National Context and Sector Analysis
Gross Domestic Product
UK economic output, as measured by Gross Domestic Output (GDP), grew by 1.3% in the quarter to September with output reaching 2.1% below pre-pandemic levels. Monthly GDP estimates suggest output was just 0.6% below pre-pandemic levels for the month of September, although monthly estimates are subject to a high degree of uncertainty. Construction output reached high levels earlier in the year but saw a slight contraction in the most recent quarter. Production output, which is predominately from manufacturing, has grown only slowly so far this year whereas service sector output growth has been much stronger, in line with the removal of the legal restrictions previously imposed during the pandemic.
Index of Services
The UK Index of Services provides estimates of monthly movements of output for the service sector industries, which make up about 80% of total UK economic output. Service industry output increasing strongly from January to June with slower growth since June. Output for September was 0.3% lower than the pre-pandemic level in February 2020. In recent months Accommodation and Food services and Arts and Entertainment have grown most in output, following the removal of restrictions.
Incorporated Companies in the UK
There has been some significant churn in company formations and dissolutions over the course of the pandemic, including a pause on the strike off process. Figures for the most recent quarter, while on the high side for both new formations and dissolutions, now appear closer to previous normal trends.
UK Business Growth
ONS Business Demography statistics include all businesses registered for VAT and PAYE, and through the Inter-department Business Register provide timely data on business activity each quarter. Business births and deaths reflect movements on and off the Register as companies either newly start or cease to make payments through VAT or PAYE schemes. In three of the last four quarters, there has been a net reduction in live businesses on the register with the reduction in quarter 3 of 2021 being over 16,000 businesses, nearly twice as many as the previous quarter. Information and Communications and Professional Services have seen the largest drops in live businesses. The overall position over the last 12 months has been a net loss of 1,600 businesses compared to a pre-pandemic average growth of 52,000 businesses a year.
The seasonally adjusted UK unemployment rate continues to reduce and reached 4.3% for Quarter 3, 2021, down from 5.2% in Quarter 4, 2020. This is a positive movement indicating labour market recovery. The unemployment rate for young people aged 18 to 24 at 10.4% continues to be more than double the rate for all ages as before the pandemic, but more positively it has reduced more than for other age groups so far this year. Uncertainty remains over how the end of the furlough scheme will impact on the unemployment figures in the final quarter of the year.
PAYE Payroll Jobs
UK figures for October 2021 from HMRC Pay as You Earn Real Time Information systems show further strong growth in payroll employee numbers since the low point last November, with numbers now 0.8% above the February 2020 level. However, this net figure hides significant differences across sectors. The Manufacturing sector has lost a net 85,000 jobs since February 2020, and the Retail/Wholesale/Motor Trade sector has lost 71,000 jobs. Conversely, the Health and Social Care sector has gained 194,000 jobs and Administration and Support services has gained 132,000 jobs. Recovery has also not been even on a geographic basis with job numbers in London still below the February 2020 level.
Wage rates have increased significantly across most sectors in the 12 months to October 2021, with Professional Services showing the highest increases. Accommodation and Food which has the lowest wage rates has also seen one of the lowest increases, with the second lowest paid sector of Arts and Entertainment the only sector to experience a fall in monthly median wage.
Job vacancy numbers across the UK have been increasing strongly since February, and have reached a new record high in October, some 50% above the level for the same time in 2019, and 23% higher than 3 months ago. Vacancy numbers are above 2019 levels across all broad sectors of the economy with the highest numbers compared to 2019 in Construction and Arts and Entertainment, with Retail and the Motor vehicle trade showing the lowest increase.
Coronavirus Job Retention Scheme
The number of jobs in the UK on furlough was 1.1 million at the end of September down from 1.4 million the month before. This was 4.0% of eligible payroll jobs, down from 4.7%. Sectors with the highest furlough rates were Other services, Arts and Entertainment, and Accommodation and Food. Large employers have reduced furlough rates to very low numbers with the majority of furloughed jobs being in Small and Micro businesses. Those remaining on furlough are disproportionately within older age groups with furlough rates for those aged under 24 being the lowest. At a detailed sector level, the highest number of employees on furlough were in the restaurant and food service industry at 81,700 employees.