It will come as no surprise to most readers that unemployment rates have increased significantly as a result of the pandemic. However, recent information from the Office for National Statistics (ONS) have shown the full extent of its impact. This reveals that 856,500 unemployment claims were registered in April, the biggest monthly rise since 1971 and a rise of 69% from the previous month. That means that 2.1 million people are now unemployed. Job vacancies also fell significantly by 170,000 in the quarter to a total of 637,000. Within that stark high-level figure though there are some significant regional variations. The worst affected area according to the ONS was the North-East where unemployment increased more quickly than anywhere else. At the end of April, 112,800 people in the region were claiming unemployment benefit, a 51% increase on the previous month. This means that 9% of people in the North-East are now officially unemployed.
What makes this particularly unfortunate is that in recent times the unemployment situation in the North-East had been in relative terms improving and, although higher here than in many other parts of the UK, the gap had been closing. Unemployment had actually fallen by 0.7% to 5.4% at the end of the first quarter though that compared to a national figure of 3.0%. The employment rate was though still the lowest and its corollary, the unemployment rate the highest, of the nine English regions. That relatively improved position has now reversed and the gap has widened again. It remains to be seen whether it deteriorates still further when the next month's statistics are published and beyond that when the furlough scheme starts to be unwound.
One issue for the government to consider is if and how to take regional economic issues into account when starting to formulate and then implement a recovery programme when the time is right for it. So far, the various measures taken in response to the pandemic have been largely national though local authority grants have been made which do give the recipients flexibility as to how the allocate the funds received down to the very local level. However, it may be that some regional economies will bounce back more quickly than others. There are a lot of uncertainties to take into account, not all of them related to COVID-19 impacts. Brexit is an important factor. With the government insisting that the transition period will end on 31 December 2020 and little sign of progress on trade talks, services is one area that may be adversely affected if no agreement is reached by then. This might impact on some areas such as London and the South-East than others. Another significant aspect of EU support in the past has been in the area of regional development grants which economically challenged areas have been beneficiaries of.
With the impact of both the pandemic and Brexit to take into account, there are some significant issues for government policy going forward. Whether or not to differentiate economic support and focus in particular on those regions worst hit by the pandemic is something of a potential headache. On the one hand, everybody will need help. On the other, the government was largely elected because of a historic switch in voting patterns in the North and the Midlands in particular. The government itself suggested that it had been 'lent' many of those votes and would need to prove itself if the change was going to be a longer-term phenomenon. Of course, when it said that, the coronavirus outbreak was not even a cloud on the horizon. The world has changed much since then and it leaves the government with a conundrum going forward.
Wayne Bartlett is an author for accountingcpd. To see his courses, click here.