Businesses and their employees are living in unprecedented times. It’s becoming increasingly clear that the Covid-19 pandemic will hit economic activity substantially, both in the UK and around the world, with the peak impact likely to be felt in the coming weeks.
However, the nature of this economic shock is different to anything that we have experienced in the past. The most intense period of disruption will be temporary, and as we get beyond the peak of the pandemic, we should see activity rebound.
For the moment, the extent of the hit to the economy in the near-term is very unclear. It is apparent already that some sectors are seeing significant disruption, and businesses and their workers across the economy are having to adapt to the new operating environment.
During the coming weeks the CBI will continue to survey firms across the UK to gauge the impact on the economy and publish the results on these pages. Your business can participate in our surveys to ensure your voice is heard and your challenges are reflected.
In the meantime, below is a snapshot of what we’ve been hearing from our members so far.
A snapshot of COVID-19 impact
- Supply chain disruption has been significant. Initially this stemmed from China, but production within Europe is now being more directly hit.
- This is particularly true for sectors that depend on globalised, just-in-time supply chains, such as automobiles and electronics.
- But high levels of inventories have been providing a buffer for some firms, as many companies built up stocks ahead of Chinese New Year, and others were still holding stocks built up before Brexit deadlines.
- Meanwhile as activity in China starts to slowly recover, firms are reporting that supply is coming back on stream.
- External demand from Asia fell sharply in the early weeks of the Covid-19 outbreak (especially in travel & tourism, education, manufacturing and business & professional services). Firms are now anticipating a similar drop-off in demand from Europe.
- There are also concerns about the impact of lost orders due to the cancellation of events, meetings, and office closures across the globe.
- Domestic demand has already taken a hit in several sectors due to travel bans, event cancellations and social distancing.
- This is particularly affecting the travel, tourism, and hospitality sectors. Non-grocery retailing and some professional services are also seeing reduced activity. Manufacturing firms supplying the most exposed industries are also being affected.
- Sharp financial market movements are creating significant risks to revenue streams across financial services and related professional services.
- However, some sectors are reporting a rise in business volumes as a result of the outbreak. These include food manufacturers, grocers, on-line retailers, suppliers of IT equipment & computer systems, and pharmaceuticals & healthcare-related goods and services.
- Working practices are being adjusted, with a widespread shift to remote working and office closures in some sectors, alongside travel bans.
- The impact on staffing levels, hours, and employment has been limited to specific sectors so far. The impact has been particularly acute in those sectors that are most affected by containment measures (such as travel and hospitality).
- The cash flow situation is deteriorating for some UK businesses. Many banks are being proactive in targeting vulnerable businesses. And companies are doing all they can to help employees through these unprecedented times.
- The response from government and the Bank of England so far has been encouraging. But the rapidly evolving situation means some firms also require urgent, swift intervention to protect pay and livelihoods.
Even before the Covid-19 pandemic, momentum was weak. The economy posted no growth in Q4 2019, and more recent survey indicators of activity were mixed at best. The peak impact of Covid-19 disruption is still to come—our forthcoming surveys will provide some early indication of what lies ahead.
Only time will tell the full extent of the economic hit, which will be heavily dependent on how long disruption lasts, how the global situation evolves, and the extent to which hefty policy action from the government and Bank of England helps to mitigate some of the damage. For now, however, we’re in for a rocky ride.