UK's ban on consumer financial products that track cryptocurrencies is a huge shock' to the market, says Jake Green, global co-head of financial regulation at law firm Ashurst:

While it was subject to consultation, this was some time ago and will be viewed as being very much out of the blue. Many will think it is not necessary - there are already material leverage restrictions related to this form of trading and this appears quite nanny state'.

On the flip side, it is a clear sign that the FCA does not want retail clients having access to products where transparency standards are somewhat subjective.

12.52pm BST

Britain's financial watchdog is cracking down on the sale of financial products that track Bitcoin, having concluded that most people lose money on them.

The Financial Conduct Authority is banning the sale of derivative contracts which give exposure to cryptocurrencies from January. It says they offer a high risk of losses due to a lack of consumer knowledge, and the extreme volatility of crypto assets.

We believe that retail consumers can't reliably assess the value and risks of derivatives (contracts for difference, futures and options) and exchange traded notes (ETNs) that reference certain cryptoassets.

12.26pm BST

Britain's bosses are also concerned that Rishi Sunak's new wage subsidy scheme isn't generous, or focused enough.

The CBI's chief economist, Rain Newton-Smith, told parliament's Treasury committee that the chancellor might need a rethink, if cases keep rising.

We may need to look at the way the scheme is designed over the coming weeks, particularly if the crisis escalates over the winter months, and we do think that for certain sectors... we may need to see additional support.

12.09pm BST

Rishi Sunak has also been warned that more than half a million jobs could soon be lost across the UK hospitality sector.

With a 10pm curfew in place, and the chancellor's furlough scheme ending this month, the industry fears a surge in redundancies.

Britain's hospitality trade is likely to see more than half a million job losses after the government's furlough scheme ends this month, as local lockdowns and reduced opening hours hurt the sector, an industry representative said on Tuesday.

Kate Nicholls, chief executive of UK Hospitality, told Britain's parliament that recent restrictions meant she needed to revise up a forecast of 560,000 permanent job losses - out of 900,000 currently furloughed workers - that the body made last month after surveying its members.

12.06pm BST

UPDATE: Rishi Sunak has now suggested that people in the arts industry, such as musicians, may need to adapt' to Covid-19 ** although the chancellor has insisted he's been misinterpreted (see later post) and that his comments apply to all workers. **

The chancellor was speaking on ITV News this morning (as he heads towards a clean sweep of media outlets).

Rishi Sunak, asked whether out-of-work creatives should find another job, said: I can't pretend that everyone can do exactly the same job that they were doing at the beginning of this crisis.

That's why we've put a lot of resource into trying to create new opportunities," he added.

This is deeply offensive to people have worked and trained their whole lives in the arts, and to everyone who appreciates their skills and the joy they bring.

Incidentally, UK Gov figures show the creative industries contributed over 111 billion to the UK economy in 2018. https://t.co/ZUtlPDd03F

The UK will be so much poorer without the musicians, artists, comedians, actors and other creatives, who have made our country a cultural capital of the world.

The government should be standing up for them now, not throwing away what makes Britain great. https://t.co/kVhHW9N0Df

Without the arts, our lives are impoverished. This is nuts. https://t.co/gWeRfQ2iby

Oh no. The thing is, there's still huge popular demand for consumption of the arts/creative industries, those industries just need help to weather the pandemic. Better that there's effort to find creative - pun intended - ways to bring audience and performers together, safely https://t.co/FJuHhXVdsT

During the Great Depression, Roosevelt paid thousands of artists to paint and write for their country. Washington paid for Rothko, de Kooning, Pollock to keep going. Let Us Now Speak of Famous Men was sponsored by the US government.

This policy on the other hand is philistinism https://t.co/FE0GXftkXo

11.22am BST

The Restaurant Group (TRG), which owns the Wagamama, Frankie & Benny's and Garfunkel's chains, swung to a loss in the first half of the year because of the coronavirus lockdown.

The pandemic has also forced TRG has permanently shut 300 outlets with the loss of nearly 4,500 jobs. But... Rishi Sunak's cut-price meals deal has helped sales pick up, as my colleague Julia Kollewe explains:

The hospitality sector was hit hard by the coronavirus lockdown when restaurants, bars and pubs were shuttered for several months. The Restaurant Group (TRG) reported a pretax loss of 62.6m for the 26 weeks to 28 June, compared with a profit of 28.1m a year earlier. Including restructuring costs, itmade a statutory loss of 234.7m.

However, sales have improved in recent weeks, also boosted by the government's eat out to help out" scheme in August.

11.08am BST

In Germany, hopes for an economic revival are building after its industrial base reported a jump in orders.

German factory orders rose by 4.5% month-on-month in August, accelerating from July's 2.8% rise, and much faster than the 2.6% expected.

The catch-up process for new industry orders is continuing at a remarkable pace".

The strong data comes following impressive German retail sales in the previous week and falling unemployment, raising optimism surrounding the economic recovery in the Eurozone's largest economy.

#GERMANY AUG FACTORY ORDERS M/M: 4.5% V 2.8%E; Y/Y: -2.2% V -3.5%E

It confirms that global trade growth (goods) will keep rebounding (in line with other proxies). pic.twitter.com/QJ9CLqZYKJ

11.07am BST

Here's Ruth Griffin, retail director at legal firm Gowling WLG, on the surge in sales at Watches of Switzerland:

This helps demonstrate the variance in impact COVID/19 is having on disposable income, coupled with the impact of the pandemic on consumer behaviour and buying habits.

It will be interesting to see how this plays out in the retail market and whether others will pick up on the dynamic. WOS's retail strategy has proved successful too, where the spread of risk and opportunity is concerned, and this now seems to be paying off."

10.29am BST

Back in the markets, shares in Watches of Switzerland have surged to a record high - after it reported blowout sales numbers.

Despite the pandemic, and the worst recession in decades, demand for expensive timepieces from Rolex, Patek Philippe, Cartier et al is holding up well, apparently.

Trading momentum has further improved in Q2. Stronger than anticipated UK domestic sales are offsetting lower tourist and airport traffic, whilst regional stores are continuing to outperform London stores.

Furthermore, the strong momentum we have established in the US has further accelerated. All US regions are contributing to this positive trend.

10.08am BST

Kate Kirby, partner at global law firm DWF, agrees that UK builders are now shedding staff as the furlough scheme winds down.

Today's figures show a sharp increase in UK construction activity at the end of the third quarter, due to pent-up demand in new business. On the employment front, staff numbers continued to fall in September as a result of businesses releasing furloughed workers.

Looking ahead, the sector really needs to prepare for a few difficulties as the furlough comes to an end and the Job Support Scheme kicks in, and whether employers opt for the latter, more complicated, option.

9.49am BST

Duncan Brock, group director at the Chartered Institute of Procurement & Supply, says that UK building firms took off in September" as lockdown measures eases.

Brock points out that construction grew faster than the services and manufacturing sectors last month (according to the latest PMI reports).

Fuelled by the easing of lockdown measures, new orders rose for the fourth month in a row and at the quickest pace since the beginning of the year before the pandemic struck. Of the three monitored subsectors, house building was the strongest performer, with activity increasing for the second month in a row, partially driven by residential-related services such as home improvements.

However, civil engineering took another backwards step and progress worsened significantly as bigger construction developments stayed in suspended animation.

Government support schemes are winding down, so the bigger worry remains levels of job creation. With another drop in employment numbers, vacancies were sparse and further redundancy schemes could be on the cards once this pent-up demand for work is satisfied.

But for now, builders are stocking up for Brexit and Covid preparations, so purchasing remains strong in spite of longer delivery times and some shortages. Optimism is at a seven-month high, so builders are enjoying this resurgence in activity following the summer lows.

9.43am BST

Britain's construction industry has reported its biggest jump in new business since the Covid-19 lockdown was lifted.

But despite this recovery, building firms are still cutting jobs.

Meanwhile, civil engineering activity fell for the second month running and at the sharpest rate since May.

On the employment front, staff numbers continued to fall in September.

However, the rate of workforce contraction eased to the slowest for seven months. When explaining job cuts, some panellists mentioned releasing furloughed workers following a restructuring of their operations.

9.20am BST

Meanwhile in the markets.... Britain's FTSE 100 has dropped by 0.5% in early trading, confounding expectations for a small rise.

Interestingly, companies worst hit by Covid-19 are among the top stock market risers this morning.

The beleaguered aviation industry had been lobbying for a two-test system, whereby travellers are tested at an airport on arrival from at-risk countries and again five or eight days later - with negative results allowing them to leave isolation earlier.

However, the Guardian understands that the UK government is considering overlooking tests at airports, instead opting for a single test for travellers after a period of isolation shorter than the current two-week requirement.

8.57am BST

The Today Programme then challenge Sunak on his claim yesterday that there's a sacred' responsibility to balance the books.

Q: Which taxes will rise, and when?

We need to get through this, and once we get through it of course we need strong public finances.

These crisis come along every so often, and when they come along we need to be strong enough to respond.

8.47am BST

Rishi Sunak's media tour has taken him to Radio 4's Today programme, for another round of questions about the economy.

Asked about his comments last month that people should live without fear, the chancellor explains that the UK economy is particularly driven by consumer activity'.

That is going to mean that our economy undergoes some change, and it is right for that to happen, and is therefore wrong to pretend to people that they can always, in every circumstance, go back to the job that they had before this started.

Companies care about their employees as people, not just numbers on a spreadsheet...

I think it will help companies for whom demand hasn't quite returned to levels they were used to.

8.26am BST

From LBC to BBC TV.... where Rishi Sunak has warned that the UK can't run huge deficits indefinitely.

The chancellor argue that the current borrowing levels are correct now, but not sustainable" indefinitely.

This year we're obviously having to borrow an enormous amount of money to provide support to the economy at a time of crisis, that's the right thing to do,"

In terms of the medium term... obviously this can't carry on forever. This level of borrowing, which will be record levels pretty much this year, is not sustainable in the long run."

8.18am BST

Rishi Sunak has also been playing down concerns that his Eat Out To Help Out scheme fuelled the surge in Covid-19 cases, by encouraging people back to restaurant and pubs.

He says the scheme was particularly popular in the South West of England, where cases remain relatively low:

Mr Sunak says it's "a matter of social justice" the Government protects jobs in the hospitality sector.

Chancellor says accusation "doesn't stack up" because in south-west the scheme was used more than anywhere else but transmission rates are among lowest in the country.

8.13am BST

Rishi Sunak has also been speaking to LBC radio - where he's reassured pensioners that the pensions triple lock is safe.

Asked about the pledge to raise pensions in line with earnings, prices, or 2.5% (whichever is higher), the chancellor indicates that it remains intact despite the pressure on the public finances.

Yes, our manifesto commitments are there and that is very much the legislative position.

We care very much about pensioners and making sure they have security and that's indeed our policy."

On tax rises, the Chancellor tells @LBC: "Our focus right now has to be on jobs.... that's what top of our mind at the moment."

Rishi Sunak goes further when Ferrari gets in to the specifics.

On the pensions triple lock, Chancellor says "our manifesto commitments are there".

*No change.

On fuel duty freeze: "You're asking me to comment on tax rises outside of fiscal events."

*It's going.

7.55am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Britain's Covid-19 jobs crisis is building day by day, with cinema group Cineworld putting 5,500 staff out of work from Thursday as it shuts its screens.

What's happening in our economy is significant and severe. Many people are losing their jobs.

So the focus of all my attention in the short term is doing what we can to support as much employment as possible.

Tuesday's EXPRESS: Payback time! Covid tax rises on the way #TomorrowsPapersToday pic.twitter.com/JQT8UkynMM

Over time, yes, we need sustainable public finances. In the short term, the best way to have long term sustainable public finances is to protect as many jobs as possible.

Asked about looming tax rises, Rishi Sunak also says his focus now is on jobs & his priority "in the short term" is employment. Adds that over time finances will need to be put on a sustainable footing but won't be drawn on how he'll do that.

Hundreds of thousands of people are losing their jobs as we speak. Many more will.

That's happening on my watch and I need to try and do what I can to provide fresh opportunity for people and protect as many jobs as possible.

Such devastating news. On the day the Chancellor boasts about the job he has done, further evidence the Government's job support scheme just doesn't work and will leave viable businesses - and their workers - out in the cold. https://t.co/5ZYZiko88z

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