Daily Management Review

UK Economy Under Severe Pressure From The Coronavirus Pandemic


UK Economy Under Severe Pressure From The Coronavirus Pandemic
The strain from the coronavirus lockdown is putting immense pressure on the economy of the United Kingdom, so much so that it is at the point of crumbling. Borrowings by the government has reached levels that were never before seen in peacetime history which has increased pressure on the government to find out an exit strategy.
After being diagnosed with coronavirus, UK Prime Minister Boris Johnson is currently recuperating at his country residence but at the same time is facing severe criticism from the opposition politicians as well as from some epidemiologists over allegations that he had reacted too slowly to the threat from the novel coronavirus outbreak.
The government is finding it hard to explain the high rate of deaths in the due to the pandemic as well as allegations of limited testing and shortages of protective kit. And on Thursday, the grim reality of the extent to which the pandemic has impacted the fifth largest economy of the world became clear.
“We are experiencing an economic contraction that is faster and deeper than anything we have seen in the past century, or possibly several centuries,” Bank of England interest-rate setter Jan Vlieghe said.
He also said that he did not expect the recovery to be a swift one.
“The risks are that it will take longer and that it will look a little bit more like a U than a V,” Vlieghe said.
Compared to 36.0 in March, the IHS Markit/CIPS Flash UK Composite Purchasing Managers’ Index (PMI) dropped to a new record low of 12.9 which was not even remotely close to a prediction by economists in a poll conducted by Reuters which was at 31.4.
Between May and July government debt of 180 billion pounds ($222 billion) will be issued by the United Kingdom which will be more than what the government had planned to take on for the entire financial year.
The total debt of the country is now over $2.5 trillion while the total borrowing of its public sector could reach 14% of gross domestic product this year which will also be the biggest single year deficit for the country since World War Two.
There is also close scrutiny being conducted of the yet unpublished strategy of the government about lifting of the lockdown and resumption of economic activities. The country’s limited testing capacity is a problem, said Deutsche Bank.
“The UK is lagging behind almost any medium to large economy globally when it comes to coronavirus tests,” Deutsche Bank’s Oliver Harvey said in a note to clients. “This will materially impact the government’s ability to pursue a ‘test and trace’ approach when it comes to easing the lockdown.”
The government had promised to conduct 100,000 people per day by the end of April but in reality only 22,814 tests were carried out on April which is the last day for which data was available.
A total of 411,192 people have so far been tested and 559,935 tests have been carried out in total in the United Kingdom.