Date Published: 19/05/2020 16:49
As we slowly edge towards lockdown the Government is walking a tightrope between health and the economy.
Jillian Thomas takes a look at what that means for you.
England is tentatively entering the post lockdown phase, with the government walking a very fine line between the safety of individuals and the re-ignition of the economy.
We have seen the establishment of the Covid-19 alert systems set from 1 to 5, based on the ‘R’ factor of the virus in the United Kingdom. The aim is to keep social distancing as much as possible, but to allow for changes in public behaviour. The difficulties are going to be getting people to take the right action and balancing how we get people back into employment to keep the economy going.
The one political shining light during this period of average to meagre political decision-making, has been the new Chancellor. Maybe it's because of his previous background in business or perhaps he is a man who truly understands the requirements to keep the United Kingdom economy going.
There is no doubt that the levels of support granted by the government are going to see some very significant alterations to the economic patterns within the United Kingdom. Currently 25% of the workforce is being paid for by the government, with this costing approximately £9 billion per month. This along with the loans to businesses and the deferment of tax payments is only going to exacerbate the situation in the short to medium-term, with the current estimate of the total cost estimated to top £300bn.
Is it important to understand that when entering this medical emergency the economy in the United Kingdom and mostly around the world was actually in a very good position, unlike our entry into the banking crisis in 2008. However, it is evident from the initial figures coming out on GDP that the impact of this medical emergency has been far more severe in the short-term.
During the banking crisis pullback the worldwide GDP figures were - 4%, and this was over a prolonged period of time. Compare this to the estimated impact of the coronavirus, which is currently - 20% for a period of up to 18 months.
I do not like using the ‘R’ word ….recession. I started a business in 2009 and remember a comment made to me by an individual saying you should never start a business in a recession, but many of you will remember my riposte. “I have decided not to participate in a recession".
There is no doubt that there are certain areas of the economy that have truly benefited from the medical emergency. And one saving grace in all this is the fall in sterling for our manufacturing businesses, providing access to international markets in a more cost-effective way. However, many areas of our economy will remain closed for probably another six to nine months.
And we await the amended furlough terms from Government later this month. But if turnovers in businesses have declined and cannot recover, the furlough scheme is reduced, and then stopped, we may be looking at redundancies.
There is no question that it is going to be extremely difficult for the next couple of months, however we need to think differently
Never has there been a more important time to plan and rework cashflow forecasts; truly understand your business, your margins, and where risk comes from.
From a financial planning point of view, I've already started to discuss with clients the ways that we can assist them. Pension funds can be used in certain circumstances, this is very specialised, and technical advice process, which we are very well qualified to provide help and support on.
If you need help, please talk to us…. Together we can emerge from this medical emergency.
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