A leading think tank believes the end of the UK government's furlough scheme will lead to an increase in job losses in the country. The National Institute of Economic and Social Research (Niesr) said it had revised up its 2021 growth forecast from 5.7 per cent to 6.8 per cent. It added that even though the UK would move up in the G7 league table for growth, the jobless rate would increase from 4.8 per cent to 5.4 per cent once the furlough scheme is phased out.
Chancellor Rishi Sunak, in an interview on LinkedIn, said he was confident that strong hiring intentions meant the “vast majority” of those still furloughed would find work. Deputy director of Niesr, Hande Küçük said, “Supply-side factors and effects of reopening amid the recovery in consumption are likely to keep inflation well above the Bank of England’s 2% target for the most part of next year.” She added it was time for BoE to prepare the ground for an eventual increase in interest rates and the reversal of bond purchases under its quantitative easing programme.
Meanwhile, IHS Markit/Cips has found shortages of labour and materials affecting the ability of British factories to take advantage of a post-lockdown boost in demand. The monthly survey found output and order book growth had slowed to the weakest in four months despite strong performance in July. It found that expansion would have been faster last month had it not been for stretched supply chains and problems with staff recruitment.
IHS Markit/Cips said the July performance was still among the best on record, but would have been even better had it not been for supply constraints. Cost and price pressures increased during the month, the survey added. Director of IHS Markit, Rob Dobson said, “Although July saw UK manufacturers report a further month of solid growth, scarcities of inputs, transport and labour are stifling many businesses. On the one hand, manufacturers are benefiting from reopening economies. This is leading to solid inflows of new work from both domestic and overseas markets, including the US, the EU, China, and the Middle East. On the other, the recent surge in global manufacturing growth has led to another month of near-record supply chain delays, exacerbated by factories and their customers building up safety stocks. Some firms also noted that post-Brexit issues were still a constraint on efforts to rebuild sales and manage supply and distribution channels to the EU.”
