End of UK Lockdown? What Now?

End of UK Lockdown? What Now? 08/05/2020

As the UK draws towards the end of it’s pandemic nationwide lockdown, there are many questions around the next plausible steps that the British government should take to kick-start the economy and salvage what they can of 2020.

It is now inevitable that the economy will spiral downwards. There are few plasters with enough strength to cover over that fact. The Bank of England announced yesterday that the UK entered a recession in the first quarter, shrinking by 3% and facing the sharpest recession in living memory. The Bank of England projects that the economy will contract by 14% by the end of 2020.

Hospitality, travel companies, airlines and the car industry have all sounded alarm bells over the last two weeks. With job cuts being announced by flag-bearing British companies like Rolls Royce, British Airways and Virgin.

Governments around the world have done what they can to cushion the blows in an entirely dissimilar fashion to 2008. This time, the people are being treated to cash injections rather than the banks via furlough schemes and support that has so far artificially protected the UK’s unemployment rate. To put this into context, the US unemployment rate has increased to 14.7% since the start of the pandemic, whereas the UK’s rate currently stands at around 4% for the same period.

Of course, this was the ‘nice-nice’ period. The government cannot afford to extend the furlough programme indefinitely, and will begin to wean companies off of these schemes starting from the beginning of the end of lockdown (likely to be from next week). Questions remain as to whether there is enough immediate demand post lockdown, not to mention risk-appetite for companies to continue to employ those without government backing. There is no doubt that the government has a delicate task ahead.

The British government’s business loan scheme has also been widely praised by the business community. Offering 12 months no-repayment, ‘bounce-back’ loans (up to £50,000) with interest rates capped at 2.5%. There are rumours from those in the business community who have been in conversation with bank managers, that the projection is that as many as 30% of businesses who have, or are yet to apply are unlikely to be able to afford to repay these government-backed loans. Anyone for more plasters?

Tough times are most certainly ahead, and all of the current figures come with the assumption that we avoid a second peak to the crisis. The recession of 2020 could end up looking like a rotten tooth on a graph, with two peaks, if we do not handle this with due care.

In times like these we can take relevant inspiration from the timeless WWII quote; “if you are going through hell, keep going”. We are here to support firms, as we offer flexible support where the risk of fixed overheads become untenable in an erratic economic climate.
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