Economic decline resulted in quarantine measures related to the coronavirus in the UK was deeper than in any other European country. A drop of 20 % in the second quarter lower than in Spain and Italy that also suffered from the virus crisis. One of the reasons is that the British economy is heavily dependent on services, which during quarantine was almost completely paralyzed. Catering companies, retail stores and other service industry since the end of March was almost completely closed. London, the biggest capital of Western Europe, with a population of nearly nine million people, which accounts for almost a fifth of GDP, turned into a Ghost town.
The British have reduced their consumption to a minimum. At the same time, the state paid more than five million workers who have been forced to go on leave, that is the fourth part of the employees in private companies, generous compensation — nearly four-fifths of their earnings. Due to this, layoffs were avoided jobs yet (at least on paper) are stored. Companies do not need it for three months, nothing to pay, now they have to make small social benefits.
Question, who was afraid of everything: how long will the recession? And also: can the government overcome recession? In June, the British economy recovered slightly from the absolute perigee associated with the coronavirus. Pent-up demand manifested itself, people went to shops, offices were gradually opened. It is expected that in the third quarter revival of the market continues, albeit slowly.
It is expected a budget deficit of 320 billion pounds
While the economy is moving as raised a hand brake, because associated with the coronavirus of the event still affects a business activity. In the sphere of public catering and retail trade tens of thousands of businesses — both small and large — are struggling for survival. If demand in the third and fourth quarter is quickly restored, and the new rules and then not give the opportunity to do business more or less normally, then many companies will be forced to close. The Central Bank expects a doubling of unemployment from nearly 4 to 7.5 percent by year-end.
The Chancellor of the exchequer Rishi Sunak (Rishi Sunak) implemented an extensive programme of assistance to the British economy. A total of measures to support the environment and assist companies valued at 190 billion pounds. However, the program to protect jobs expires at the end of October. After that, companies will have to lay off hundreds of thousands of workers that are now forced to leave. Sunak says about hard times and difficult decisions. Indeed, a compensation program earnings cannot be extended forever. At the moment it exceeded 40 billion pounds, and in General will cost more than 60 billion are the estimates of the budget agencies OBR. It expects this year’s record budget deficit at more than 320 billion pounds (354 billion euros), amounting to 16 percent of GDP.
A further extension of the program of support of workplaces would mean that the government continue to financially support the jobs after the end of the pandemic will not be able to maintain economic measures. It also means that the loss of viability of the structure will be maintained longer than necessary. As already said Rishi Sunak, the most popular Minister of the Kingdom, not give people “false hope” that they will return to their former jobs. The government cannot artificially support a large part of the labour market. The main difficulties will come in the fall, when the recession is fully reflected in the labour market. But jumping to the harsh reality of the inevitable.