| STATESIDE We’re in dire straits... and the pain is yet to come for most
ESTATE agents have been enjoying a bumper month. The latest House Price Index, published by Rightmove on Monday August 17, shows homes in the West Midlands have increased in value by 6.3 per cent over the past 12 months. And they’re selling.
Rightmove reports a “post-lockdown mini-boom”.
Their publicity material quoted Dominic Murphy, Managing Director of DM & Co. Estate Agents in Solihull, who said: “The market is showing incredible signs of resilience post-lockdown... the market is more active now than it has been in the last ten years. July 2020 was the best month in DM & Co.’s history.”
He highlighted Chancellor Rishi Sunak’s announcement of a temporary holiday on stamp duty as part of the explanation. There will be no stamp duty on the first £500,000 of all property sales in England and Northern Ireland until March, as part of a Government effort to get the property market moving. But even with Mr Sunak’s help, the boom in the property market is hard to reconcile with recent economic developments.
The UK economy shrank by 20.4 per cent between April and June, following a fall of 2.2 per cent between January and March.
It’s expected to recover to some extent, but the Bank of England still forecasts it will shrink by 9.5 per cent over the course of the year.
Last week, Henrietta Brealey, director of policy and strategic relationships at Greater Birmingham Chambers of Commerce, said a regular survey of local firms found businesses were experiencing the “worst economic conditions on record within the 30 year lifespan of the survey”.
In practical terms, this means some businesses closing and others cutting jobs. A recent example is Marks & Spencer, which is to lose 7,000 positions over three months. Many small firms have made cuts without receiving media coverage. And some self-employed people have lost their livelihoods.
What’s going on? The economy is in dire straits but many of us aren’t yet feeling the pain. Eventually, however, we will.
For people who haven’t lost their jobs, the past few months hasn’t been so bad, at least not financially. People have saved money. Working from home saves on transport costs, and making your own lunch works out far cheaper than a visit to the local Pret at lunchtime.
Restaurants, pubs and shops were closed and, while there may have been a boom in online shopping and takeaways, many people simply spent less. They also cancelled holidays.
The result was that some people are feeling pretty flush.
Others are not so lucky. But even for many of those losing their jobs, the worst hasn’t yet come.
For example, Marks & Spencer has announced plans to lose thousands of staff but it hasn’t made them redundant yet. It’s entered a consultation period (as it’s obliged to do by law). It will be three months before all those positions actually go, and the staff stop being paid.
What’s more, the Chancellor’s job retention scheme, known as the furlough scheme, continues until the end of October. Employers are now expected to make a financial contribution, but the Treasury is still subsidising jobs.
Some people have already lost their jobs and others are suffering stress and uncertainty as they go through redundancy proceedings. But it may take a few months – perhaps until the new year – before the UK as a whole really feels like it’s entered an economic slump.
When it happens, it could be devastating. In the West Midlands, 820,200 workers were put on furlough. Some of them will never go back to their old jobs.
The Bank of England predicted earlier this month that unemployment nationally would reach 7.5 per cent, almost twice the current level. If unemployment rises at the same rate across the country, this would mean an additional 119,000 people in the West Midlands region out of work, bringing the total in the region to 248,000.
The Bank’s estimates are, if anything, conservative. Other forecasters have predicted things will be worse.
And while we can’t be sure what will happen in the West Midlands, it’s possible we could face bigger problems than elsewhere.
Some local politicians are quietly concerned about the future of Jaguar Land Rover, which – like many carmakers – faced difficulties even before the coronavirus pandemic. West Midlands mayor Andy Street, local council leaders and trade unions have drawn up a £3.2 billion plan to save the region from economic disaster, which they want central government to fund.
It includes £250m to bring a massive ‘gigafactory’ making batteries for electric vehicles to the region, creating 10,100 jobs, and £100m to make 50,000 homes energy efficient, which will create 26,000 jobs.
Liam Byrne, Labour’s candidate to be West Midlands mayor in next year’s election and currently the MP for Birmingham Hodge Hill, set out his own proposals in a letter to the Chancellor last month.
He said: “We stand on a precipice. We need action now to save and reposition our manufacturing industry for the years to come and give a future for our region and our young people.”
Mr Byrne’s ideas include continuing to subsidise jobs in manufacturing, through an extended and more flexible furlough scheme; subsidising the purchase of environmentallyfriendly vehicles, to increase sales, and a huge increase in training and apprenticeships.
These debates will become more heated in the months to come, as the economic impact of the Covid crisis really starts to hit home.
Even for many of those losing their jobs, the worst hasn’t yet come ....