Perhaps I am a cynical accountant, but a recession has been coming for some time. When the pandemic started the UK economy was already on a nervous edge. The high street had taken a battering, spending was low and uncertainty surrounding EU Exit all contributed to limited economic confidence.
The Bank of England base rate was lowered to 0.25% ahead of the UK even going into lockdown, and just over a week later, dropped to it’s lowest ever level (where it currently remains) at 0.1%.
At the height of the last recession, the rate was cut to 0.5% where it remained for the next 7 years, before being slashed again after the UK’s exit from the EU was announced.
For those not familiar, an economy is generally deemed to be in a recession when there are two quarters of negative growth. If the economy is not growing it usually means people are not putting their money into the economy – unemployment is often high, and subsequently, spending is low. This pandemic has contributed to a textbook recession.
What could we expect in this recession?
When a recession occurs, interest rates are slashed, spending is encouraged and there is a drive for companies to recruit and retain staff. This is to get cash flowing through the economy. This has been the stance taken, and the government has pledged a large portion of resource into propping up the economy so far.
Typically in a recession, we might see prices decrease to encourage spending, but the impact of the virus will likely see them either stagnate or even increase due to cost increases.
We are likely to see sales continue however; lots of companies will have previous season stock that they will be trying to sell and bring people into store.
Flexible working is likely to be here to stay. From a business perspective, as beneficial as an office is, downsizing their office could make large savings for them. It might enable them to recruit more, but this is perhaps something longer term.
With less office space required across the country, we may find that these could be re-purposed into other useful spaces (housing, schools, hospices and hospitals).
It probably won’t be over quickly. Combined with the transition period after leaving the EU, the UK will likely remain with low economic confidence once (if!) the virus becomes less of a challenge. This is could present itself in continued low interest rates, price variation, product displacement and large phases of recruitment and change for businesses.
However, nothing is certain other than a need to get more money moving again to get us out of this. Whilst the government support has been welcomed by many, it’s not captured everyone and there are still risks. A recession and a global pandemic have generated vast expenses, and this can only be repaid through the inevitable – tax increases. Whilst I suspect we will not see an immediate rise, we must brace ourselves for that in the future.
It’s not just doom and gloom
Go easy on yourself. It’s hard in hard times to not see that the way out is through. And the way through is often long and challenging. Remember that the virus has been the catalyst for what has been teased for several years now and so many things are out of our hands – we can only control our own individual responses.
- If you can, now is the perfect time to buy a property.
- Sales are likely to be bigger, and last for longer – treat yourself!
- Small businesses are not just cute little shops to take an Instagram picture of – go inside and buy things to help them out – it’s more valuable than you realise.
- If you’re still working, take away the positives you’ve learned from less commuting, flexible working and trust built with your employer and employees. Don’t let that be lost.
- If you have lost your job (permanently or temporarily), don’t be scared to try something new. It’s not a productivity competition, but you might be able to get a new career (or even hobby) that you love.
- By making use of discounts and staying home – save a little where you can. I know it seems to go against what I’ve said earlier – and frankly, interest rates are dire – but a having more than £0.00 in an account mentally makes a difference.
- Finally don’t be afraid to ask for help, or talk about it. Hard times can bring hard people – and not in a strong way.
All opinions are my own. No paid or sponsored content. Quoted and relevant links credited. All links correct at the time of publication. Information researched and interpreted by myself. For entertainment only – this is not intended for advice. COVID-19 is a virus that needs to be taken seriously and firstly all medical advice provided by WHO and the NHS or relevant health authority should be followed. There may be unique advice for people who suffer from illnesses and one size does not fit all. If you consider yourself (or those close to you) at risk, seek advice – remotely – from a healthcare professional.