PM takes measures to raise the economic activity in Britain, while the slowdown continues

PM takes measures to raise the economic activity in Britain, while the slowdown continues

Summary

  • Johnson asks his staff to start coming to office from Monday, 13 July
  • PM office is preparing a nine-month roadmap to return to normal life, without any social distancing requirements
  • British economy to contract by 10.1 per cent during 2020: Moody’s
  • 10,000 jobs to be cut across different companies- Boots, John Lewis, and Rolls Royce

 

Prime Minister Boris Johnson has asked his staff to re-start coming to offices and resume work from Monday, 13 July 2020. It is needed to raise the economic activity in the nation, and take it out of the undergoing slump, due to the ongoing corona pandemic. He is also expected to soon ask businesses to do the same and call employees to work, provided it is safe.

By resuming desk work at his own office first, for his entire team, Johnson wants to lead by example. This will surely increase the employee productivity and keep the infections under control, provided the safety guidelines are strictly followed, he added.

No amount of government spending will work if people do not start to come out and live life as usual.

But it is remains to be seen how many people get back to work, given that public transport is running at less than full capacity, due to safety measures in place. Also, the seating arrangements in offices need to be made conducive to the 1-meter distance rule.

Places like the Victoria Station in London, which used to be jam-packed before the lockdown was imposed in Britain during late March 2020, look very deserted even after the lockdown has been uplifted and people are allowed to move around. Similar deserted look is seen across theaters, malls, markets, retail outlets, and tourist attractions. 

Johnson’s office is also preparing the outline of a ‘Roadmap 2’, a plan to return to normal life routine across Britain. It will be spread over a nine-month long period and will try to get rid of most of the existing social distancing norms, in a systematic and scientific manner.

 

UK’s debt to GDP ratio worsening

In the meantime, an analysis by the leading rating agency Moody’s revealed that Britain’s debt as a share of its GDP (Gross Domestic Product) could shoot up by 24 per cent for the year 2020, as compared to its previous year level.

The agency also forecasted the country’s GDP to contract by 10.1 per cent during 2020. It added that the economy is projected to grow next year in 2021, by 7.1 per cent. By definition, GDP calculates the total value of goods and services produced in an economy.

It is pertinent to note that the UK economy had shrunk by a record level of 20.4 per cent during the lockdown month of April 2020.

 

Job losses still being announced, despite the mini-budget

On 9 July 2020, Chancellor Rishi Sunak had announced a £30 billion mini budget plan to save jobs across the nation. It consisted on wage subsidies, VAT cut on hospitality and tourist attractions, and a temporary stamp duty waiver for the home buyers, amongst other initiatives.

Though it can’t be expected that things change overnight with these support stimuli, however taking stock of the current situation is important to understand the gravity of the recession British economy is exposed to.

Just a day after the Sunak plan was out, around 10,000 more jobs are on the verge of getting redundant.

On 10 July 2020, Boots had announced that it is being forced to axe 4000 staff, while John Lewis said it would lay off 1300 staff due to store closures. Rolls Royce announced job redundancy plans for its 3000 employees on the same day.

Boots UK Limited is a UK based beauty retailer, and also runs pharmacy chains. The retailer’s footfalls fell by 85 per cent during the month of April 2020 across Britain. As part of its restructuring initiatives, the chain plans to close 48 of its stores.

John Lewis, the country-wide departmental store is also struggling to make its ends meet during the challenging corona times, and has decided to shut 8 stores.

Rolls Royce, the UK based luxury auto company, had announced its plans to lay-off 9000 employees globally in May 2020. Out of these, its Derby head office will see 1500 jobs being cut.

Just a week back, Burger King and Pret a Manager had laid off 2600 employees.

In fact, close to 60,000 jobs have either been lost or put at risk since March 2020 from companies such as Airbus, Arcadia, Boots, British Airways, Burger King, Carluccio's, Chiquito, Frankie & Benny's, Bella Italia, Cafe Rouge, Las Iguanas, DHL, Harveys, Le Pain Quotidien, Oasis and Warehouse, P&O Ferries, Pret a Manger, Quiz, Rolls Royce, Royal Mail, Ryanair, Upper Crust, Caffe Ritazza, TM Lewin, Victoria's Secret and Virgin Money.

The rate of unemployment is expected to rise rapidly during the course of the pandemic year 2020 in Britain, and is a major area of concern. It is projected to cross 10 per cent by the end of 2020, according to government estimates.

In a separate poll by the Bank of England, which surveyed 2,776 business executives across the nation, the volume of unemployment is forecasted to reach 3.5 million by December 2020, owning to the devastating effects of the Covid-19 pandemic. The respondents said that their sales are expected to drop by 38 percent in 2020, as compared to the last year levels.

In sum, the British Prime Minister is rightly worried about the pace of the economic recovery, which looks to be very slow at the moment. Despite a drop in the rate of corona related infection across the nation, people are still fearful to go out. Johnson’s commitment to call his office staff to work is likely to instill a new wave of confidence amongst people and will encourage them to start going to their offices for work. This could have a ripple effect on raising the level of economic activity across the UK, which is already struggling with massive job-losses and a high public debt.

 


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