At the time of writing this blog the situation regarding the outbreak of Coronavirus is rapidly unfolding. Following the first reported cases in Wuhan in December 2019, as of 11 March the World Health Organisation has declared that Coronavirus is a pandemic.
This blog looks how the UK specifically is reacting, and what this might mean for the industry in both the short and long term.
Today the UK Government will hold an emergency COBRA meeting to discuss moving to the ‘delay’ stage of interventions and advice in order to best protect the population from the accelerating spread.
Yesterday we saw economic interventions from the Bank of England as well as announcements in the Chancellor’s Budget, aimed to protect businesses and workers that will be impacted by the Coronavirus.
Bank of England
The BoE detailed outcomes of a special meeting of the Monetary Policy Committee (MPC) and Financial Policy Committee (FPC) who agreed a timely set of packages to support UK businesses and households to mitigate any longer-lasting effects of Covid-19 on jobs, growth and the UK economy.
The MPC agreed unanimously to reduce Bank Rate by 50 basis points to 0.25% and also introduced a new Term Funding Scheme with additional incentives for Small and Medium-sized Enterprises (TFSME), financed by the issuance of central bank reserves
The FPC reduced UK countercyclical capital buffer rate to 0% meaning that banks should not face obstacles to supplying credit to the UK economy and to meeting the needs of businesses and households through temporary disruption
Later in the morning, UK GDP figures were released or the three months to January and once again showed no signs of growth, almost extinguishing any hope of growth in Q1 2020 at least given that the UK was already struggling before the Coronavirus outbreak, a contraction this year is now a very real possibility.
Saw the new chancellor Rishi Sunak delivered his debut budget which heavily focused on fiscal stimulus for the economy amidst the Coronavirus outbreak. There was extra and unconditional support for the NHS as well as making statutory sick pay available to those who self-isolate from day one.
For businesses, as a compliment to the Governor of the BoE’s efforts, the Government announced efforts to support the SME community by providing a one-off grant of £3,000 to around 700,000 business currently eligible for Small Business Rates Relief or Rural Rate Relief, to help meet their ongoing business costs. The Government is also set to cover statutory Sick Pay costs for businesses with fewer than 250 employees in full for up to 14 days per employee. There is also a new Coronavirus Business Interruption Loan Scheme will see banks offer loans of up to £1.2m to support SMEs.
Industry will feel the impacts
The biggest impacts across the economy will occur when people begin significantly reducing their social consumption and changing behaviours. Previous evidence suggests it is demand factors that will influence the overall impact of the virus on the economy.
Globally, flight disruption is already taking place, this morning we woke up to the news that President Trump has banned flights to and from 26 European countries to the US (the UK and goods aren’t included in this). China took steps to halt flights in a bid to stop the spread of the virus, and Italy has since restricted travel, as have many other countries.
Any long-term impact will depend on the length of disruption to economic activity and daily life in general. Yesterday, the Office of Budget Responsibility’s growth forecast for 2020 was revised down to 1.1 per cent, though this estimate was produced on the basis of information available on 14 February. The OBR makes clear that absent Coronavirus, the near-term economic outlook for the UK would have been little changed since their previous forecast last March.
Additionally, disruption to supply chains is inevitable, ADS is monitoring this situation and encourage members to update us on any areas of your business that may be impacted or disrupted in the near future.
Advice to those attending ADS events can be found here.