The Shorthand – unemployment and Covid-19 cases reach long-time lows

Welcome to The Shorthand, your weekly digest of news stories that affect small businesses in the UK, breaking down what's happening and why you should care.

And all in under 5 minutes.

1. Unemployment at a 48-year low

What’s happening here?

The Office for National Statistics (ONS) has released new data showing that the UK’s unemployment rate has fallen to 3.6% – the lowest since 1974. The data also shows that the UK's employment rate and total number of vacancies fell during the same three-month period.

The BBC's Economics Editor Faisal Islam explained:

The lower unemployment rate is not really about a jobs boom, it is more reflective of fewer people actively looking for work.

When calculating the unemployment rate, the ONS only accounts for people aged 16 to 64 who are "economically active" – excluding people who are not looking for jobs such as students or those unable to work due to long-term health conditions.

With the "inactivity" rate hitting a five-year high of 21.7%, the recent drop in unemployment is largely due to an increasing number of people exiting the workforce because of their health or studies.

Why should you care?

Chief Economist at the Institute of Directors (IoD) Kitty Ussher described the ONS' new data as "a very real concern" for businesses.

Over the last few months, job vacancies have reached a historical high. While August saw a marginal decline in vacancies, this drop seems to be the result of budget restrictions and recruitment freezes rather than filled roles. An extraordinarily low unemployment rate suggests that the staffing crisis is far from over – even if a business could afford to make new hires, there's far fewer people to choose from.

Jane Gratton, Head of People Policy at the British Chamber of Commerce (BCC), echoed the IoD's concerns and called on the government to take action:

With firms doing their best to keep afloat during a period of spiralling costs, they are also facing an extremely tight labour market which is further impacting their ability to invest and grow. During a period of increasing inflation, and a stagnant economy, we cannot afford to let recruitment problems further dampen growth.

The government can help by reducing the upfront costs on business and providing training-related tax breaks, increasing flexibility in the apprenticeship levy and ensuring job-seekers have access to rapid retraining opportunities.

The Shortage Occupation List (SOL) must also be reformed to include more jobs at more skill levels, to give firms breathing space to train and upskill their workforce.

2. Light at the end of the Covid-19 tunnel

What’s happening here?

Dr Tedros Adhanom Ghebreyesus, Director-General at the World Health Organisation (WHO), has given his most optimistic assessment of Covid-19 to date. He said, "We are not there yet. But the end is in sight".

According to the WHO, the world has seen the lowest level of weekly deaths from the virus since March 2020 – the month Covid-19 was first declared a pandemic by the United Nations agency. This comes as infections in the UK have dropped to their lowest level for nearly 11 months.

Despite this positive outlook, countries were urged to remain vigilant, keep testing and strive for vaccinating 100% of high-risk groups:

A marathon runner does not stop when the finish line comes into view, she runs harder, with all the energy she has left. So must we.

We can see the finish line, we’re in a winning position. But now is the worst time to stop running.

Why should you care?

According to the ONS, the Covid-19 pandemic had an “unprecedented shock” on the UK economy. During April and June 2020, the height of the first national lockdown, GDP fell by a record 19.4% – a level of change that had never been seen since ONS began measurements in 1955.

Start-ups and SMEs were among the hardest hit. Research from the Bank of England found that smaller businesses are more likely to operate in sectors vulnerable to Covid-19, while data released by Goldman Sachs revealed that nearly two thirds of SMEs saw revenues decrease and almost half had to cut jobs due to the pandemic.

The WHO’s announcement will therefore be welcome news to small businesses, many of which would struggle to deal with last-minute lockdowns and staff shortages due to self-isolation on top of the hiring and cost-of-living crises.

3. UK climbs crypto rankings

What’s happening here?

New research suggests that British investors are increasingly turning towards cryptocurrencies, with the UK now ranking 17th in the world for crypto adoption. Up four places since 2021, the UK is the only major economy in Europe to see an increase since the start of the year.

This dominance in crypto adoption has been attributed to a couple of different factors. Firstly, the country is home to world-class financial institutions and a thriving tech scene, making it a natural fit for alternative investments. Secondly, the falling value of the pound has led to slower returns on traditional portfolios – making crypto an increasingly attractive option for investors.

Why should you care?

This research comes at a significant time for the digital assets industry. Last week, we noted that industry experts were waiting for confirmation of the new prime minister’s stance on crypto. Since then, Liz Truss’ new government has pledged to embrace opportunities around cryptocurrency and plans to push ahead with the Financial Services and Markets Bill.

Ben Davis, Digital Assets Lead at Superscript, commented:

The UK's digital asset sector continues to grow, with the government reaffirming its stance on making the UK a home for crypto asset businesses. This is further cemented by the rate of consumer adoption and an increase in the rate of traditional financial institutions working with digital assets.

All signs point to a robust crypto ecosystem built by leading digital asset companies based in the UK.