Fears For Tiers ... As Local Lock-downs Loom ...

Just when you thought it was safe to leave the bubble and nix the rule of six, the traffic light system is coming. Fears for tiers and local lock-down abound. Pubs and restaurants may have to close in Northern Cities. More job losses seem inevitable in the hospitality sector.

The Chancellor is already handing out lifebelts, on a cruise ship heading for the ice. The Chancellor has announced a new Job Support scheme starting in November. The Treasury will pay one third of the wages of those in businesses forced to close; Closures as a result of new measures, yet to be announced. The support scheme will last six months and cost around £2.4 billion.

This is not an extension of the furlough scheme. It should have been. The cost of £2.4 billion of the new scheme, should be added to the £6 billion for the Job Retention Scheme and the £9 billion for the job retention bonus. Scrap three schemes and the Treasury could have saved £17.4 billion.

Running the initial furlough scheme though until Easter next year would have cost just £20 billion. Money well spent in a year in which Public Sector Borrowing will exceed £300 billion. Uncertainty now abounds in the pubs and restaurant sector. Not just the Turkeys will be on reduced rations in the run up to Christmas.

Good news from the latest GDP data released this week. The Eat Out to Help Out scheme boosted growth in the food and accommodation sector in August. Manufacturing and construction also performed better than expected. Latest data from the IHS Markit series suggests strong growth continued into September.

UK construction activity increased sharply in the month. The manufacturing recovery continued as output and new orders increased. Business activity in the service sector increased for the third successive month. B2B activity was the focus of main gains. The hotel and leisure sector reported a downturn, as the government stopped the support for family food outings.

Given the latest data, what shape will the recovery be? It's a V. It has always been a V since 1933. The recent data has not changed our outlook much. If anything we have upgraded our sector forecasts slightly. The details are listed below.

Output in the second quarter was down by 20%. We expect a recovery by halves this year. Output down by 10% in the third quarter, then down by 5% in the final quarter of the year. For the year as a whole, output will be down by around by almost 10%. A strong bounce back is in prospect for 2021 especially from Easter onward ...