Bakul Kumar

Economy

The Corona virus pandemic has had a substantial impact on the UK economy, costing hundreds of British people their jobs and forcing several sectors to come to a complete standstill. The Office of Budget Responsibility (OBR)¹ estimated the outbreak could result in over two million job losses and cause the economy to shrink by 35%.

Many businesses have had to close with hundreds of thousands unable to work. While the UK government has produced unprecedented loan and pay schemes to keep companies in business and workers on the payroll, it is unavoidable that numerous people will become unemployed and many businesses may never open again.

A feature of the last decade has been the rise of self-employment, including gig economy workers. About 15% of workers now work for themselves, most of them operating alone. Many earn little and lack access to the traditional safety net, including sick pay and the national minimum wage. The self-employed have suffered more than the employees in terms of real income losses².

The lockdown is having the biggest impact on the young, low-paid and female workers, according to a recent research from the Institute for Fiscal Studies³.

Many low-income households will struggle to make ends meet. Citizens Advice – a charity which provides guidance on jobs, welfare and debt management, had over two million website views in a week. The most viewed page being “Advice on what to do if you can’t pay your bills?”.

After the lockdown is lifted, some businesses may snap back to how they used to operate before, but with changing habits it will create a demand for new products and services. For example, many may continue to work from home, whilst the delivery of goods and services online may see a sustained increase⁴.

The Chancellor, Rishi Sunak, has introduced schemes in which the state will pay 80% of the salary of the workers who would otherwise be laid off by their employers, up to £2,500 per month⁵.

It’s a difficult conundrum which not only the UK government but the rest of the world will try to address over the coming months and years.

READ MY NEXT BLOG – POST PANDEMIC BRITAIN – Effect of Pandemic on Mental & Physical Health

References

1. https://obr.uk
2. Bloomberg – https://www.bloomberg.com/news/articles/2020-04-06/how-low-u-k-unemployment-masked-holes-exposed-by-virus-pandemic
3. https://www.bloomberg.com/news/articles/2020-04-05/u-k-lockdown-hits-young-low-paid-and-women-most-study-finds
4. https://www.techuk.org/insights/opinions/item/17224-covid-19-what-does-it-mean-for-the-economy
5. https://www.ft.com/content/973dc0c0-6ae4-11ea-800d-da70cff6e4d3