ONS COVID-19 Briefing: Economic Impact

Briefing: 14th July 2020 Coronavirus and the impact on output in the UK economy: June 2020

National (Released 14th July 2020)

Analysis of monthly growth for the production, services and construction industries in the UK economy between April and May 2020, highlighting the early impact from the coronavirus (COVID-19) pandemic.

Key Points:

  • Gross domestic product (GDP) has fallen dramatically, with production, services and construction remaining well below their February 2020 levels.
  • Despite being much lower than their February 2020 levels, retail and supporting industries grew slightly between April and May 2020, primarily because of the uptake in online shopping.
  • Manufacturing and construction growth during May 2020 were primarily because of the recommencement of work, as businesses managed to operate while adhering to social distancing measures.

Context: the UK economy during the covid-19 pandemic

GDP in May was 24.5% below the level of February 2020, having risen by 1.8% in May 2020. This reflects widespread small rises in construction and manufacturing and a more mixed picture in services, with most industries continuing to fall but with retail ensuring there was a small overall rise.

The output of services industries remains 24.4% below the level of February 2020, growing only by 0.9% in the latest month.

The production industries remain 19.1% below their February 2020 level, even after growth of 6.0% in the latest month, with manufacturing declining by 22.3% since February 2020 and growing by 8.4% since April 2020.

The construction industry remains 38.8% below the February 2020 level, despite a rise of 8.2% in the latest month.

The features of growth include:

  • The recommencement of manufacturing-related activities for some businesses in May after stopping production earlier in the year.
  • A pickup in retail and supporting industries such as freight transport by road, warehousing, and post- and courier-related activities linked to online sales.
  • Ongoing projects recommencing at the end of May in construction and construction-related activities.

 

Services industries

  • In May 2020, 8 of the 14 services sectors grew.
  • Services industries that are linked to retail activity had a boost in May 2020, particularly from online sales. These included freight transport by road, warehousing, and postal- and courier-related activities.
  • In addition, several other industries, predominantly those with non-market elements, also saw some small growths in May. However, any growth is muted in comparison with the large falls in April 2020, so many industries remain far below their values in February 2020.
  • Those industries struggling the most were those that were suffering a ripple effect as businesses cited a lack of demand from April, which impacted turnover during May.

Retail and retail-related industries

  • Retail sales volumes partly rebounded in May with an increase of 12.0%, but they remained 13.1% below their level in February 2020.
  • The proportion attributed to online retail soared to the highest value since records began in January 1997 in May 2020 at 33.4%, which compares with the 30.8% reported in April 2020.
  • Wholesale, retail and service of motor vehicles had the largest growth of 136.1%, but this remained 85.2% below its February 2020 level.
  • Accommodation services continued to decline in May 2020, whereas food and beverage services showed a small pickup. This was because of an increase in restaurant and take-away activity, while pubs and bars continued to decline.

Professional, scientific and technical activities

All industries in professional, scientific and technical activities declined in May 2020, except for veterinary activities. This industry increased by 30.9% despite remaining 20% below the level in February 2020.

Entertainment-related industries

  • The information and communication sector continued to show declines in May 2020, with all industries showing a decline, except for information service activities.
  • Film, video and TV programme production, sound recording, and music publishing activities declined by 17.4% because of social distancing affecting production of TV and film.
  • Cinemas continued to suffer in May as venues remained closed, showing a 97% decline in turnover since February 2020.
  • Music publishing grew slightly in May 2020 but remained significantly lower than in February 2020.

Education

69% of the education sector is government output, which is measured using direct volume indicators rather than by deflating expenditure. This element of education saw growth of 1.4% in May 2020 primarily because of increases in labour inputs from preparatory work and from increases in attendance.

Human health and social work activities

85% of human health and social work is government output, which is measured using direct volume indicators rather than by deflating expenditure. This element of health saw an estimated 1.0% growth in May 2020, although this is based on a very incomplete dataset at this stage.

Production industries

  • Total production output during May 2020 continued to be significantly impacted by the COVID-19 pandemic, falling by 19.1% compared with February 2020, the previous full month of “normal” operating conditions.
  • Output increased during May 2020 by 6.0%, the strongest monthly rise in output since February 1979 (7.5%). The strength was primarily because of the rise of 8.4% from the manufacturing sector, which accounts for 75% of the production industries.
  • May’s growth should be interpreted in the context of a reaction to the weakness displayed during March and April 2020 because of the significant impact of the coronavirus.
  • Following a fall in both export and domestic turnover growth over both March and April 2020, there was a partial recovery for both variables during May 2020, suggesting the further re-opening of UK and worldwide supply chains amid the easing of lockdown restrictions.

Food products

The food products industries were 6.9% weaker in May than in February 2020, with other food products, meat and meat products, and bakery and farinaceous products the hardest hit since the start of the pandemic.

Alcoholic beverages and soft drinks

Output for alcoholic beverages and soft drinks were 21.1% weaker in May than in February 2020, clearly impacted by a drastic fall in demand from the hospitality sector because of the closures of pubs, restaurants and cafés.

Textiles, wearing apparel and leather products

This sector provided a partial recovery, rising by 39.4% during May 2020, led by record increases across all three subindustries, although all fell during April to a notably weak level. As a result, output was still 41.5% weaker in May than in February 2020.

Wood and wood products except furniture

From a notably weak April position, the rise of 57.5% during May was primarily because of an increase in supply to the construction trade. There has also been increased demand for DIY products because of the amount of home DIY projects being undertaken as people spent more time making home improvements during lockdown.

Basic pharmaceutical products

This export-led sector continued to maintain strong levels of output, despite falling by 1.7% during May.

Rubber and plastics products and other non-metallic mineral products

From a very weak April position, sector-level growth of 32.5% is because of strength across all three subindustries. Within rubber and plastic products, there was some evidence that the production of PPE) boosted turnover. It should be noted that plastic products were up on the month by 22.6% compared with rubber products at 6.6%.

Motor vehicles, trailers and semi-trailers

This industry displayed a record monthly rise of 108.4%, although this should be treated within the context of a fall of 85.8% compared with February 2020.

Furniture

There was notable strength from this industry, which rose by 41.0%, from a very weak April position.

Other manufacturing

This subindustry rose by 7.0% during May. Responder-led evidence suggested a far more positive effect in May from increased demand for medical equipment (for example, PPE, ventilators, and oxygen tubing).

Electricity and gas

The fall of 2.5% at sector level was driven by gas supply. This fell by 8.1%, mainly because of warmer than average temperatures during May 2020.

Briefing date: 2 July 2020

Data published: 2 July 2020

Coronavirus and the economic impacts on the UK: 02 July 2020

The indicators and analysis presented in this bulletin are based on responses from the voluntary fortnightly business survey, which captures businesses’ responses on how their turnover, workforce prices, trade and business resilience have been affected. These data relate to the period 1 June 2020 to 14 June 2020.

This is the latest briefing on the Healthy Suffolk website, but the ONS may have published further updates. You can find historical information and any further updates on the Office for National Statistics (ONS) website. 

 

Key Points:

  • 80% had been trading for more than the last two weeks, while 6% had started trading again within the last two weeks after a pause in trading.
  • Of businesses who were continuing to trade, 6% of the workforce had returned from furlough in the last two weeks, while 2% had returned from remote working to the normal workplace.
  • 41% of businesses reported providing top-ups to furloughed workers' pay on top of the Coronavirus Job Retention Scheme (CJRS).
  • 86% of businesses who were continuing to trade, and who were using logistics services, reported that distribution demands had been met in the last two weeks.
  • Of businesses continuing to trade, 42% reported that capital expenditure had stopped or was lower than normal because of COVID-19.
  • Of all businesses continuing to trade, 11% reported that stock levels were higher than normal, while 17% reported that stock levels were lower than normal.

Context:

 

Current trading statuses of businesses

  • 86% of businesses reported continuing to trade as their current trading status, while 14% reported they had temporarily closed or paused trading. This differed little between the size of businesses.
  • A small number of businesses (fewer than 1%) also responded that they had permanently ceased trading in the period that the survey was live – 15 June to 28 June 2020.
  • The accommodation and food services activities sector and the construction sector reported the largest percentage of businesses to have restarted trading in the last two weeks, at 19% and 15% respectively.
  • The arts, entertainment and recreation sector, and the accommodation and food services activities sector reported by far the largest percentage of businesses indicating that they had paused trading and were not intending to restart in the next two weeks, at 50% and 43% respectively.
  • This was followed by the information and communication sector and administrative and support service activities sector at just 9% for both.

Impact of turnover for businesses' financial performance

  • Of all businesses continuing to trade, 64% reported a decrease in turnover outside of normal range while 9% reported that turnover had increased outside of normal range.
  • The main sectors to have reported that their turnover decreased by more than 50% were the arts, entertainment and recreation sector (58%); the accommodation and food service activities sector (52%); and the construction sector (32%).
  • The human health and social work activities sector (private sector businesses only), and the information and communication sector reported the largest percentages of businesses who responded that their turnover had been unaffected in the period, at 44% and 41% respectively.

Workforce

  • The arts, entertainment and recreation sector and the accommodation and food services sector had the highest proportions of furloughed workers – 70% and 67% respectively.
  • The education and information and communication sectors reported the largest proportion of the workforce working remotely (79% and 75% respectively).
  • The accommodation and food services activities sector, and the arts, entertainment and recreation sector reported the lowest proportion of the workforce working remotely, at 5% and 17% respectively.
  • Across all industries, apportioned by workforce size, less than 1% of the workforce had been made permanently redundant for all businesses continuing to trade. This was also the case as a proportion of all those not permanently stopped trading.

Safety measures

  • The three most common measures that businesses indicated they have implemented, or were intending to implement, in the workplace were social distancing, hygiene measures, and personal protective equipment (PPE), at 91%, 85% and 80% respectively.
  • Across all sectors continuing to trade or who have temporarily closed or paused trading and intend to restart in the next two weeks, 74% reported having implemented, or intending to implement, all three of the most common safety measures.
  • The industries reporting the largest percentages of businesses implemented, or intending to implement, social distancing in the workplace were water supply, sewerage, waste management and remediation activities (99%) and manufacturing (98%).
  • There were 6% of businesses indicating they were implementing, or intending to implement, routine COVID-19 testing, of which was mainly driven by businesses within the human health and social work activities sector (private sector businesses only) (35%).

UK supply chains

  • Of businesses continuing to trade and who had used logistics services to distribute goods or services produced within the UK, 86% of businesses reported that distribution demands were met in the last two weeks.
  • The construction sector and the information and communication sector reported the largest percentage of businesses reporting that only some distribution demands were met, at 21% and 14% respectively.
  • While 96% of businesses within water supply, sewerage, waste management and remediation activities and 94% of businesses within the education sector reported that all distribution demands were met.

Capital expenditure

  • Of all businesses continuing to trade, 19% reported that capital expenditure had stopped, while 23% reported that capital expenditure had been lower than normal.
  • The arts, entertainment and recreation sector and the accommodation and food services sector reported the highest percentage of businesses reporting that capital expenditure had stopped, at 40% and 36% respectively.
  • In contrast, the human health and social work activities sector (private sector businesses only), and the information and communication sector reported the lowest percentage of businesses reporting that capital expenditure had stopped, at 4% and 9% respectively. 6% of businesses continuing to trade reported that capital expenditure had been higher than normal.
     

Quarterly economic commentary: January to March 2020

National (Released 30 June 2020)

Economic commentary for the latest quarterly national accounts, prices, and labour market indicators.

Key Points:

  • GDP fell by 2.2% in Quarter 1 (Jan to Mar) 2020, the joint-third largest quarterly contraction on record, which reflects the imposing of public health restrictions and voluntary social distancing in response to COVID-19.
  • Total actual hours worked in the three months to April 2020 fell by 8.9% when compared with the same period a year ago.
  • The number of vacancies is now 44% lower than the record high recorded in the three months to January 2019.

Context:

 

Gross Domestic Product (GDP)

  • GDP is estimated to have fallen by 2.2% in Quarter 1 (Jan to Mar) 2020, revised from a preliminary estimate of a decline of 2.0%. This is the joint-third largest quarterly contraction in GDP.
  • The decline in the first quarter largely reflects the large fall in output in March 2020, with widespread monthly declines in output across the services, production and construction industries.
  • Estimates show that the UK economy fell by 20.4% in April, following a .9% contraction in March.
  • There was a 19.0% contraction in services output, a decline of 20.3% in production output and a 40.1% fall in construction activity. Over the initial two-month period in which the effects of the coronavirus pandemic had been felt, the UK economy has contracted by around a quarter.
  • The industries most impacted by the response to the coronavirus pandemic have been retail, construction, manufacturing, accommodation and food services, and education, in line with where there were the largest falls in hours worked.

Output

  • Services output contracted by 2.3% in Quarter 1 2020, the largest quarterly fall on record, which were most notable in education; wholesale and retail trade and repair of motor vehicles and motorcycles; food and beverages; accommodation; and travel agencies.
  • Health and social work output contracted by 4.2%, reflecting the postponement or cancellation of healthcare treatments as the NHS prepared to increase its critical care capacity in response to the pandemic. Education output fell by 6.0% in Quarter 1 2020, driven by the partial closure of schools from 23 March onwards as part of the response to the COVID-19 pandemic.
  • Manufacturing output fell by 1.1% in Quarter 1 2020, driven by declines in the manufacture of transport equipment, machinery and equipment, and textiles. This was partially offset by increases in the manufacture of pharmaceutical, chemical, and wood and rubber and plastic products in response to stronger-than-usual demand for medicinal products and for soaps and cleaning products in response to the COVID-19 pandemic.
  • Construction output fell by 1.7% in Quarter 1 2020.

Expenditure

  • Household consumption fell by a revised 2.9% in Quarter 1 2020, which is the largest fall since late 1979. The decline reflects falls in spending on transport, restaurants and hotels and clothing and footwear, in line with those expectations of where social distancing will likely have the most impact.
  • Government healthcare consumption fell by a revised 6.2%. There was increased activity in some areas, such as calls to NHS 111, but reduced activity in other areas (for example, elective operations and accident and emergency).
  • Education fell by a revised 6.4% in Quarter 1 2020, reflecting school closures across the UK, except for vulnerable pupils or those whose parents are key workers. We include the education consumed by pupils who are learning at home using materials provided by teachers.
  • There were large falls in the volumes of exports and imports in Quarter 1 2020, reflecting declines in the international trade of goods and services. The COVID-19 pandemic has led to a marked fall in domestic and global demand, while the disruptions to international supply chains might have impacted on the trade intensity of demand.

Income

  • Nominal GDP fell by 1.2% in Quarter 1 2020, which is the largest quarterly fall in nominal GDP since Quarter 1 2009.
  • Taxes less subsidies fell by 8.6%, reflecting updates to the Office for Budget Responsibility (OBR) coronavirus reference scenario and updated information on the extent to which VAT receipts were impacted in Quarter 1 2020.
  • The latest HM Revenue and Customs weekly outturn figures point to a lower average grant per job than previously estimated because of an apparent concentration of furloughing among part-time and lower-paid jobs, so the OBR has revised down its estimate of the gross cost of the Coronavirus Job Retention Scheme (CJRS).

Labour market

  • Total actual hours worked in the three months to April 2020 fell by 8.9% when compared with the same period a year ago, the largest contraction on record. On the quarter, they fell by 8.7% in the three months to April 2020, the largest quarterly decrease recorded.
  • All industries recorded a fall in hours in this period, with the most marked in accommodation and food services, construction, and other services, which includes the arts, entertainment, and recreation industry.