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There is no doubt that coronavirus poses one of the biggest challenges to the health of the UK economy. But to what extent? In this piece, we take a look at the latest data from the Office of National Statistics and take a look at the impact of the pandemic on the UK’s businesses. The following data is derived from the ‘Coronavirus and economic impacts on the UK: 21 May 2020’ report and CEPR Policy Portal’s Decision Maker Panel
At a UK level, 61% of all businesses continuing to trade reported their turnover had decreased outside of normal range between 20 April and 3 May 2020.
The North East was the region that had the greatest proportion of businesses that saw a decrease in turnover with 72%, and the lowest proportion of businesses with turnover unaffected at 20%. In contrast, London saw the lowest proportion of businesses that saw a decrease in turnover with 58%, and the highest proportion of businesses with turnover unaffected at 34%.
Of those businesses who were continuing to trade, the main sectors to have reported that their turnover decreased by more than 50%, relative to the sample within each industry, were the accommodation and food service activities sector (61%), the arts, entertainment and recreation sector (43%) and the construction sector (43%).
Of those businesses continuing to trade and whose turnover was outside of normal range, 99.8% attributed the coronavirus (COVID-19) as a reason for their turnover being outside of its normal range.
In a survey conducted 6 to 20 March, where the number of cases in the UK rose from 160 to 4000, the average probability attached to a large negative impact on sales rose from 25% at the start to almost 60% by the end of the survey.
Below are the results of the survey by industry. You will notice how businesses that are accommodation, leisure and transportation-orientated are affected the most. Firms in the accommodation and food and leisure and tourism industries estimated the likelihood of a large negative impact on their sales over the next year at around 60%.
Of all surveyed businesses who had not permanently stopped trading, 85% had applied for at least one government scheme. The most popular government schemes applied for were the Coronavirus Job Retention Scheme and the Deferring VAT Payments Scheme, at 76% and 59% respectively.
Of businesses who have not permanently stopped trading, 10% of businesses with fewer than 250 employees had applied for a small business grant or loan in England, compared with 7% of businesses with greater than 250 employees; 4% of businesses with fewer than 250 employees applied for a government-funding small business grant or loan in the devolved administrations, compared with 2% of businesses with greater than 250 employees.
Below is a by industry breakdown of the government schemes being applied for by surveyed businesses who have not stopped permanently trading.
The uncertainty created by COVID-19 has led to a sharp increase in overall uncertainty. The percentage of firms reporting that the overall level of uncertainty facing their business was either high or very high increased from 40% in February to 68% in March (Figure 5). At the firm level, there was a strong correlation between reporting high overall uncertainty and COVID-19 being an important source of uncertainty.
COVID-19 was viewed as a more important source of uncertainty than Brexit for most UK businesses in the March survey. The share of firms reporting that Brexit was an important source of uncertainty for their business fell from 44% in February to 36% in March.
CEO of NextFin, Sacha Bright said: “I commend the government for all the financial support they are giving to businesses.
“However, my only criticism has been that they are not being creative enough to develop schemes that stimulate the economy. Schemes such as EIS and SEIS have been proven in the past to create jobs and grow companies.
“But the government has its hands tied by EU State Aid rules. The government has its hands tied and are not allowed to extend the EIS and SEIS allowances, which encourages the deployment of private capital into start-up businesses.
“The government has also missed an opportunity by not extending the Bounce Back Loan Scheme to all peer-to-peer lenders. Doing so would stimulate a whole new industry and guarantee saver’s money.”
Author: Sacha Bright & Oliver Murphy
Disclaimer
To the best of our knowledge, the information we have provided is correct at the time of publishing. We recommend that you seek professional advice on any topic discussed.
Tagged: Covid-19 UK Economy
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