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
Altman Says GPT-5 Already Outpaces Him, Warns AI Could Automate 40% of Work
Russian Research Vessel 'Yantar' Tracked Mapping Europe’s Subsea Cables, Raising Security Alarms
Global Cruise Industry Posts Dramatic Comeback with 34.6 Million Passengers in 2024
U.S. Demands Brussels Scrutinize Digital Rules to Prevent Bias Against American Tech
Private Equity’s Fundraising Surge Triggers Concern of European Market Shake-Out
Tokyo’s Jimbōchō Named World’s Coolest Neighbourhood for 2025
European Officials Fear Trump May Shift Blame for Ukraine War onto EU
The Personality Rights Challenge in India’s AI Era
Italy Considers Freezing Retirement Age at 67 to Avert Scheduled Hike
Italian City to Impose Tax on Visiting Dogs Starting in 2026
Study Finds No Safe Level of Alcohol for Dementia Risk
Trump Says Ukraine Can Fully Restore Borders with NATO Backing
Europe Signals Stronger Support for Taiwan at Major Taipei Defence Show
Germany Weighs Excluding France from Key European Fighter Jet Programme
Cyberattack Disrupts Check-in and Boarding Systems at Major European Airports
Björn Borg Breaks Silence: Memoir Reveals Addiction, Shame and Cancer Battle
When Extremism Hijacks Idealism: How the Baader-Meinhof Gang Emerged and Fell
JWST Data Brings TRAPPIST-1e Closer to Earth-Like Habitability
Trump Orders $100,000 Fee on H-1B Visas and Launches ‘Gold Card’ Immigration Pathway
France’s Looming Budget Crisis and Political Fracture Raise Fears of Becoming Europe’s “Sick Man”
Three Russian MiG-31 Jets Breach Estonian Airspace in ‘Unprecedentedly Brazen’ NATO Incident
European manufacturers against ban on polluting cars: "The industry may collapse"
Turkish car manufacturer Togg Enters German Market with 5-Star Electric Sedan and SUV to Challenge European EV Brands
Christian Brueckner Released from German Prison after Serving Unrelated Sentence
World’s Longest Direct Flight China Eastern to Launch 29-Hour Shanghai–Buenos Aires Direct Flight via Auckland in December
New OpenAI Study Finds Majority of ChatGPT Use Is Personal, Not Professional
The conservative right spreads westward: a huge achievement for 'Alternative for Germany' in local elections
Pope Leo Warns of Societal Crisis Over Mega-CEO Pay, Citing Tesla’s Proposed Trillion-Dollar Package
Poland Green-Lights NATO Deployment in Response to Major Russian Drone Incursion
U.S. and China Agree on Framework to Shift TikTok to American Ownership
Le Pen Tightens the Pressure on Macron as France Edges Toward Political Breakdown
Czech Republic signs €1.34 billion contract for Leopard 2A8 main battle tanks with delivery from 2028
Penske Media Sues Google Over “AI Overviews,” Claiming It Uses Journalism Without Consent and Destroys Traffic
Indian Student Engineers Propose “Project REBIRTH” to Protect Aircraft from Crashes Using AI, Airbags and Smart Materials
One in Three Europeans Now Uses TikTok, According to the Chinese Tech Giant
Could AI Nursing Robots Help Healthcare Staffing Shortages?
NATO Deploys ‘Eastern Sentry’ After Russian Drones Violate Polish Airspace
The New Life of Novak Djokovic
German police raid AfD lawmaker’s offices in inquiry over Chinese payments
Volkswagen launches aggressive strategy to fend off Chinese challenge in Europe’s EV market
France Erupts in Mass ‘Block Everything’ Protests on New PM’s First Day
Poland Shoots Down Russian Drones in Airspace Violation During Ukraine Attack
Apple Introduces Ultra-Thin iPhone Air, Enhanced 17 Series and New Health-Focused Wearables
Macron Appoints Sébastien Lecornu as Prime Minister Amid Budget Crisis and Political Turmoil
Vatican hosts first Catholic LGBTQ pilgrimage
Apple Unveils iPhone 17 Series, iPhone Air, Apple Watch 11 and More at 'Awe Dropping' Event
France joins Eurozone’s ‘periphery’ as turmoil deepens, say investors
France Faces New Political Crisis, again, as Prime Minister Bayrou Pushed Out
Nayib Bukele Points Out Belgian Hypocrisy as Brussels Considers Sending Army into the Streets
France, at an Impasse, Heads Toward Another Government Collapse
×