In the first quarter, Gross Fixed Capital Formation (GFCF) posted slight annual growth, driven by the recovery of its Machinery & Equipment component, which grew 21.5 percent annually. The Construction & Works item, on the other hand, fell by 10 percent year-on-year, due to works being slowed down and/or postponed because of the pandemic (Figure 2). The labor market has shown a noticeable, albeit heterogeneous, improvement with respect to its worst levels of last year. The measured magnitude of this improvement varies depending on the source of information: while National Statistics Institute (INE) data show the recovery of more than half of the jobs lost since the beginning of the pandemic, the number of pension fund and unemployment insurance contributors —which can be associated with formal salaried employment— has returned to pre-pandemic levels (Figure 3). At the same time, inactivity has declined, although it remains high by historical standards, and vacancies have increased, with the result that the unemployment rate remains at around 10 percent. In any case, there are different indicators showing the fragility and heterogeneity of the labor market’s recovery, even though it still has a long way to go. On the one hand, the recent extension of quarantines had a greater impact on self-employment and informal salaried work, and there was also an increase in unemployment insurance applications, although still below their 2020 levels. Low-skilled workers and women continue to be the segments that lagged the most in the recovery of employment (Figure 4).
Across all of these, we will also want to dig into systemic risks – most obviously those associated with cyber-attacks and the risks associated with a heavy concentration of activity across firms with a handful of outsourcers. But there is also a much wider set of more day-to-day operational issues and problems which arise for firms, and given the increasing importance of digital service delivery firms need to get much better at this. Sometimes these issues will engage the FCA’s objectives, which will be a judgement for Andrew and his team. But in general, they will only be a priority for the PRA if they meet the criteria I have just mentioned. With sufficient but limited resource we need to focus our efforts where they can have the biggest impact in terms of advancing our statutory objectives. Brexit Now Lord Mayor, I admit that I am very tempted to conclude this speech without a mention of the B-word, not least because this would surely guarantee a speech shorter than Andrew’s. But our philosophy on Brexit issues happens to illustrate the point I am making here about shared endeavours. Because getting from A to B on Brexit is very much a shared endeavour, although let’s be honest it doesn’t always feel like that! Of course there are some debates between us and firms as they restructure, in particular where we see structures that appear overly complex or lacking in proper accountability.