Published Thursday 14th May 2020
The country is currently experiencing a business slowdown the likes of which we have never seen. With vast swathes of the economy shut down, the UK GDP has shrunk by 2%, with even worse performances expected over the next quarter.
In an attempt to at least minimise the scale of the upcoming recession while also caring for public health, the Prime Minister has announced a tentative roadmap as to how the country’s businesses can slowly return to normal. Some industries are already expected to resume in these early stages. However, with specific sectors unexpected to re-open until autumn at the earliest and a drug or vaccine not expected until next year, it’s clear that these struggles are only beginning for some sectors.
The Slow Return of Industry: How the Roadmap Unfolds
On Sunday 10th May, Prime Minister Boris Johnson announced in a TV address a prospective plan for re-opening England following almost two months in lockdown. At the heart of the strategy was a new COVID Alert System, indicating a more proactive approach to the virus going forward.
The major announcement, at least for the short-term, was a change in the message regarding workers. Previously, the advice was to work from home if that is possible. That message remains, but is now coupled with new advice: “All workers who cannot work from home should travel to work if their workplace is open.”
This message particularly impacts sectors such as construction, distribution and more advanced institutions such as laboratories. However, the government has also reiterated that non-essential businesses, such as hospitality and some retailers, will remain closed.
The next stage of the government’s phased plan is tabled to begin on 1st June, on the assumption that the current decline in the virus’ impact on health is maintained. If this best-case scenario is realised, the headline change for business is the opening of non-essential retail, so long as the stores can follow COVID-19 guidelines.
Step three is tabled to begin no earlier than 4th July. Again, this is a best-case scenario, which could very well be pushed back depending on the outcomes during Phase One and Two. During this stage, the ambition is for the remaining businesses to be re-opened to the COVID-19 guidelines.
This phase mostly concerns those hospitality and leisure services that were some of the earliest to close, such as hairdressers, pubs, restaurants and cinemas. However, official documents note that “Some venues which are, by design, crowded and where it may prove difficult to enact distancing may still not be able to re-open safely at this point, or may be able to open safely only in part.”
Pilot re-openings are also expected to take place at this stage, meaning that any re-opening for these kinds of businesses will very much be on a sector-by-sector basis.
When will the Economy Return to Normal?
This roadmap does provide some answers for businesses that have been sat on expenses for the last few months. However, as was the significant media and public response, these announcements leave too many variables and uncertainties to prepare businesses for the future.
There are many doubts about when the UK economy will return to a level of normality where growth can be achieved across various industries. Days after this initial announcement, the UK Chancellor announced that the furlough scheme for closed businesses had been extended from June until October. While this comes with changes, the extension paints a picture as to the long-term issues now facing the UK economy.
A shred of optimism for UK business comes from recent Bank of England economic forecasts. While a shocking downturn is expected throughout this year, they have tentatively forecasted an equally strong rebound for the UK’s GDP in 2021. While comparisons have been made to the financial crash of 2008, the prolonged nature of that event is one reason why economists believe the recovery from COVID-19 will be notably faster.
The Bank of England predicts that economic activity could return to pre-crisis levels around next summer, which provides something of an aspiration for businesses currently managing their risk. However, getting to that point, through a year where consumer demand is expected to remain low, is an incredible challenge for companies.
Here at Expense Reduction Analysts, we’ve been offering our services to various industries to help support them through this unprecedented crisis. If you need any advice from our experienced cost reduction consultants on how your business could navigate this period, don’t hesitate to get in contact with us – we would be happy to offer our support.