Latest economic figures show Britain's GDP will have only grown by 1% in 2019, the lowest non-recession growth since the second world war.
The Resolution Foundation released its economic assessment for 2019, based on data currently available (quarters 1 - 3) and it warns that we may be seeing signs of a recession in the UK, and that its strong labour market data may start to weaken in 2020. However, improvements in the global economy along with increased investment could still improve the picture in the coming year, according to their analysis.
The think-tank’s report, released on 27 December, says that for the period of July to September 2019 “the 16-64 employment rate ticked up to a new record high of 76.2 per cent, while annual growth in real weekly pay (excluding bonuses) remained at a reasonably healthy 1.8 per cent.”
The largest increase in labour participation has been among the 50 – 69 year olds.
Low productivity and falling vacancies are among worrying trends
The problem, as the Foundation experts see it, is that there are a number of key signs that the economy is headed for trouble. These include “very low” productivity growth, a continued drop in vacancies since the end of 2018, and a long-term drop in off-the job training.
The ‘disappointing’ labour productivity figures reflect no growth over the last year and only 1.2% growth over the past four, says the Foundation. While there is no evidence the country is in recession, “vacancies tend to fall as the as the economy enters a recession”, they say.
The Foundation does point out that vacancies are still high, implying “higher employment and faster pay growth”, its continued decline is a source of concern. Off-the-job training was “slightly up” since 2018 but there has still been an overall decline in “training intensity” over the last two decades. 2019 also saw a decline of 1% in the number of graduates doing non-graduate work. Finally, businesses overall have not shown intentions to be increasing their workforce, according to the latest Bank of England figures.
Employment and employment growth are not evenly distributed
While unemployment has seen record lows, according to official metrics, there is a “wide disparity” between unemployment rates throughout the country. North East of England, for example, is experiencing employment rates at around 71%, which is 10% less than South East England at 81%. Furthermore, 2019 has seen this gap increase by 2.5%. Six regions of the UK with the weakest employment figures also show “slower-than-average employment growth” as well. Meanwhile the inequality in the system as a whole is also showing no sign of reversing, with the wealthiest 10% of the UK population owning nearly 50% of the wealth, according to the Foundation.
The overall take-away from the report is that while the UK is experiencing strong employment figures overall and steady nominal pay growth these are at risk by an economy which is showing signs of slowing down. Yet the more worrying signs could be counteracted by policy-makers and investors. That and how businesses and consumers react “are what will decide our economic future", the report says.