Published Tuesday 23rd June 2020
The recent coronavirus outbreak in the UK and across the world has already led to significant economic decline impacting all sectors. However, it can be argued that the true impact of COVID-19 is yet to be fully understood. Economic stimuli from the UK Government has slowed the tide, but the aftershock of this crisis is expected to be long and deeply felt.
Slowly, examples of the potential long-term impact of coronavirus are starting to emerge. A recent study of business confidence is just the latest in a string of reports that paint a bleak picture of the rest of 2020 and beyond.
A New Level of UK Business Pessimism
In mid-June, the Institute of Directors (IoD) published their latest confidence tracker, a monthly survey of their member’s hopes and concerns. The figures are stark and reveal how much of an impact these last few months have had on businesses, even more so than previous concerns such as Brexit.
Overall economic confidence was reported at -60 for May, only marginally improved on the record low -69 seen in their April survey. For comparison, overall positive scores were recorded in December (following the general election), January and February before the virus hit.
Perhaps more strikingly, respondent’s confidence in their organisation improved, but remains at -7, making this only the second period on record where the score has been negative.
There is a slight regional disparity reported by the IoD with regards to economic confidence. Scotland, London and the West Midlands all recorded scores of -65 or lower, while the East Midlands, North East and South West England recorded scores above -60.
The Broad Impact of Coronavirus
The recent lockdown due to COVID-19 brought many industries to a sudden halt. As a result, the whole business cycle has been shaken, with uncertainty now prevalent in every facet of company management.
The IoD survey uncovers the extent of that uncertainty in its business expectations. According to the study, business expectations regarding revenue now sit at -54, while investment expectations are at -43. Employment and wage expectations are also negative. For comparison, all of these factors showed positive expectations as recently as March.
While many factors are negative, cost expectations have remained marginally positive, as businesses consider how they will make ends meet in the short and long term.
Growing Concerns for UK Businesses
While there has been a slight improvement in overall business optimism over the last month, it’s worth repeating that confidence remains starkly negative. As the UK Government seeks to ease the various lockdown measures and supports, there is a concern that a worse economic climate could still be on the horizon.
A recent economic forecasting report predicted the UK economy could shrink by as much as 8% this year, and may not fully recover until 2023. Substantial job losses over this tumultuous period are having a significant impact on consumer confidence financially, while health fears are harming confidence even further.
Coronavirus is the immediate concern across all industries, but there’s a fear that it is overshadowing other matters, notably Brexit. With an agreement between the UK and EU regarding future trade agreements required by the end of this year, a struggling recovery could be compounded by restrictive trade measures, especially if no deal is agreed.
According to the IoD survey, 32% of respondents currently consider the uncertain trading future with the EU as a top concern. While 78% view the coronavirus as a primary threat, Brexit continues to develop in the background, and its impact on the economy is only likely to grow over the coming months.
Securing Your Future in Uncertain Times
Overall, the economic picture in the UK is looking more uncertain than ever before. The true extent of the coronavirus impact is unclear, and the worse could still be ahead of us.
Here at Expense Reduction Analysts, we’ve been working with various major businesses across the UK during this unprecedented time. Our cost reduction consultants can help to refine your supply chains and reduce your overheads, helping to build a firm foundation on which your business can stand during this period.
If you would like to know how our industry specialists could offer support to your business during this time, why not get in contact with us today?