In April, the UK economy shrunk by a record 20.4% due to lockdown, causing irreversible damage for many families and businesses. Over the whole of lockdown, statistics also show that the economy is expected to have slumped by a quarter due to widespread contractions across the economy.
Most noticeably, the sector which has been worst hit by this economic downturn is the hospitality and accommodation industry which has had a minus 40% spike in growth rates. In addition, there was only one sector of the economy that did not shrink, public administration and defence, which had itself flattened. John Gathergood, Professor of Economics at the University of Nottingham, shared a similarly damning outlook, stating “by the end of the 2020/2021 financial year, the government will most likely owe in debt more than the value of everything produced in the economy in one year”.
The young are also thought to be the hardest hit by the lockdown financial squeeze, as data from the Office for National Statistics (ONS) showed that younger people had little in savings and less chance to cut spending.
Yet, in spite of all the economic difficulties at the moment, it’s important to remember that it isn’t all doom and gloom. On the statistics, the governor of the Bank of England, Andrew Bailey, said “Obviously it’s a dramatic and big number” but there are “signs of the economy now beginning to come back to life”. The economy will eventually bounce bank, like it always does, and even if this takes time, it’s important to look at the economic benefits that lockdown has brought too.
Broadcast journalism has seen a huge growth in support
Technology has grown exponentially as people seek to look for technological alternatives for face-to-face events, which can only be a good sign for tech companies going forward. Zoom, for example, has seen its users rise from 2 million in 2019 to 4.2 million in March this year, which is expected to have gone up by now. On top of this, broadcast journalism has seen a huge growth in support as people are relying on television and radio outlets to inform them about coronavirus. ITV’s weekend audience for example, is up by 147 percent.
On top of this, many sectors are gradually starting to reopen which is hoped to minimise the economic effects of lockdown, so long as there isn’t a second wave which sets back this progress. All non-essential shops are due to reopen on Monday the 15th of June, all be it with social distancing measures, allowing retail to reopen in order to avoid more losses. Camping and caravan sites are also hoping to reopen on July 4th which many hope will enable a growth in the UK tourism industry as people invest in holidays closer to home, instead of jet setting abroad.
It is also important to place the UK’s economic damage in perspective as the global economy is receding, making this not just a UK issue. The International Monetary Fund (IMF) estimates the entire world economy will shrink by 3% this year, making it the worst recession since the Great Depression of the 1930s. Whilst this is fairly damaging and not something to feel optimistic about, it nevertheless shows all countries are in this together and the UK isn’t unique in facing an economic downturn. The IMF also predicts the recession should be over by next year with an economic bounce back hoping to eventually boost the economy.
The university sector is facing losses of about £790 million
Clearly, however, there will still be lasting economic impacts in all sectors of society, including universities whose funding has been stripped back significantly. As little is known about what the long-term economic effects of this pandemic could be, there is much uncertainty over how severe this recession could be. In the current financial year (2019-2020), the university sector is facing losses of about £790 million due to a downfall in accommodation, catering and conference income as well as the additional spend to support online learning. Universities UK also warn that some universities are likely to face financial failure, causing irrevocable damage to students, staff and the local communities.
Only time will tell if we’re faced with a long-term economic recession but for now these economic effects are likely to be felt for a few more months at least.
Lauren McGaun
Featured image courtesy of spDuchamp via Flickr. Image license found here. No changes were made to this image.
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