UK to enter tier-system amid an economic emergency - Redmayne Bentley

On the other hand, the US S&P 500 added 1.97 per cent as mixed US data and the possibility of a smooth transition of power boosted sentiment.

According to the Chancellor, the ‘economic emergency’ caused by the pandemic has only just begun, as he warned the crisis would cause lasting damage to growth and jobs.

Official forecasts now expect the biggest economic decline in 300 years, as the UK economy is predicted to contract by 11.3 per cent this year and not return to pre-pandemic levels until the end of 2022.

The Office for Budget Responsibility (OBR) now expects the number of unemployed people to surge to 2.6m by the middle of next year, driving the unemployment rate to 7.5 per cent, its highest level since the financial crisis in 2009.

On the other hand, the National Living Wage will rise by 2.2 per cent to £8.91 an hour, with the rate extended for those aged 23 and over. The UK has also ditched its policy of spending 0.7 per cent of national income on overseas aid in order to help with the coronavirus crisis at home.

Overall, the long-term impact will cause the economy to be 3 per cent smaller in 2025 than what was initially expected in the March budget.

US first-time applications for unemployment benefits rose to 778,000 last week, in a worrying sign of weakening momentum in the US labour market as it struggles with a new wave of Coronavirus cases amid fading fiscal support. Overall, almost 1.1m Americans requested jobless claims for the first-time last week, with approximately 20.5m citizens receiving some form of unemployment benefit since the Coronavirus crisis began.

The discouraging data comes as negotiations are at a standstill over new stimulus for the US economy, with no further signs of significant talks between the outgoing Trump administration, Republicans who hold the majority in the US Senate and Democrats who control the House of Representatives.

Although encouraging vaccine news may help aid economic activity from mid-2021 onward, the expiry of policy safety nets at the end of this year, suggests that the near-term outlook will be bleak for many heading into the holiday season.

President-elect Joe Biden is expected to name Janet Yellen to lead the treasury department, and if confirmed by the Senate, she would be the first woman to hold the position in US history. The former Harvard professor and economist had previously served as head of America’s central bank and as a top economic adviser to former President Bill Clinton. As chair of the US Federal Reserve, Ms Yellen was known for focusing more attention on the impact of the bank’s policies on workers and the costs of America’s increasing inequality. Now she is likely to be charged with directing the Biden administration’s economic response to the pandemic, which has caused the worst economic contraction that the US has seen in decades. With Ms Yellen’s focus on employment, rather than inflation, she has gained a reputation of favouring low interest rates, which drive economic activity by making it less expensive to borrow money.

Yorkshire-based Provident Financial has stated that it is on course to meet market expectations for 2020 as the lender’s third-quarter results were in line with forecasts. However, although delinquency trends at the Vanquis credit card business were stable, customer bookings were lower than last year. Home credit lending to existing customers was more than 70 per cent of normalised levels for the quarter and loans to new customers were at around 60 per cent.

Chief Executive Malcolm Le May remains cautious for possible economic shocks caused by COVID-19 measures, which will inevitably impact customer spending and borrowing patterns. The firm is now undertaking an operational review of its consumer credit division, to ensure the company is best positioned and returns to delivering long-term sustainability profitability, while focusing on quality customer outcomes. In the last week Provident Financial’s share price has lost 2 per cent.

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