In the past few months alone, the United Kingdom has taken a significant hit to its economy as a result of the circumstances and implications brought about by the COVID-19 pandemic.
As restrictions continue to remain in place and prevent consumers from heading over to establishments and resuming their daily pre-lockdown routines, sales have tumbled to a near-halt. Spanning from mom-and-pop retailers to big-name corporations, many have struggled to keep their operations afloat, restart their cash flow, and recoup their costs.
With many business owners pooling the last stretch of their optimism to overcome the hurdles posed by the pandemic, there’s one hard truth that should be known by all companies: the UK economy is set to take a more sizeable hit over time.
An overview of the UK economy’s current situation
The latest financial statistics and forecasts set by institutions paint an undesirable picture that puts the UK economy at the bottom of leading nations in terms of economic performance.
According to the Organisation for Economic Co-operation and Development’s latest warning to the general public, Britain’s economy is expected to experience a slump of 11.5 percent at the end of Q4 2020.
In comparison with projected polls for its neighbours such as Spain, Germany, and France, the United Kingdom is expected to take the biggest hit in the global economic landscape—with experts speculating a dip of as much as 14 percent should a second peak occur.
The effect of the pandemic on surrounding economies
The OECD, in its report, stated that the current COVID-19 pandemic is slated to cast a long shadow over the world as it is expected to generate a single-hit scenario that will take a toll on economies all over the world.
In the case of Europe, the current conditions of the global health crisis are expected to result in contractions for economic stalwarts all over the region. Spain, Italy, France, and Germany, for instance, are expected to experience contractions of 11.1, 11.3, 11.4, and 6.6 percent respectively should a second peak fail to materialize. If a second peak does take place, those figures would likely be higher.
Why the UK is expected to take the biggest drop
As opposed to economies in other countries, the UK has a largely service-based economy that thrives on footfall or in-store visits to thrive and grow.
Given the current mandatory lockdowns imposed by the government in its efforts to combat the Coronavirus pandemic, it’s clear that the country’s economy is taking a far greater hit as opposed to that of its neighbours. The UK’s economic decline is expected to become even more aggressive as the nation continues to depend on its services sector to fuel three-fourths of its gross domestic product—a sector whose constituents are under closure orders until further notice.
On the matter of chart shapes
Despite the expectations of most businesses and economic planners for a V-shaped chart in hopes of a post-crisis rebound, the truth is that such is not the case as the OECD forecasts a U-shaped chart with an extended downturn.
While the pattern may not apply to all countries equally, OECD Secretary-General Angel Gurria says that the UK may be experiencing a more severe example of this chart pattern because of its service-dependent economy.
To remedy this, the OECD has recommended that the country temporarily extends its stay in the single market in addition to its local and national economy rescue packages for much-needed support.
With the current UK economy in tow after an onslaught of economic barriers and implications brought about by the Coronavirus pandemic, businesses in the country are expected to experience even more blows in the coming months. As the future of the current healthcare crisis continues to remain ambiguous with regards to its end, the UK government is expected to heed the OECD’s recommendations and warnings for a fast-tracked recovery.
We’re a leading news portal for information and innovative news for the UK banking and finance industry that takes pride in our well-written and well-researched stories. Subscribe to our newsletter to stay updated on the latest news and top developments!