Budapest Post

Cum Deo pro Patria et Libertate
Budapest, Europe and world news

Coronavirus hits UK economy with unprecedented force

Coronavirus hits UK economy with unprecedented force

Britain’s economy is shrinking at a record pace, faster than during the 2008-09 financial crisis, as businesses across the services sector shut up shop in face of the coronavirus, a survey showed on Tuesday.

Conducted last week, before the government ordered the closure of all pubs, restaurants and other non-essential businesses open to the public late on Friday, the monthly Purchasing Managers’ Index (PMI) points to the economy shrinking at a quarterly rate of 1.5-2.0%.

“This decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter,” said Chris Williamson, chief business economist at IHS Markit, which compiles the survey.

At the worst point of the 2008-09 recession, Britain’s economy shrank 2.1% in a single quarter.

Economists at Morgan Stanley forecast British economic output will shrink by around 10% or more in the three months to the end of June, and just over 5% in 2020 as a whole, if social restrictions can be relaxed in the second half of the year.

“Should the outbreak - and the associated economic hit - be more prolonged than anticipated, we think that both the Bank of England and the Treasury could ramp up their response, with more spending and more QE,” Morgan Stanley economist Jacob Nell said.

Britain’s central bank restarted quantitative easing (QE) asset purchases last week.

The flash composite PMI - which includes about 85% of firms in the full survey - sank to 37.1 in March from February’s 53.0, its lowest since the survey started in January 1998 and below all forecasts in a Reuters poll of economists. The services component sank to 35.7 from 53.2, also a record low.

“Any growth was confined to small pockets of the economy such as food manufacturing, pharmaceuticals and healthcare. Demand elsewhere has collapsed ... as increasing numbers of households and businesses at home and abroad close their doors,” Williamson said.

There was little immediate market reaction to the data, with sterling still close to the 35-year low it struck last week as fears of the virus drove investors into U.S. dollars.

The decline was mirrored in PMI data across the euro zone and as far afield as Australia and Japan, highlighting the global nature of the economic crisis. U.S. surveys were similarly dire.


FACTORIES ALSO HIT

Britain’s manufacturing activity PMI fell by less, to 48.0 from 51.7. IHS Markit said this reflected an upward distortion, due to the positive impact on the index of lengthening delays from suppliers - usually a sign of a sharp rise in demand, but in this case caused by the coronavirus.

Looking at the manufacturing PMI’s output component alone, production was falling at its fastest since July 2012, at the peak of the euro zone debt crisis.

The Confederation of British Industry said a survey it conducted between Feb. 25 and March 13, published on Tuesday, showed the biggest drop in factory output expectations since the financial crisis.

“It’s now more important than ever manufacturers get the support they need,” CBI economist Anna Leach said.

British finance minister Rishi Sunak last week promised businesses 330 billion pounds ($380 billion) in loan guarantees and offered to pay 80% of their wage bills if they put staff on leave rather than sack them.

The PMI data showed employment was already falling at the fastest rate since July 2009.

The Bank of England, in turn, has said it will buy a record 200 billion pounds of extra assets, mostly government debt, and cut its main interest rate to a record-low 0.1%.

Former Bank of England Governor Mervyn King said on Monday that the economic challenge facing Britain was tougher than during the 2008-09 financial crisis and that public borrowing was likely to rise significantly.

But he warned against viewing the coming economic downturn like a conventional recession or depression.

“In order to deal with a health crisis, the government is deliberately pressing down on economic activity ... and at some point there will be a rebound,” King said.

AI Disclaimer: An advanced artificial intelligence (AI) system generated the content of this page on its own. This innovative technology conducts extensive research from a variety of reliable sources, performs rigorous fact-checking and verification, cleans up and balances biased or manipulated content, and presents a minimal factual summary that is just enough yet essential for you to function as an informed and educated citizen. Please keep in mind, however, that this system is an evolving technology, and as a result, the article may contain accidental inaccuracies or errors. We urge you to help us improve our site by reporting any inaccuracies you find using the "Contact Us" link at the bottom of this page. Your helpful feedback helps us improve our system and deliver more precise content. When you find an article of interest here, please look for the full and extensive coverage of this topic in traditional news sources, as they are written by professional journalists that we try to support, not replace. We appreciate your understanding and assistance.
Newsletter

Related Articles

0:00
0:00
Close
Miliband Sets Climate and International Law at Centre of UK Diplomacy
Czech Central Bank Governor Rejects Early Euro Entry and Rate-Cut Pressure
Trump Readies New Tariffs as Temporary Global Levy Nears Expiry
Vivienne Westwood Casts Cicciolina, 74, in Its New Autumn Campaign
Dejavu: Germany’s Military Expansion Reshapes Europe’s Strategic Balance With France
Morgan Stanley Builds a Wall Street Lead in AI Infrastructure Finance
High Prices Push Coffee Drinkers Toward Whole Beans and Home Brewing
Trump Draws Boos and Podium Scrutiny at Spain’s World Cup Triumph
Brilliant move: Péter Magyar Moves to Nominate Chess Grandmaster Judit Polgár as Hungary’s President
Spain Defeats Argentina in Extra Time to Win Second World Cup
Current AI Seeks to Build an Open Global AI Infrastructure Outside Big Tech Control
Germany’s Economic Malaise Reopens the Sunday Shopping Debate
Proposed U.S.-Saudi Nuclear Pact Could Permit Limited Uranium Enrichment Under International Safeguards
Netherlands Declares Water Shortage Emergency After Drought Pushes Rivers to Historic Lows
Why Kentucky Fried Chicken Became KFC—and Why the False Explanations Persist
Ukrainian Drones Strike Wildberries Warehouses Deep Inside Russia
Reported CIA Mission Helped Clear the UAE’s Path to Advanced US AI Chips
Artificial Intelligence Capital Fuels Markets While Governments and Regulators Face Mounting Strategic Tests
China’s Moonshot’s Kimi K3 Narrows the Gap With Anthropic Through Scale, Openness and Lower Cost
The Ledger Will Not Trust on Faith
Trump Administration Pressures Banks to Restrict Financial Access for Undocumented Immigrants
Passenger Bound for Germany Refused to Sit Beside a Woman on a Plane — Then Slapped a Flight Attendant
Ukraine’s Leadership Rift Spills Into the Streets as Protesters Target Army Chief
Ukrainian Drone Barrage Kills Eight and Strikes Russian Logistics Network
The Ten World Cup Finals That Defined Football History
Smartphones Are Getting More Expensive, Sales Are Collapsing, and Even Apple Admits: "Prices Will Rise"
The Monaco Bombing Has Become a Test of Ukraine’s Intelligence Accountability
Leadership Change and Strategic Rivalry Redraw the Political Map
The AI Race Enters Its Infrastructure Era
Britain Nationalises British Steel to Protect Scunthorpe Production and Strategic Supply
French National Assembly Overrides Senate to Pass Historic Assisted-Dying Legislation
Spanish Prime Minister's Wife Ordered to Stand Trial as Corruption Probes Encircle Governing Party
Zelensky Faces Kyiv Protests Over Ousting of Dynamic Ukrainian Defense Minister
Thomas Tuchel Faces Fierce Backlash After Tactical Retreat Costs England World Cup Final Berth
A Quiet Bastille Day: France Grapples with World Cup Heartbreak and Leftover Fireworks
Spain in Ecstasy: "We Feel Unbeatable, We Taught the Whole World a Lesson"
Spain and UK Dismantle Gibraltar Border Following Landmark Schengen Integration Treaty
Hungary's "Puppet" President to Be Ousted, Orbán Fumes: "Democracy Is Dead"
Forget Tinder: The Surprising Platform Where People Find Love
Harvard Astrophysicist to Lead U.S. Scientific Advisory on Unidentified Aerial Phenomena
Emergency Sirens Activated Across Bahrain as Interior Ministry Issues Shelter Directives
World Cup Visitors Turn American Big-Box Stores Into Souvenir Stops
Netflix Weighs Always-On Channels, Bundles and Short-Form Video
Passenger Is Pulled Partly Outside Ryanair Jet After Window Fails Mid-Flight
The AI Invoice Shock: Layoffs Didn't Save Managers Money — They Cost Them More
Concern: Sexually Transmitted Bacterium Among Men Develops Antibiotic Resistance
Passenger Partially Pulled Out of Ryanair Jet After Cabin Window Fails Mid-Flight
Severe Heatwave Drives Dangerous Ground-Level Ozone Pollution Across Two Thirds of European Union
The Physical and Electronic Barriers Disrupting Domestic Wireless Networks
France and Morocco Open World Cup Quarter-Finals as Collina Defends Refereeing
×