Amidst the most significant and far-reaching economic slump in over three centuries, the Bank of England is preparing fresh measures to attempt to address the drastic decline in economy and industry across the UK.
Now more than ever, the government is acting to work with companies to maintain industries and the flow of wages.
With retail and street economies in sharp decline, consumer trends show significant saving and the removal of debt. April saw households remove £5bn in credit card debt, followed by £7.4bn in the following month. This is matched by a drastic increase in debt among private sector businesses, with the isolation and quarantine measures enforced by necessity inducing an £8.4bn spike in debt.
Predictions prove difficult
It’s predicted that the central bank will expand its activities in bond buying. Investors are keeping a close eye on this, with expectations of an increase to £745bn in the bond-buying program. Speculation is difficult at such a turbulent time, however, with the sudden and radical policies often released in an effort to open the country up for business once more playing havoc on any measured effort towards predicting growth.
With the GDP showing a massive shrinking of over 20% in April alone, the recent easing of social distancing measures is hoped to lead to a modest benefit for retail, with non-essential stores across the UK opening for the very first time since their enforced closing in March of this year. Despite this positive move upon which stimulation of the economy is pinned, uncertainty over Brexit lingers like a dark cloud overhead, threatening further damage through a no-deal verdict.
Growing business debt
With the total accumulated debt taken on by UK businesses under government-backed bailouts exceeding £38bn already, UK banks are being warned by professionals including Britain’s financial regulator to create a new method for handling both business and personal debt in a unique period in our country’s history.
Although the loans taken by small businesses from the government are keeping them afloat during this period of closure and lockdown, a real concern over the ability for debts to eventually be repaid remains. Executives from leading banks in the UK recently predicted that as many as half of UK businesses that have taken loans from the bounceback schemes will be unable to be repaid.
An uncertain future for consumers and retail
Despite consumers erasing billions in debt in the last month alone, it’s uncertain as to how spending and saving will emerge in the months ahead. While many households are repaying debts owed on loans and other financial obligations due to drastically reduced monthly living costs, less is known as to how the spending habits of the UK population will be once our high streets are open once more.
Although the removal of debt is encouraging, many households are seeing their employment, wages and financial stability dashed against the threat of the pandemic. With many jobs lost and savings plundered simply in an effort to keep food on the table in this difficult time, it can only be hoped that the combination of personal and business stimulus leads to a restored economy once the COVID-19 curve is flattened and a vaccine made available.
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