Economic Insights

BISWorld expects Real GDP Growth to slow to 0.7% during 2019-20 previously 1.4%. Slowest rate of growth since the financial crisis.
Coronavirus is expected to compound the uncertainty regarding the terms of Brexit. Exports are expected to be impacted significantly and could outweigh the government’s increase in export finance.
IBISWorld has downgraded expectation for exports, household consumption and business investment.
UK Government budget spending increased for FY20 with at least £32 billion in spending and £330 billion in government backed lending related to the COVID-19 outbreak.
Consumer confidence is expected to decline during 2019-20 to 90.6 index points in response to COVID-19 and could fall further in 2020-21 depending on longevity of on-going disruption.

Written on April 1, 2020 by Xeinadin Group

Bank of England (BoE) Base Rate

The BoE reduced on 19th March to 0.1%. Factors influencing this decision include; keeping inflation below 2%, low consumer confidence and also COVID-19. There is limited scope for BoE to reduce the base rate further but have indicated that there is potential to stimulate the economy further if required. As we approach December 31st 2020, IBISWorld expects monetary policy to be focussed on Brexit dependant upon the severity of the on-going crisis.

Quantitative bond purchasing measures increased by £200 billion.

Oil Prices

COVID-19 has heavily impacted the price of oil together with a lack of OPEC price agreements which led to an oversupply. The price of Brent Crude oil has reduced from approximately US$60 in mid-February to US$30 mid-March. Supply levels and price will be dependent on the OPEC agreements.

Most affected industries; Petroleum refining in the UK, Organic Basic Chemical Manufacturing, Crude Petroleum & Natural Gas Extraction.

Financial Sector

The Financial sector in the UK contributes approximately 7% of GDP.

General insurance is expected to face increased claim cost over the coming months. Association of British Insurers have said that the majority of businesses will not be able to claim against the insurance as Coronavirus is not likely to be listed, even if the business does have infectious disease insurance. Additionally, most policies will not cover forced closure by the government as this is meant to cover damage to premises such as fire and flooding.

Some insurers have stopped offering travel insurance that covers Coronavirus related claims as they are unable to assess the costs involved.

Pension funds have been affected, especially those with a defined benefit structure as sponsoring firms have started to face liquidity and cash flow issues, resulting in requests for delayed payment.

Defined contribution pension schemes are feeling the squeeze as bond prices have increased whilst simultaneously facing falling asset prices as seen in the FTSE 100.

Auxiliary financial services such as accounting, tax consultants and actuarial consultants are likely to feel to effects of COVID-19 in a delayed manner.


Expected to be the one of the most affected industries as travel bans hinder international travel. Rishi Sunak pointed out that this sector is facing particularly acute challenges with significantly less inbound and outbound tourism.

The decline is driven by weak consumer confidence, travel bans and government advice to avoid non-essential travel due to COVID-19. During 2020-21, a decline of 4.8% is expected to occur as both domestic and international tourists recover. This is likely to have a direct impact on Airlines, Accommodation providers and Travel agencies. As an indirect impact, Restaurants,

Cultural heritage sites/tourist attractions and Local transport services are likely to be affected.

However, an increase in tourist numbers is expected in the second half of 2020-21 as travel bans are lifted and confidence in international travel increases.

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