Summary

• The United Kingdom’s Gfk Consumer Confidence was recorded at -27 for August 2020
• There has been an improvement in personal finances optimism, but the outlook of the economy has deteriorated, mainly because of the surge in the rate of unemployment
• The latest labour market statistics by the Office for National Statistics has revealed that employment has weakened

Like many other countries battling with the coronavirus pandemic, the United Kingdom has also been in a state of lockdown, brought on by successive measures of social distancing. As a result, the economy has taken a sudden and dramatic hit, perhaps even more severe than the global financial crisis of 2008.

Amid all the prevailing uncertainties, there is some signs of recovery or at least halt in decline. The United Kingdom’s Gfk Consumer Confidence remained unchanged in August 2020, at -27 similar to the previous month, resulting from an improvement in personal finances optimism, but the outlook of the economy has deteriorated, mainly because of the surge in the rate of unemployment.

GfK’s Client Strategy Director, Joe Staton, sees employment as a big issue in the current scenario because years of job security has been hit with the pandemic. Approximately, one in eight workers has been relying on the government’s job retention subsidy scheme, costing 35 billion pounds ($46 billion), which is due to end in October.

The perception of economic recovery remains weak, as the GfK’s measure of how consumers view the economy over the next 12 months fell to -42 from -41 in July. It is to be noted that the British GDP slumped by 20.4 per cent in the second quarter (April-June).

Gfk Consumer Confidence Index

The GfK Consumer Confidence is a leading index used for measuring the level of consumer confidence in economic activity. A high level of consumer confidence represents economic expansion, while a low level drives the economy to an economic downturn.

Consumer Confidence Barometer is the most respected and watched indicators in the United Kingdom. The survey involves varied sectors such as the world of banking, governmental departments, retail and media, focusing on consumers’ opinions about their household finances, the general economy and their views on the current purchasing climate.

Let us closely follow some of the listed financial stocks of the London Stock Exchange.

HSBC Holdings PLC

HSBC Holdings PLC (HSBC) is the banking and financial services company, which manages its products and services through four businesses: Retail Banking and Wealth Management (RBWM), Commercial Banking (CMB), Global Private Banking and Global Banking and Markets, . The company operates across various geographical regions including Europe, Asia, the Middle East and North Africa, North America and Latin America.

Stock Performance

HSBC Holdings PLC (LON:HSBA) stocks were trading at GBX 325.10 on 21 August 2020 at 2:04 PM, down by 1.17 per cent from its previous close of GBX 328.95. The 52-week low/high range was GBX 324.95/630.70. It had a market capitalisation (Mcap) of £66,994.26 million. The volume traded at the time of reporting was 12,428,821. The company recorded a negative return on price, which was 44.72 per cent on YTD (Year to Date) basis.

Barclays PLC

Incorporated in 1896, Barclays PLC is a global financial services provider offering personal and business banking, wholesale and commercial banking, private and investment banking solutions to individuals, SMEs, corporates, and high-net-worth clients. The Company has two business divisions: the Barclays UK division (Barclays UK), and the Barclays International division (Barclays International). Barclays UK offers everyday products and services to retail customers and small-to-medium-sized enterprises, particularly based in the United Kingdom.

Stock Performance

Barclays PLC (LON:BARC) stocks were trading at GBX 106.56 on 21 August 2020 at 2:14 PM, down by 0.95 per cent from its previous close of GBX 107.58. The 52-week low/high range was GBX 80.24/192.46. It had a market capitalisation (Mcap) of £18,662.34 million. The volume traded at the time of reporting was 12,136,711. The company recorded a negative return on price, which was 41.91 per cent on YTD (Year to Date) basis.

Natwest Group PLC

Formerly Royal Bank of Scotland Group PLC, NatWest Group PLC is a financial services company, providing banking products and related financial services. It operates in segments like UK Personal Banking, Ulster Bank RoI, Commercial Banking, Private Banking, RBS International (RBSI), NatWest Markets (NWM) and Central items & other.

Stock Performance

Natwest Group PLC (LON:NWG) stocks were trading at GBX 110.55 on 21 August 2020 at 2:16 PM, down by 0.94 per cent from its previous close of GBX 111.60. The 52-week low/high range was GBX 105.95/120.90. It had a market capitalisation (Mcap) of £13,531.55 million. The volume traded at the time of reporting was 3,966,433. The company recorded a negative return on price, which was 7.69 per cent on YTD (Year to Date) basis.

Economic Condition of the United Kingdom

As per the latest reports of the Office for National Statistics, the recession brought on by the pandemic has led to the biggest fall in the quarterly gross domestic product (GDP), recording 20.4 per cent in Q2 (April to June) 2020.

With the lockdown restrictions easing in June, the economy began to bounce back with shops reopening, factories beginning to ramp up production and house-building continuing to recover. There was an increase in the volume of retail sales by 13.9 per cent in June 2020 in comparison with that of May 2020, driven by the non-food and fuel stores continuous recovery from the sharp falls experienced since the start of the coronavirus pandemic.

The Business Impact of COVID-19 Survey (BICS) for the period 27 July to 9 August 2020 showed signs of businesses emerging from the coronavirus restrictions. Out of the responses recorded from the businesses, 93 per cent said they had been trading for more than the last two weeks; which was up from 90 per cent in the previous wave. A further 2 per cent had resumed trading within the last two weeks after a pause in trading. This resulted in monthly GDP growth by 8.7 per cent in June 2020, but it remained a sixth below its level in February before the UK imposed lockdown.

For Q2 2020, labour productivity, measured in terms of output per hour, declined by 2.5 per cent when compared with the previous quarter (the largest fall since estimates began). The fall in output per worker was steeper at 19.9 per cent compared with the previous quarter because of the impact of the furlough scheme that retains employees as workers even though they work zero hours.

Total actual weekly hours plunged by 18.4 per cent across the economy between January to March 2020 and April to June 2020. Since estimates began in 1971, this has been the largest quarterly decrease. Early indicators for July 2020 suggest that the number of employees in the UK on payrolls is down by approximately 730,000 compared with March 2020.

The latest labour market statistics reveal that employment is weakening (down 0.2 percentage points on the quarter to 76.4 per cent), and unemployment remains largely unchanged at 3.9 per cent, but signs of economic inactivity have been seen rising with people out of work not currently looking for work reflecting perceptions of the jobs market.

Public sector borrowing for the period of April to June 2020 reached £127.9 billion, which is more than double that borrowed in the whole of the last full financial year, as indicated by the provisional estimates. In June 2020, the government receipts also declined by 16.5 per cent in comparison with the previous year (June 2019), while central government spending increased by 24.8 per cent over the same period, reflecting the emerging effects of government coronavirus policies.

How Will the British Economy Adjust to A New Reality Post Pandemic?

Even after the lockdown completely eases and the economy heads into a new reality, the businesses will continue to face uncertainty. Unemployment is expected to rise in the second half of this year as the Job Retention Scheme is supposed to unwind. And as the downturn continues to bite, we could be more business causalities, however, once the vaccine for the virus finally comes into existence, the confidence level will start recovering.

To know more do read: What Next For The Ailing UK Economy?