Client Update - Coronavirus - 7th May 2020
On Sunday we will hear from Boris Johnson all about the Governments plans for the next stage of the fight against Covid-19 – a phased release from lockdown.
As the UK death toll passed 30,000, putting us at the top of a very unwelcome table in Europe and second only to the US in global reported Covid-19 deaths, it seems an interesting time to be considering a removal of the “stay at home” guidance. The Government is caught in a delicate balance between people’s health and the gradual erosion of the economy. Today the Bank of England (BoE) forecast a 25% second quarter decline in GDP, following on from a 2.9% decline in the first quarter. The BoE went on to suggest an overall decline in UK GDP by 14% in 2020, the biggest annual decline by some way since the Office for National Statistics data started in 1949. This forecast assumes a reduction in lockdown measures from June to September.
We await news on how the Government will manage the Furlough scheme that is currently keeping the workforce technically employed but waiting at home for a pickup in demand and earnings before they are invited to return to work. Currently the scheme is scheduled to run to 30th June and the suggestion is that the Government will then gradually phase the scheme out over several months. Should they remove it to soon, especially for the areas of industry hit hardest, like tourism and hospitality, then they risk a massive spike in unemployment and a torrent of people looking for work at the same time. All whilst companies keep trying to cut costs and boost cashflow – a difficult combination.
The UK economy is in trouble. April saw a 98% fall year on year for new car registrations and the UK Purchasing Managers Index (PMI) saw a reading of just 13.4 (anything under a reading of 50 indicates the sector is shrinking). This is basically a survey made up of the senior managers at the largest UK firms, asking them for their confidence in their own sectors outlook. That was down from 34.5 in March – which was already a record low. In the depths of the 2008 financial crisis, the reading only fell as low as 40.1.
The UK has come together amid the Covid crisis and I very much hope that this social unity will continue as we start to exit lockdown. It will be very interesting to see how social distancing impacts on commuting; I gather that rail companies have confirmed that a 2-metre social distancing rule will mean a service running at only 25% capacity. There are going to be some very big queues at some point this summer.
Sundays update from the Prime Minister will ultimately attempt to restore some confidence in the way forward, the economy and the containment of Covid-19.It will also show that entering lockdown was much easier than leaving it.As always, I very much hope you are staying safe and well, have a good bank holiday and amongst all the Covid-19 focus, tomorrow is about remembering those that gave so much during the second world war.
Take great care and catch up soon.