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Thursday, July 09, 2020

UK economy inching past crisis peak as demand for aid slows

The Department for Work and Pensions said the number of individuals making declarations for Universal Credit benefit claims fell to 96,510 in the week starting May 25, the first time below 100,000 since March. In normal times there are around 55,000 applications a week.

By: Bloomberg | Updated: June 9, 2020 5:54:50 pm
A commuter boards a London Underground train on a platform at Earls Court station in London, UK, on Thursday, May 21, 2020. (Image source: Bloomberg)

The UK appears to be retreating from the peak of the economic pain caused by the coronavirus, with demand for government support showing signs of slowing.

The Department for Work and Pensions said the number of individuals making declarations for Universal Credit benefit claims fell to 96,510 in the week starting May 25, the first time below 100,000 since March. In normal times there are around 55,000 applications a week.

Meanwhile, the number of new jobs supported by the government’s job furloughing plan increased by around 200,000 in the week through June 7, the smallest rise since the plan began, while an Office of National Statistics survey showed the impact of the lockdown on businesses was slowly diminishing.

Graph source: Bloomberg

The small improvements coincide with a very gradual easing of the UK’s lockdown, which has allowed some businesses to reopen. Prime Minister Boris Johnson will talk his cabinet through his plans for easing the restrictions on Tuesday after officials reported the lowest number of daily deaths since curbs were imposed.

The furlough program will close to new entrants from 30 June. From this point onwards, employers will only be able to furlough employees that they have been idled for a full 3-week period prior to 30 June.

Still, the UK is far from out of the woods, with the government now supporting 11.5 million jobs through its furloughng and self-employed plan, at a cost of 27 billion pounds ($34 billion) so far. There have also now been around 3.1 million claims for universal credit since March 1, an indication of the dramatic hit to incomes caused by the virus.

The figures don’t necessarily translate into a one-for-one increase in unemployment, since people can also claim for the benefit if they see a drop in income. Furthermore, some of those who claim originally after losing their jobs may have since been placed on the government’s job retention scheme.

The government also announced an update on the uptake of its three lending plans to firms on Tuesday, which have now paid out almost 35 billion pounds.

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