Home Business News Impact of Covid-19 pandemic on the global economy and what’s next for the UK

Impact of Covid-19 pandemic on the global economy and what’s next for the UK

13th Mar 20 11:10 am

Coronavirus has been the story of 2020. Long before the World Health Organization (WHO) declared a global pandemic, the virus has dominated the radio airwaves and countless column inches. Attitudes among people range from genuine concern to accusations of media hysteria. One thing is for certain however – this humanitarian crisis has created global uncertainty and the universal truths of global business is that markets crave certainty.

Just this week, the Australian National University released a report predicting that even in a best-case scenario, $2.3tn. will be wiped off the value of the global economy as a direct result of coronavirus.  Countless outdoor and major sporting events have been cancelled and how the pandemic will unfold is still far from certain.

In the travel sector, businesses such as Easyjet and Carnival Cruises have seen major impacts on their share prices and the regional carrier Flybe also claimed the virus was the final blow in the ailing airline’s coffin. Many people are calling for Mark Carney to make an emergency cut to UK interest rates this month to stimulate the UK economy and safeguard consumer confidence in the face of daily Doomsday headlines.’

In such a fast-moving situation, it is almost impossible to predict what comes next. The global economy is reliant upon the ability to trade internationally, so anything that threatens UK business’ ability to do unhindered clearly has the impact stifle domestic growth.

Yesterday, the UK government pivoted its coronavirus strategy and said  it was looking to ‘delay’ the peak of the outbreak until the summer, where there is traditionally less pressure on the NHS and crucial public services. If this is successful, it will provide businesses with a degree of short-term certainty and will allow them to more confidently plan for Q2 & Q3 in line with government guidance. But the situation has the potential to change every day.

Coronavirus has the potential to have a Brexit-like impact on the UK economy, in that every daily development has the potential to shift the FTSE needle, consumer spending, and business activity in any direction. The UK government and to some extent the UK media have a responsibility to UK businesses to communicate clearly and report accurately to mitigate the impact of each development on the UK economy.

Last week, the FTSE 100 rallied to a 3% rise on Tuesday, only for this to be immediately wiped off by Friday lunchtime. This Monday, the FTSE saw it’s biggest one day drop since the 2008 financial crisis, only to rally and recover some of these losses.  This volatility is unsustainable and all parties should look to calm investors. Industries such as travel and transport are clearly more exposed to the risk of cornonavirus, but policy-makers should look to isolate the impact of the virus to these industries as best they can, in much the same way as they are trying to isolate the spread across the population.

The truth is the next step of outbreak is almost impossible to predict. One thing is for certain however, if the pandemic is matched by an outbreak of hysteria and muddled thinking by those acting as guardians of the UK economy, the impact of the virus will be felt long after  the virus has peaked.

My advice to policymakers would be to monitor developments closely, calmly assess any interventions that may be required and wherever possible discourage hysterical consumer behaviour.

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