Skip to content

An Overall Look at the Economic Impact of the Coronavirus Outbreak

A study by a British think-tank has attempted to give us an overall impression of the way that the coronavirus outbreak has affected the country’s economy. The Resolution Foundation discovered a sharp downturn following the start of the Covid-19 pandemic.

Unemployment Rising

The report points out that the sudden and dramatic grinding to a halt of economic activity in the UK appears to be more severe than it was during the financial crisis. As part of this, the unemployment rate is rising faster than at any time since 2008.

One example that they cite is of there being a “huge spike” in people search for employment online. This ties in with close to half a million people starting to claim Universal Credit in the nine days leading up to 25 March, which is 8 times the recent average. Another factor is the fall in the number of job vacancies.

It has been calculated that vacancies have dropped by between 15% and a third. This is despite widespread reports of retail and delivery companies needing to hire more staff right now. It seems certain that firms will turn to international debt recovery and other measures to keep going.

Other Numbers

Among the other details looked at in the study is the falling GDP, as confirmed by the latest PMI data. This shows an early collapse of output even before the crisis really kicked in. It is suggested that the percentage drop in GDP could be a “high single, or even double-digit” number.

Another factor is the drop in energy demand that has been seen since the first week in March, with up to 25% fewer energy needed at the end of the month as at the beginning. This is a possible indicator that economic activity in the country has declined sharply in this period.

It is also noted that consumer confidence has fallen but remains relatively resilient. There is some hope that the consumer sector isn’t as badly affected as manufacturing and other industries that are already showing clear signs of the slowdown.

Meanwhile, the FTSE 100 has been staging a recovery this week, and is up to 5,579 at the time of writing. In the same way, the GBP has recovered against the USD to 1.24. The markets remain extremely volatile, though, as investors react to the latest new stories as they are released.

The Unknown Issues

The report points out that there are still too many unknown factors to take into account. Among them, it is noted that there is a time lag on traditional measures like official government figures. There is no way of seeing the full effect of a situation like this in real-time.

All of this means that it will be some time before the true impact of this virus is known. Yet, there appears to already be enough data to assume that it is going to be an incredibly difficult period ahead for the UK and for the overall global economy.