TheTimes8April2020

36 1GM Wednesday April 8 2020 | the times

Business

The coronavirus pandemic is expect-

ed to wipe out the labour of 195 mil-

lion full-time workers, the equivalent

of almost 7 per cent of all hours

worked globally in the second quar-

ter of this year.

The findings were published by the

International Labour Organisation,

which it said was having “devastating

effects” on jobs, with more than four

out of five people in the global work-

force living in places hit by full or par-

tial workplace closures.

The ILO, a United Nations agency,

said “efforts to stimulate economic

Virus ‘equivalent to losing 195m workers’

activity through expansive fiscal and

accommodating monetary policies”

were “essential” to avoid mass unem-

ployment.

The report was issued as separate

figures revealed that new UK job

placements in March fell at their fast-

est pace since the global financial cri-

sis.

Permanent and temporary roles

fell at their fastest since 2009 as busi-

nesses cancelled or postponed plans

to take on staff, according to a report

by KPMG and the Recruitment and

Employment Confederation (REC).

Its permanent placements index

fell from 52.9 in February to 31.7 in

March, while the temporary billings

index fell from 49.7 to 35.6. Any read-

ing below 50 signals contraction.

“After rising in the prior three

months, permanent staff placements

declined sharply in March. Panel

members said the Covid-19 pandemic

had led many clients to cancel or

postpone hiring decisions,” the report

stated. REC surveys 400 recruitment

and employment consultancies.

Heightened uncertainty over the

outlook also underpinned the first re-

duction in overall vacancies for over

a decade. The vacancies index fell

from 56 to 47.8 in March, marking the

first negative reading since 2009.

Gurpreet Narwan

Britain ended a decade of weak

productivity by registering zero

growth last year, according to official

figures.

The Office for National Statistics

said that output per hour had risen by

only 0.3 per cent in the final quarter of

last year and was flat for 2019 overall.

Productivity rose in only two of the

previous six quarters.

The country has been plagued by

weak productivity since the financial

crisis a decade ago. Since 2010, the UK

has achieved average growth of only

0.5 per cent a year and has been out-

performed by all other G7 economies,

except Italy. Productivity has risen by

5.2 per cent over the ten-year period.

The poor performance has been

driven by sectors that before the

financial crisis had been among the

most efficient. The financial services

industry, for example, has exerted the

biggest drag on productivity growth

over the past decade. Productivity in

the sector was flat in the fourth quar-

ter of 2019 compared with the same

three-month period in the previous

year, but has fallen by 0.1 per cent

over the past ten years.

“Financial services has seen a net

negative contribution to output per

hour growth, reflecting that its pro-

ductivity has actually declined over

the decade,” the ONS said. “This

contrasts with the years leading up to

the 2008 economic downturn, where

financial services saw extremely

strong productivity growth, so the

post-downturn decline may offer

evidence that this earlier growth was

unsustainable.”

In contrast with financial services,

non-financial services — including

retail and wholesale trade — have

contributed the most to productivity

growth over the past ten years. Pro-

Growth in productivity held

back by financial services

ductivity in the sector grew by 0.6 per

cent in that period, despite falling by

0.1 per cent in the final three months

of 2019. Were it not for non-financial

services, the rest of the economy

would have registered virtually no

growth in output per hour this decade.

Low productivity is damaging for

the economy because it means that

companies are struggling to produce

more with the same resources. As a

result, employers are unable to in-

crease wages faster than prices and

living standards stagnate.

Productivity has failed to grow

over the past ten years, while employ-

ment has hit record highs. Econo-

mists argue that a decade of low wage

growth has made hiring workers

more attractive, but companies have

postponed plans to invest because of

political uncertainty.

The Bank of England recently cut

its forecast for output per hour in

2020 to 0 per cent, down from 0.75 per

cent. This rises to 0.75 per cent in 2021

and 1.25 per cent in 2022. However,

economists warned that the true out-

come was likely to be worse as Covid-

19 would continue to take its toll on

business investment.

Gurpreet Narwan

Economics Correspondent

Productivity growth

Source: ONS

Output per hour %

2

1

0

-1

-2

151311 172019

RONNY HARTMANN/AFP/GETTY IMAGES

I

ndustry across the

board in Germany is

going through its

deepest slump since

the country was

reunified three decades

ago, according to a

closely watched survey

(Oliver Moody writes).

Managers in every

sector except food and

drink believe that their

companies’ output will

collapse over the next

three months, with the

pessimism at its

strongest among

carmakers.

The Ifo Institute, a

Munich-based economic

research centre, said

that the coronavirus

pandemic had brought

about the biggest

decline in sentiment

since its records began

in 1991. Its index of

production expectations

fell from +2 to -20.8 in

March. A negative score

implies that most

businesses think they

will have to cut their

production. The fall was

nearly twice as sharp as

the worst drop during

the eurozone crisis.

The German

government has forecast

that the country’s GDP

will shrink by between

2.8 per cent and 5.4 per

cent this year, although

some independent

economists have argued

that it could contract by

more than 20 per cent.

A confidential strategy

paper drawn up by the

interior ministry is said

to have estimated that

industrial output could

almost halve in a worst-

case scenario.

By the end of March

nearly half a million

companies had applied

for support through the

Kurzarbeit shortened

work scheme, under

which the state steps in

to supply lost earnings to

workers who have been

sent home or have had

their hours curtailed in

a downturn.

The prospects are

particularly gloomy for

the automotive industry,

which employs 830,000

Germans. The Ifo report

found that sentiment in

the sector had crumpled

from +4.2 points to -36.

Klaus Wohlrabe, the

economist who led the

research, said that the

true picture might be

even worse as most of

the responses had been

gathered in the middle

of last month, before

Germany had borne the

full brunt of the

coronavirus epidemic.

The official industrial

output statistics for

March will be published

next month.

Output set

to collapse,

say German

managers

Volkswagen has paused

production and laid off

about 80,000 workers