Vaccine Breakthroughs Drive Output Growth In Q2 2021 But Job Creation Lags Behind
A new economic study has revealed that the UK’s towns and cities will all be showing rapid recovery rates at the same time as the government’s extended furlough scheme comes to an end next year.
The latest UK Powerhouse report by law firm Irwin Mitchell and the Centre for Economics and Business Research (Cebr), says that the average annual GVA* growth in the second quarter of 2021 across all locations is expected to be 23%.
The report however highlights a disjoint between the increase in output and employment growth and reveals that the average change in employment is forecast to be -0.7% year-on-year over the same period.
The study, which assumes a substantial proportion of the UK population will have received a Covid-19 vaccine by the middle of next year, predicts the northern towns of Doncaster, Wakefield and Rotherham will be in the top five for GVA growth by Q2 2021.
However, despite Doncaster’s strong performance for GVA growth, its employment rate is expected to fall by 8.4%. In contrast, southern locations such as Reading, Exeter and Oxford are expecting to see employment growth of over 6% at the point when the furlough scheme finishes.
UK Powerhouse predicts unemployment will peak in Q2 2021 at around 7% – up from the 4.8% reading in Q3 2020.
Looking ahead to the end of next year, there is better news with three cities predicted to record over 9% annual growth, both in terms of GVA and employment . Compared with 28 cities experiencing a fall in employment levels in the year to Q2 2021, only four locations at the end of the year are expected to see headcount fall.
During the last quarter of 2021, Milton Keynes is expected to move into top spot for year-on-year GVA growth with Reading leading the way for job creation.
Interestingly, the report finds that the cities in the south of England are expected to emerge from the crisis with the most in-tact labour markets with nine out of the 10 locations for the highest job creation in Q4 2021 being located in the south.
It also reveals that by the end of next year London and other large UK cities, including Leeds, Manchester and Edinburgh, will be amongst the five slowest growing economies in terms of output.
Expert Opinion“The encouraging news about vaccines should mean that by that by late Spring, consumer spending and business investment will be able to increase significantly.
“Although the labour market is likely to take a hit when the government’s furlough scheme comes to an end, there are some encouraging signs that the economy will perform well next year and employment levels will start to recover.
“It is striking that the southern city economies are set to recover more quickly than the rest of the country in terms of employment growth. In the last three months of 2021, job creation rates in places like Reading, Exeter and Oxford are predicted to be twice as high as in Manchester, Sheffield and Leeds.
“The government has talked a lot recently about its levelling up agenda but it’s time for action, not more words.”
Victoria Brackett - CEO of Business Legal Services & Partner
Josie Dent, Managing Economist at Cebr said: “The decision by the Chancellor of the Exchequer to extend the furlough scheme has saved hundreds of thousands of jobs. The impact of the ending of the scheme in March 2021 is expected to be far smaller than it would have been in October 2020, as there is considerable hope that in Spring 2020 the virus will be much more containable. By the end of next year, all Powerhouse cities are expected to be in recovery-phase, with positive annual GVA growth forecast across the board in Q4 2021.”