One month after a national lockdown was declared in an attempt to limit the spread of Covid-19, it is clear that Britain is heading for the deepest recession in living memory.
Boris Johnson’s government launched unprecedented restrictions on 23 March, telling the British public that they must stay at home and bringing life as the nation knew it to an abrupt halt.
Thousands of lives have been lost to Covid-19, while millions of jobs are at risk with the economy effectively in deep freeze. Pubs and restaurants remain shut, high streets are empty, and planes are grounded.
As the global health emergency prompts an economic crash unparalleled since at least the Great Depression of the 1930s, the Guardian is launching a monthly Covid-19 crisis watch to track the financial shock facing households and businesses.
One month in to tough government controls, early snapshots of business activity, transport usage and the numbers of people signing up to claim universal credit paint a picture of an economy grinding to a halt, as the urgent challenge to save lives is made paramount.
Over the coming months, the Guardian will attempt to map out the damage to jobs, companies and living standards by following the latest economic developments on a monthly basis, tracking indicators such as inflation, unemployment, GDP and retail sales, as well as the FTSE 100 and house prices. The Guardian’s Covid crisis watch will also consider how the UK is faring compared with other countries.
At this stage, much of the official economic data has yet to catch up with events, as government analysts and statisticians require weeks to gather enough data to make a judgment. However, the impact of lockdown is clear in several rapid indicators, including travel, online restaurant bookings, cinema ticket sales, travel and retail footfall, which has plunged by 85%, according to Google location data.
Highlighting the effectiveness of the lockdown measures, government figures showed transport use down by around 60% or more since February, with rail journeys and trips on the London Underground down by more than 95%. Road traffic levels have also slumped to 1950s levels.
Fewer vehicles on the streets and planes in the air, alongside sharp reductions in industrial output, have come as a boon for the environment. Early figures suggest pollution levels have dropped by up to half in London and several other big cities.
Among the most rapidly available barometers of economic stress, financial markets around the world have been plunged into turmoil, with the biggest collapse in share prices since Black Monday in 1987. The price of oil has crashed on global markets as demand for crude crumbles, with factories closed or running reduced hours, while international travel is grounded. Falling oil prices have been exacerbated by a price war between Russia and Saudi Arabia. In the US, oil prices turned negative for the first time ever on Monday as producers paid buyers to take barrels of oil off their hands.
Ahead of what is expected to be the deepest global recession in peacetime, closely watched surveys of business activity suggested service sector output, manufacturing and construction projects had slipped into reverse, with the monthly purchasing managers index (PMI) barometer falling by the biggest margin since records began more than two decades ago. In a glimmer of hope for the economy, some firms are starting to eye a return to work, including Jaguar Land Rover, B&Q and Taylor Wimpey.
Economic activity has collapsed around the world at the onset of an unprecedented synchronised downturn, little more than a decade after commentators believed the world had witnessed a once-in-a-generation recession with the 2008 financial crisis.
The Guardian will track the government’s unprecedented emergency financial support measures for firms and individuals, and the impact they will have on the public finances.
In response to the coronavirus crisis, ministers have stepped in to cushion the economic fallout and save as many jobs and businesses as possible. Despite a price tag spiralling into the billions, with costs rising the longer lockdown continues, significant holes in the safety net still remain, made worse by a decade of austerity before the coronavirus struck.
Launching a job retention scheme to pay 80% of the wages of workers up to £2,500 each per month on Monday, the government has received applications for furlough payments from more than 387,000 firms to pay more than 2.8 million people, an intervention that has cost at least £2bn so far. Although a similar scheme to compensate the country’s 5 million self-employed workers is planned, it will take until June to set up, and millions will receive no support under the current plans.
The government has promised to back more than £300bn of loans to businesses, with larger firms able to access finance from the Bank of England and smaller firms able to borrow using Treasury-guaranteed loans from high street banks. The central bank has also cut interest rates to the lowest levels in history, 0.1%, and pumped £200bn more into its quantitative easing bond-buying programme to lower borrowing costs for households and businesses.
Despite hopes that the interventions would help companies to bridge a black hole in sales during the lockdown, many firms are struggling to access support and rising numbers of people are losing their jobs.
As rising numbers of people find themselves without a job and facing the threat of financial hardship, around 1.5 million people have signed up to apply for universal credit payments. Almost one in four adults have already suffered a financial hit as the crisis unfolds, according to the Office for National Statistics.
As demand for goods and services evaporates, shoppers stay away from the high street and the global oil price plummets, inflation has started to tumble. However, prices of some goods in high demand have spiralled in recent weeks after shoppers scrambled to stockpile long-life food and sanitary products.
Forecasts
UK growth
The Office for Budget Responsibility has warned that the coronavirus crisis could cause a 35% fall in gross domestic product (GDP) this spring. The damage to jobs and growth depends on the length of lockdown measures, with a bigger impact the longer tough controls last. If lockdown lasts for three months, GDP could crash by around 13% for 2020 as a whole.
Unemployment
More than 2 million people could lose their jobs by June, according to the OBR. But some analysts expect a bigger impact. David Blanchflower, a former Bank of England rate-setter, has warned that job losses could surpass the Great Depression by rising to more than 6 million people, around 21% of the workforce.
Public finances
Britain’s budget deficit, the gap between public spending and income from taxes, is expected to surge to the highest levels since the second world war, surpassing the damage caused by the 2008 financial crisis. As spending rises to fund emergency support measures and the economy crashes, the OBR said the deficit could hit £273bn this year, or around 14% of GDP.
World economy
The International Monetary Fund has warned that the world faces the worst recession since the Great Depression. It said world GDP could fall by 3% this year, compared with the 3.3% growth it forecast for 2020 just three months ago.
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