Looking at the global performance, it’s clear that British businesses aren’t alone in trying to find a foothold post-lockdown, but the UK does have some unique challenges.
Easing lockdown is just the start
The reopening of shops, restaurants, gyms and services including hairdressing and beauty salons has not meant a return to normal. Fears of a second wave and a second lockdown are depressing consumer and business sentiment. The recent package of measures from the Government announced in the Summer Statement mean that the total cost of the measures is an estimated £300bn and there are questions about whether this will be enough to keep businesses afloat.
Brexit looms once more
The immediate threat of the virus appears to have receded and now Brexit concerns are returning to the fore. The Prime Minister has held fast to the December 31st deadline for the end of the transition period and refused the opportunity of an extension in June. A number of measures have been announced to help business delay the cost and red tape of changes to trade, but it may not be enough. The pandemic brought significant disruption to global supply chains, leading to organisations across the world turning to domestic suppliers where possible. As discussed in our webinar, figures from the WTO show that world trade is not picking up and a fall in trade of 13-33% is projected. The WTO has forecast an overall growth figure of -10% for 2020, suggesting that the opportunities for the UK in seeking to advance in world trade may be limited and this may be bad news in the wake of Brexit.
Uncertainty rules sterling
In recent weeks, the pound has been making gains but the overall picture remains challenging. The euro appears to be gaining a firmer footing as the EU starts to show early signs of recovery and the US dollar appears to have been brought in check as tensions escalate once more with China over trade while new State-wide lockdowns and restrictions suggest that the US is not yet over the worst of the ravages of the pandemic. Varying responses from governments and central banks as well as economic performance will be scrutinised by the market and it is likely that there will be further volatility as cautious investors remain sensitive to any changes.
Sustainable change and reasons for optimism
One of the key questions regarding the current situation is whether any uptick in activity in Q3 can be sustained. The arrival of a vaccine for the coronavirus could cement any positive movements in the coming months, but businesses can’t rely on this as a certainty. It’s likely that the UK economy will suffer further damage, if not from a second wave of infections then from Brexit at the end of the year. This in turn could mean a further increase in government borrowing, already very far from the £55bn figure recorded in March of this year. However, the world has been changed by the pandemic and this may mean that there are new opportunities on the horizon. We are not returning to the same world that locked down in March; businesses have evolved at pace and shown agility and creativity in responding to the challenges of the pandemic. These are skills that are likely to be helpful in the coming months and years.
View the webinar here