The swift and sudden shock to the UK economy brought about by the coronavirus outbreak has left the government to find measures to stop the economy from going into contraction. As of August, the UK saw a 2.1% rise with prime minister Boris Johnson rolling out an incentivized scheme Eat Out to Help Out, aimed at encouraging citizens to eat out and pump money back into the economy. Although this is progress, it’s still well shy of the expected 9.2% increase.
The government lay in place an expansion plan, which saw success in the summer months of June and July with the economy growing 8.7% and 6.6% respectively. On the face of it, this is positive news. But, the July figure of 6.6% dropped dramatically in the following month and with lockdown measures ramping up, it’s going to be a difficult few winter months. The government can take solace in the fact that UK citizens responded very well to the scheme, with discounts on more than 100 million meals claimed so far.
The fallout from the scheme
Despite the recovery of the UK economy over the past few months, all of that is likely to be undone as the UK looks to reimpose lockdown restrictions. As we enter the winter months, things are likely to see any growth further slacken. This is a cause for concern for business owners. Not only because they’ll be operating under new Covid restrictions, but also because the furlough scheme will end on the 31st of October.
However, the governments Chancellor of the Exchequer Rishi Sunak is expected to declare further support schemes for businesses as well as those who are out of work as a result of the imminent local lockdowns. The government is burning through money and must look for alternative ways to raise revenue and control public spending.
Two quarters of shrinking GDP is concerning. If the figures continue to fall, it could mean any efforts to raise the economy will be undone in the final quarter of the year. A decision must be made and the options are few and far between. Putting funds into a “safe haven” such as gold or even cryptocurrency are ideas that we’ve seen other governments adopt. But the instability and lack of credibility of cryptocurrency exchanges, will likely deter those in Westminster.
The bigger picture is scary. A full recovery is so far down the line and as a tough winter approaches and the public becomes increasingly frustrated, the government must come up with answers quickly.
What does the future look like?
The UK’s Office for National Statistics (ONS) reported that certain major sectors of the economy are still considerably smaller than they were in February. It’s evident from everything we’ve seen from the easing of lockdown restrictions drastically affects the GDP – but at what cost?
The government must remain persistent in their pursuit of getting people back to work and creating new jobs, whilst protecting those industries that are still able to operate. This is something Rishi Sunak has reaffirmed, stating “my single focus has been on jobs” “This goal remains unchanged.” But, regardless of the eased restrictions we still only saw a faint growth in August. As cases rise and a lack of faith in the government’s handling of the pandemic continues to brew below the surface, action must be taken to get a grip on things and deliver on what was promised.
The government’s costly and seemingly futile attempt at providing a track and trace scheme is a source of great frustration for many. Implementation of such a scheme might allow citizens to go back to work. But with that stage still a long way down the line, one wonders where things will be after Christmas.
