What impact will coronavirus have on the UK economy?
On 23rd March 2020, the UK government imposed a nationwide lockdown in an attempt to slow down the spread of coronavirus.
As a result of this, the country’s economy rapidly began to decline, suffering a staggering 20.4% blow in the first full month of lockdown alone - the highest ever recorded.
The lockdown was, of course, a necessary measure, and has undoubtedly saved thousands of lives. But, skip forward five months later, and the United Kingdom has fallen into the worst recession it’s economy has ever seen.
With almost every industry being affected by the coronavirus pandemic and the subsequent social distancing measures put in place to further prevent it from spreading, it’s safe to say that we’ve never seen such uncertain times ahead.
But what impact will coronavirus have on the UK economy as the country begins to move forward and works hard to put itself back in the black?
Consumer demand
It’s fair to say that most people are still fairly concerned about coronavirus, and although the ‘R’ rate has held steadily below ‘1’ for a while, the risk of contracting the virus is still a very real threat.
This has lead to a significant change in consumer demand, with certain businesses such as gyms, cafes, restaurants, and pubs all seeing a fall in their customer numbers as more people decide to stay at home instead of risking their chances in what are traditionally crowded places.
These businesses are also having to put social distancing measures in place as well in order for their customers to feel safe in their establishments, however, this has also lead to reduced numbers of customers and with it reduced cash flow.
Travel and tourism
The economic impact of these new measures being put in place will be felt most by the travel and tourism industry, which the UK economy relies heavily on all year round.
Travel restrictions and enforced quarantine for people visiting the UK from certain countries may be a necessary measure to help prevent the spread of the virus, however, it also has the potential to act as a deterrent, with holidaymakers not having the time or inclination to self-isolate for the required periods of time.
When you factor in that the UK has had some of the highest numbers of Covid-19 cases in the world, also, it certainly becomes a less desirable destination.
It’s not all doom and gloom for the travel and tourism industry though, and restricted travel measures have meant that the UK has seen an increase in people deciding to take a ‘staycation’ and travel to a different part of the country for their holiday.
Hotels and campsites have been given the all-clear to open their doors once again, and the government’s ‘Eat Out to Help Out’ scheme has given a much-needed boost to the restaurant industry.
So, whilst the economy is on track to shrink by up to 14% by the end of the year, certain measures are being put in place to encourage spending and keep money coming into the economy as much as possible.
Your finances
A harsh reality of any economic collapse is that it affects everybody in the country and, if your finances haven’t already taken a hit from the coronavirus pandemic, it’s almost a guarantee that you’ll see a change in your personal wealth at some point.
The main reason for this is the number of people claiming Universal Credit after being made unemployed during the lockdown, and with job opportunities becoming rarer this isn’t looking to improve any time soon.
Universal Credit, mixed with the government’s job retention scheme, has meant an outgoing of around £14 billion per month from the UK’s economy, and whilst the furlough initiative is due to come to an end in October, the chances of employers making redundancies will likely increase due to cashflow problems caused by the pandemic and subsequent lockdown.
Even if you’re one of the lucky ones and your job is safe, the economic impact of coronavirus could lead to a freeze in pay rises or any bonuses that you’re used to receiving.
Growth during lockdown
Despite the fall in consumer demand for retail and hospitality, there are some industries that have in fact seen a rise in profit since the coronavirus lockdown.
Energy firms and life insurance providers are amongst these, with more money being put into these from the general public than ever before. Internet shopping and streaming services have also seen a rise in sales, and for some this has been a life-changing way of getting their essentials, and is certainly one that’s hard to come back from in terms of convenience.
Whilst the growth in these particular areas didn’t have much of an impact on preventing the economy from falling into recession, they certainly played their part in keeping certain jobs alive. And, as the demand for these services continues to grow, so to will the job opportunities that the associated companies can offer.
Looking forward
Growing the economy and getting out of this recession is going to be a slow process, but not an impossible one. As cases of coronavirus begin to decline, and the hope of a possible vaccination begins to become more of a reality, the UK’s economy will also begin to heal.
Investors can also play a huge part in helping to get the economy back on its feet and, as Javad Marandi explains, investing in businesses so that they can grow over time will be a critical part of this.
The more support a business is given, the larger it can grow and, in turn, the more people it can employ, and the more customers it can serve. This is the basic formula to increasing cash flow and getting the economy back on track.
Unfortunately, in such unprecedented times, the impact coronvirus will have on the UK economy is a hard thing to predict. But, thanks to online shopping, government-supported schemes, and businesses putting social distancing measures in place to help keep their customers feeling safe, the process of growing the economy can finally start.
