Economic Outlook - United Kingdom
The economy in the United Kingdom had already showed signs of slowing due to the uncertainty caused by Brexit. The first COVID-19 cases were identified in the UK in late-January, around the same time that the UK officially left the European Union. Since the UK is still working to manage the spread of the virus and the country is still on lockdown, economic recovery unlikely in the immediate future. The current situation in the UK of the virus, economy and government actions are detailed below.
- The number of COVID-19 cases based on a three-day average is still increasing each day as of March 30, 2020, according to reports from Johns Hopkins University. The country has 22,453 reported cases and 1,411 deaths.
- As this page is updated regularly, a screenshot of the graphs and statistics referenced can be seen here.
- The BBC is reporting higher numbers claiming the deaths of 2,352 virus patients as of Tuesday, March 31, 2020.
- The UK has canceled Wimbledon and suspended all Champions and Europa League (European football) games until further notice. The country has also canceled the Edinburgh cultural festivals that were scheduled to take place in August. This suggests that the COVID-19 pandemic in the UK has not yet shown signs of slowdown.
- Prior to the COVID-19 outbreak, economic growth in the UK had showed signs of slowing, showing only 0.5% growth gross domestic product (GDP) in the third quarter of 2019 and a flat GDP in the fourth quarter. This is compared to a 1.1% growth in GDP in the fourth quarter of the prior year.
- Brexit has caused uncertainty in the economy of the UK, resulting in a weaker value for the British pound and less investment in business.
- The UK left the European Union on January 31, 2020; however, the country continues to follow the EU rules during the transition period schedule to last until the end of 2020.
- The full effects and future of Brexit is unclear as negotiations with EU have been delayed due to the COVID-19 outbreak. This may lead to more uncertainty in the market as the UK has left the EU without finalized trade agreements.
- Travel restrictions around the world have damaged the UK's aviation industry and leaders in the industry including bosses of Virgin Atlantic and the Civil Aviation Authority have requested government funding to keep the airlines afloat during this crisis.
- The struggling British airline Flybe collapsed in early-March due to the decrease in demand and travel restrictions from the coronavirus, leaving passengers to find alternative transportation home.
- Travel tour operators are also at risk of going out of business due to the financial strain of issuing refunds for canceled tours as required by current regulations.
- In a news article published on March 13, 2020, UKHospitality had already reported a 15% decrease in hotel occupancy and 7% decrease in eating and drinking out. This was prior to the lockdown issued in the UK on March 24, 2020, which closed pubs and restaurants.
- As of March 2020, fashion sales in the UK are down by £11.1 billion from 2019. The lockdown in the UK and concern about ensuring adequate food supply significantly contributes to the decreased spending on non-essential items. Online sales may help companies survive, but are unlikely to make up for lost business in retail locations.
- The Confederation of British Industry reported an increase in stockpiling of groceries with the grocery sales index increasing from 29 in February 2020 to 94 in March 2020. The index for clothing and furniture stores was reported at negative 75, showing a deterioration in sales.
- Retail sales had already begun dropping in February, decreasing by 0.3% over January's sales numbers due to bad weather in the country.
- Supply chain issues are also affecting retail sales with 24% of companies reporting a significant impact to their business.
- The UK government has taken significant actions to boost the economy by helping support businesses and employees during the COVID-19 outbreak. This includes £330 billion in government-backed loans for small businesses. Some small businesses are also eligible to receive cash grants up to £25,000.
- The government has committed to refunding companies with fewer than 250 employees for up to two weeks of statutory sick pay per employee to help with COVID-19-related sick leave expenses.
- The government committed to establishing a Coronavirus Job Retention Scheme that would allow employers to apply for a grant to cover up to 80% of the salary of employees not currently working for up to three months.
- The Coronavirus Business Interruption Loan Scheme allows businesses to apply for loans that are interest-free for up to 12 months.
- The government has also deferred VAT payments until the end of June and delayed income tax payments for self-employed individuals until January 31, 2021.
To provide examples of economic recovery as cases of COVID-19 slow in the United Kingdom, we started by evaluating the current situation of the virus in the country. Our findings show that while the government is hopeful that lockdown and containment efforts have started to slow the spread of the virus, current numbers of new cases and deaths are still increasing. Despite that we, continued to look for signs of economic recovery. While the government has taken actions to help small businesses by issuing loans help them survive the COVID-19 outbreak, we did not find signs of economic recovery for the country. We also looked specifically at the retail and travel verticals and did not find positive signs in terms of recovery. As an alternative, we did provide details on the current state of these industries as well as the governments actions to help boost the economy.