Coronavirus - How Will It Affect The Economy?

Gary Green
Gary Green
June 8, 2020

Today we're going to look at how the coronavirus pandemic will affect the economy in the UK. The unprecedented situation could have serious consequences for your business.

Coronavirus has taken a deadly toll on the world, but how will it affect the economy? In today's article we'll give you an overview of the effects. You may also like the following articles:

The Tax Implications Of The Coronavirus
How The Coronavirus Has Affected Mortgages
Coronavirus - The Tax Fallout

1. Government Borrowing

Chancellor Rishi Sunak announced an extremely generous raft of measures to help employees, businesses and the self-employed cope with the lockdown:

Unfortunately, these all need to be paid for! The Office for Budget Responsibility recently updated its prediction for public sector net borrowing to £298b. This represents a staggering 95.8% of GDP.

Who knows what the eventual consequences of this borrowing will be? We have to assume tax rises in the coming year. Increased taxes can hurt your business directly (you have to pay more tax), They can also mean that consumers have less disposable income. This means less spending on your goods or services.

2. National & International Trade

Air travel is the sector most affected by the lockdown. Heathrow’s traffic fell by 97% in April compared with the same month last year. Several airlines have started massive job cuts (see below). And the recent 14-day quarantine will make things even harder.

As a consequence, global trade will fall by around a quarter this summer. If your business depends on international shipping or flight, times will be very hard. Even business based locally will struggle. Disruptions to the supply chain filter down to even the smallest businesses.

Some investors are bullish this summer. If the economy does show the "V-shaped recovery", there could be a huge autumn of spending. Keep an eye on the government's approach to the lockdown.

3. Personal Finances

The coronavirus furlough scheme has been keeping millions of Brits in work. However, household finances are in trouble. Many people have seen pay freezes or cuts. Job security is down. And UK consumer confidence is the lowest it has been since 2008.

The IHS Markit Households Finance Index report has lots of really interesting statistics. The takeaway: UK consumers are feeling poorer, more frightened and less confident.

Think how this will affect your business. Perhaps now would be a good time to:

  • Cut costs
  • Concentrate only on high margin products
  • Be conservative in launching new services or product lines
  • Pivot towards money-saving offerings

The danger with the furlough scheme is that it just postpones inevitable job losses. This means the country's financial well being could be even gloomier in the autumn when the scheme is wound up.

If you are concerned that your business has been affected by coronavirus, please get in touch. We have been supporting all our clients throughout this difficult time. We are very much open and here for all your accounting and business support needs.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
Contact Form Demo (#1)
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
October 23, 2023
PAYE Investigations

Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog

September 29, 2023
London-based accountancy business acquired by Key Business Consultants

Exciting Merger Alert: London's Reed Taylor Benedict & Benedict Leff Accountants Acquired by Key Business Consultants.

September 18, 2023
Tax Tribunals – An Overview

Dive into the realm of Tax Tribunals: A comprehensive overview shedding light on this crucial aspect of taxation.

September 2, 2023
What Is A COP8?

Learn about COP8, a tax-related Code of Practice issued by HMRC for suspected tax avoidance cases. Discover when COP8s are used and the penalties associated with them.

August 20, 2023
HMRC Compliance Checks

Navigate the complexities of HMRC compliance checks confidently. Our comprehensive guide covers everything you need to know about handling tax inspections and more.

August 6, 2023
Tax Evasion and Tax Fraud

Untangling the complexities of tax evasion and fraud. Delve into our comprehensive guide to understand the differences, consequences, and preventive measures.

June 18, 2023
Which Jobs In The UK Have The Best Salary Growth Potential?

Explore the top UK jobs with the highest salary growth potential. Uncover promising career paths and industries that offer substantial earning potential.

May 23, 2023
How To File Dormant Accounts Through Companies House

Learn the step-by-step process of filing dormant accounts through Companies House with our comprehensive guide.

May 19, 2023
Customs Declaration Service (CDS) and VAT

Discover how the Customs Declaration Service (CDS) and VAT intertwine in this insightful blog article.

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
Newsletter Form (#2)
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2022 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram