UK economic slump already 'worse than 2008', say business owners

A woman in a face mask wasks past major shops on Oxford Street, closed for business. (Phil Clarke Hill/In Pictures via Getty Images)

The escalation of the coronavirus pandemic in the UK has led to a sharp economic downturn that business leaders are saying is already worse than the global financial crisis of 2008.

The Bank of England on Thursday published its latest Agents’s summary of business conditions, a quarterly report based on discussions with at least 700 business leaders across the UK. It paints a grim picture of activity slumping across the economy, severe cashflow issues for businesses, and lay offs across the country.

“The Covid-19 (Coronavirus) pandemic has caused a sudden, rapid decline in economic activity in recent weeks,” the report said. “The situation has been described by many Agency contacts as being worse than the financial crisis in 2008.”

Almost all industries are facing severe disruption.

Hotel, airline and travel bookings have crashed. Business at restaurants, pubs, cafes, and leisure venues has dried up. Clothes shops are reporting “high double-digit falls in sales.” New car sales are diving. Factories are shutting down as parts fail to arrive from China. Companies are cancelling consultancy projects. Marketing and advertising spending is plummeting. And activity in the property markets, both residential and commercial, is rapidly tailing off.

Across the economy, the Bank of England’s agents reported redundancies. The Work and Pensions Select Committee head on Wednesday said that half a million people have applied for unemployment benefits in just the last 9 days.

Even still, the Bank of England report is likely to paint a rosier picture than the reality today. The findings were based on conversations in the first few weeks of March and so are unlikely to capture the full impact of the government ordered shutdown that took effect on Monday night. Prime minister Boris Johnson ordered all non-essential businesses to shut and told people to stay at home as much as possible.

While almost all industries are suffering, a handful of sectors were seeing an upturn in business.

Stockpiling led to a surge in demand at supermarkets and food production companies, with sales exceeding Christmas levels.

However, even here the Bank of England said businesses were struggling due to staff shortages. Illness and self-isolation led to “reports of staff absences being more than six times the normal rate.”

“Some contacts were looking into redeploying head office or administrative staff to stores and distribution hubs to cover staff shortages,” the report said. “Some supermarkets have started recruiting more staff.”

Other pockets of the economy seeing rises in business include legal advice on employment law and corporate debt restructuring services.

The Agent’s summary of business conditions was published alongside the latest Bank of England monetary policy decision, leaving interest rates and asset purchases unchanged. The central bank warned there could be “longer-term damage to the economy,” as businesses go bust and people lose their jobs.