Corona’s Economic Implications in Britain

2020/05/29 | Economy, Note, top news

Strategic Council Online: The Prime Minister of the United Kingdom is in a very difficult situation so that on the one hand he must be able to advance the Brexit negotiations and on the other hand he must deal with the consequences of the coronavirus disease. The combination of these two issues has created difficult conditions for Boris Johnson and the advancement of his plans in Europe and the world. At the same time, these conditions provide a special opportunity for Iran to forge industrial-economic cooperation with the United Kingdom by getting the desired concessions. Morteza Makki - Expert on European Affairs

The British economy, like that of other European states and the United States, has been hit hard by the spread of corona virus. Britain was faced with a delay of several weeks in the spread of corona in Europe but very quickly it ranked second after Spain in the world. More than 36,000 people have died of the virus in the UK. Of course, these are unofficial figures and according to Keir Starmer, the new Labor leader, the number of losses is higher than the official figures. Not all deaths are reported in nursing homes.

The quarantine imposed by the government of British Prime Minister Boris Johnson to prevent the outbreak of the coronavirus has put millions of jobs at risk in the country, effectively reducing Britain’s unemployment rate and economic growth in the first quarter of 2020. It shows that the country’s economy is in deep recession.

A quarter of British citizens have been affected by the outbreak of the coronavirus; One-third have lose their income in the first week of the enforced curfews, and one-fifth face serious living expenses. Half of the population also predicts that their financial situation will worsen over the next 12 weeks. According to a survey by YouGov, a global public opinion company, one in 20 Britons has lost their jobs in recent weeks due to corona and has joined the camp of unemployed.

Speaking at the House of Commons, British Chancellor of Exchequer Rishi Sunak said that the massive outbreak of the coronavirus in the country had caused the epidemic to affect more than four million people working in the UK. He added that 25 percent of businesses in the UK have stopped operating and that 500,000 companies have resorted to government spending to pay their employees. Sunak said 1,500,000 unemployed people have applied for livelihood allowance since the start of the quarantine. The British finance minister described the economic situation in the country as “very bad” and warned that the situation might become more difficult.

The results of a national financial impact tracker published by Standard Life Foundation show 50 per cent of UK households believe they will struggle to meet their financial commitments over the next three months. Researchers found that, since the beginning of the pandemic, 7 million households (a quarter of all households in the UK) have lost a significant part of their earned income as a consequence of the crisis. This included people who had either been laid off temporarily and received no wage, become unemployed or lost all of their self-employed income, or had seen a big drop in wages/self-employment income.

In a report on families with four children between the ages of 2 and 13, the BBC said they could hardly survive with 30 pounds in weekly government livelihood allowance. While food prices in the UK have risen sharply since the coronavirus outbreak, the British family’s usual diet is 30 eggs at a cost of five pounds so they can spend the week.

Also research company Kantar found that a third of people think their household is likely to need financial support from the government in the next three months. Across Britain, 33% of people agreed their household is likely to need state help.

Confidence in the economy fell to its lowest level since this measure started in August 2011, with nearly two-thirds (65%) stating that Britain’s economy is doing worse than 12 months ago, compared with 31% in March. The previous high was 58% in December 2011.

 

The results of further assessments and estimates by British think tanks show that the UK economy could shrink by 35 per cent in the second quarter of this year and unemployment could hit 10 per cent as coronavirus lockdown measures take a devastating toll, Britain’s budget watchdog has warned. The Office for Budget Responsibility (OBR) said such a slowdown could send the budget deficit to its highest level since World War II as it combines with unprecedented government spending. The British government’s borrowing rate will now rise from 218 billion to 273 billion pounds, the highest since the end of World War II.

BBC economics editor Faisal Islam says today’s figure shows that the UK economy has already undeniably entered recession, although that will not be officially confirmed until August.

In and of itself the loss of 2% of the value of the economy in one quarter is very rare, it is one of the five worst three month periods since modern records began in 1955.

But this was the consequence of an already stagnant economy hit by just over a week of official shutdown at the end of March.

That led to a record monthly fall in the economy of 6%, about the same fall seen over a much longer period in the last recession in 2008.

It means that the current second quarter between April and June is set to see truly incredible record falls in excess of 20 to 30% – perhaps a quarter of the whole economy.

The chancellor of the exchequer said that it was too early to speculate on the shape of any rebound, but fears are growing that it can no longer be presumed as rapid.

And as welcome as the unprecedented support has been, the government is likely to come under pressure from industry over further support, delaying travel quarantines, and the need for a post Brexit trade deal.

The Conservative government of Britain also has the concern about Brexit and must complete negotiations with the European Union by the end of December to reach a comprehensive economic and trade agreement. The Johnson administration and the European Union have so far held three rounds of tough talks without success. The European Union has repeatedly acknowledged that it is unlikely for a comprehensive agreement with Britain to be reached by December. That’s why EU High Commissioner Michel Barnier has repeatedly stressed that the talks should be extended until 2021 so that Britain and the European Union can reach a comprehensive economic and trade agreement. Otherwise, Britain will have to accept the hard choice. Boris Johnson could inflict another economic shock on Britain if he refuses to extend negotiations with the European Union. A tough exit from the EU in a recession will hurt the British economy even more. That is why both the European Union and many statesmen and non-Conservative currents in the British Parliament and political circles are calling for an extension of negotiations with the European Union so that they can reach a comprehensive trade agreement with the European Union.

Given that no vaccine or drug has yet been found for the coronavirus and there is no clear prospect, Boris Johnson will still have to implement a flexible quarantine to keep jobs in the country and prevent the outbreak of corona at the same time.

Overall, the British Prime Minister is in a very difficult position to negotiate on the one hand, and on the other hand, to deal with the consequences of the coronavirus. The combination of these two issues has created difficult conditions for Boris Johnson and the advancement of his programs in Europe and the world. At the same time, these conditions provide a special opportunity for Iran to forge industrial economic cooperation with the United Kingdom by getting the desired concessions.

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