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Bloomberg
For Graham Lancaster, the owner of a real estate agency in the English county of Kent, the alarm will go off in three months.
Britain is headed into its peak of the coronavirus outbreak, and companies and households are busy doing the math to see how long they’ve got before the money runs out, just as they are across Europe. The difference is that the UK economy, vaunted by the government and Bank of England as flexible and resilient, already entered a new era of uncertainty after the country left the European Union just weeks before the pandemic hit.
Everywhere, businesses are closed, lockdowns are in place and governments are announcing eye-watering sums to try to mitigate the fallout from coronavirus. The UK’s compensation plans are slowly kicking into gear as people steel themselves for weeks, or even months, of virus-related disruption.
Lancaster’s calculations are being repeated up and down the country. A survey from the British Chambers of Commerce found that 6% of firms had already run out of cash, while 16% had less than a month in reserve and 41% could make it potentially to three months. Meanwhile, a poll by Opinium of 2,005 adults showed half of workers don’t have savings that can be accessed if they lose their job.
“We don’t know how long this is going to go on, and we don’t want to go into debt to survive,†said Lancaster, 65. “And it is about survival at the moment.â€
The virus spotlight is firmly on Britain with cases expected to rise over the next week after they started to decline in Italy and Spain, Europe’s hardest-hit nations. Since the government unveiled more than $493 billion of aid and loan guarantees in March, Prime Minister Boris Johnson was struck with the disease and remains in the hospital and the country has struggled to expand testing and get a grip on the pandemic.
Financially, unlike the bailout of Greece or UK banks during the financial crisis that started in 2008, nobody knows the scale of the challenge. The eventual bill isn’t quantifiable as thousands of people die and the authorities are worried about easing restrictions too soon. A report showed the British economy shrank in February, putting it on an unsteady footing even before the lockdown, which is all but certain to be extended.
What is known is that Britain’s response to the pending economic crisis was quick. The country won praise compared with the rest of Europe, while its public health response faced criticism. The government’s measures include a pledge to pay 80% of the wages of temporarily laid-off employees and offer some support for those who run their own businesses.
But the cracks are already beginning to show, and even Chancellor Rishi Sunak admits he can’t save every firm. According to the British Chambers of Commerce survey, just 1% of
companies have successfully managed to access the Coronavirus Business Interruption Loan Scheme.
Bloomberg Economics expects the UK economy to contract 2.7% this year, with unemployment jumping to as high as 6% in the summer, from under 4% currently. Others see a far gloomier picture, with analysts at bank Nomura predicting the jobless rate will hit 8.5%—the equivalent of nearly 3 million people.
More than 1 million people in the country have applied for welfare since mid-March, and the expected probability of losing a job in the next four months is more than 30%, according
to research from the University of Oxford.