Pay, debt and spending: how the UK economy is faring this week

Lily Canter
·3 mins read
UK retail sales climb back to pre-pandemic levels. Photo: Getty.
UK retail sales climb back to pre-pandemic levels. Photo: Getty.

This week, the economy has continued to see peaks and troughs, as the bumpy road to post-pandemic recovery continues. Whilst employment remains volatile and public debt continues to rise, spending on retail and manufacturing is booming.

Here’s what you need to know:

Jobs and pay

Employees working in the private sector have received the lowest pay rises in a decade, according to data released by XpertHR this week.

Pay deals in the three months to July offered a median annual pay rise of 0.5%, down from 2.2% from the last three reports.

The median pay award fell two percentage points lower than the median of 2.5% recorded in the same period a year ago ⁠which is the lowest figure for more than 10 years.

And as the COVID-19 crisis continues employers are increasingly looking to hire temporary workers, instead of full-time, according to Recruitment & Employment Confederation (REC) data.

The Bank of England expects the UK unemployment rate to nearly double to 7.5% by the end of the year with 750,000 jobs already being axed since the start of the pandemic.

The government has announced a "plan for jobs" scheme to replace the furlough package which will focus on “protecting, supporting and creating jobs to ensure that nobody is left without hope" according to the Chancellor.

READ MORE: Coronavirus: UK public debt breaks through £2tn for the first time

Public debt

UK government coronavirus spending measures have pushed public sector debt over £2tn ($2.6tn) for the first time.

Figures released by the Office for National Statistics (ONS) on Friday (21 August) revealed borrowing for July was £28.3bn more than the same period last year. Public debt has now reached £2tn making it 100.5% of gross domestic product (GDP) for the first time since March 1961.

Chancellor Rishi Sunak said on Friday: “Today’s figures are a stark reminder that we must return our public finances to a sustainable footing over time, which will require taking difficult decisions.”

A report published by the Office for Budget Responsibility has suggested that borrowing in the current financial year, between April 2020 to March 2021, could increase to £322bn, around six times the amount borrowed in the previous financial year.

The mammoth public debt has been caused by people earning and spending less which has driven down government income via taxes, coupled with the need to mitigate the impact of the coronavirus crisis, including the furlough scheme, leading the government to borrow more money than anticipated.

READ MORE: Coronavirus UK private sector sees sharpest growth in seven years

Spending

In better news, the economy is faring well when it comes to spending. Retail sales rose by 3.6% between June and July according to ONS figures also released on Friday.

Sales have now climbed back to pre-pandemic levels and are 3% higher than February, which was just before the World Health Organisation declared a pandemic and the UK was placed in lockdown.

Shoppers have been spending more money on clothing and petrol although fuel sales still remain far below February levels.

July's rise in retail sales, follows larger peaks in May (12% increase) and June (13.9% rise).

The UK manufacturing and services industry also grew rapidly in August at the fastest rate in almost seven years, according to IHS Markit purchasing managers' index.

IHS Markit said the growth in new orders was linked to the reopening of businesses, alongside "greater willingness-to-spend among UK households".