The UK economy will shrink 11.3% this year, the biggest decline for more than 300 years, Chancellor of the Exchequer Rishi Sunak said in his Spending Review.
He said that the total spend on Covid-19 so far has been £280 billion, stressing the health emergency is not yet over and the economic emergency had “only just begun”. He has put aside another £55 billion to spend on supporting public sector services next year.
Unemployment in the second quarter of 2021 is predicted to rise to 2.6 million (7.5%), but there is hope it will fall to 4.4% by 2024.
There will not be pay rises in the public sector next year, apart from for NHS workers. The exception here is those on lower incomes – the 2.1 million public sector workers who earn less than the median wage of £24,000 will be guaranteed a pay rise of at least £250.
Taking the recommendations of the Low Pay Commission, there will an increase in the National Living Wage next year by 2.2% to £8.91 an hour – extended to those aged 23 and over. Sunak explained that in the six months to September, private sector wages fell by nearly 1% compared with 2019, while at the same time public sector wages rose by almost 4%.
Other announcements include
- Local authorities have been given “extra flexibility” to raise money for social care through council tax and the Adult Social Care precept. Sunak promised the extra £1 billion social care grant provided this year will be maintained into next year.
- Foreign aid will be cut to 0.5% of national income in 2021.
- A new National Infrastructure Bank, to be headquartered in the north of England, will help finance projects from next Spring.
- As part of the government’s £5 billion commitment to support those hardest-to-reach areas, the government has put aside £1.2 billion to subsidise the rollout of gigabit-capable broadband.
There is very little here to indicate the impact of Brexit, so we have to conclude the obvious – it will either make it better or worse. We remain confident however, that even with all the bad news there are growth opportunities both in the UK and globally.