Featured, News, On Campus

31st March 2020

Coronavirus and the Economy

Since the first confirmed cases back in December, Coronavirus has spread at an unprecedented rate. What started as a health emergency has now become an economic emergency too.

Recent weeks have seen the closure of many businesses. Initially the final decision lay in the hands of business owners. However, as per the PM’s announcement on 23 March, all “non-essential” shops have been legally forced to close. Those ordered to shut include restaurants, cinemas, clothing stores and places of worship. Delivery services are permitted to continue, alongside other “essential” establishments. A complete list of such stores can be found here.

With small and big businesses forced to operate on a restricted basis, what does this mean for the economy and its workers?

The FTSE (footsie)

What is the FTSE?

The FTSE is the Financial Times Stock Exchange. When people talk about the FTSE or FTSE100, they are referring to the top 100 companies on the London Stock Exchange. There are other variations of the FTSE, but the 100 index is most commonly used.

Image Credit: Flickr

Each company is weighted, based on their size. This means that a given change in the share price of one company will follow through to a change in the FTSE. However, the impact on the index depends on the size of the company.

Additionally, the FTSE100 indicates the general performance of the economy. As the FTSE includes both international and domestic firms, it can likewise reflect the health of both the international and domestic economy.

What has happened to the FTSE100?

At its launch in 1984, the FTSE started at a base level of 1,000 points. Until the second half of February, the FTSE was around 7,500 points.

As the coronavirus pandemic grew, the stock markets crashed. On 12 March, the FTSE index experienced its worst day since 1987, as it dropped by over 10%. Then on 23 March, the FTSE100 fell to just under 5000. Compared to 12 February, the total percentage decrease was 33.7%.

The index has since somewhat improved. But given the current social situation, it is difficult to predict how it will fluctuate in the near future.

Click here for a real-time update on the FTSE

Help from the Government?

Boris Johnson and Rishi Sunak (Chancellor of the Exchequer) have gradually announced financial relief measures for businesses and workers.

Left to right: Professor Chris Witty (Chief Medical Officer), Boris Johnson (Prime Minister) and Sir Patrick Vallance (Chief Scientific Adviser) – Image Credit: Flickr

Coronavirus Job Retention Scheme

Employers will be able to claim financial aid to cover 80% of their workers’ salaries. The grant will pay up to £2,500/month, per employee.

Despite this scheme, J D Wetherspoons initially refused to pay their staff for unworked hours. Tim Martin, the boss of the chain of pubs, told staff to get a job at Tesco instead. In response, many of his establishments were graffitied with the statement, “Pay Your Staff.”

The Wetherspoons boss has since agreed to pay staff, using the government scheme.

Self-employment Income Support Scheme

Those self-employed will be able to access a grant equal to 80% of their trading profits. Like the job retention scheme, the grant will cover up to £2,500 per month.

At the moment, the scheme covers the next three months. However, it will be extended if necessary.

Additional Support for Business

A range of measures have also been introduced to support individual businesses. These include:

  • 3 month deferral of VAT payments
  • Deferral of Income Tax payments
  • Cash grant of up to £25,000 for retail, hospitality and leisure businesses
  • Small Business Grant Scheme – £10,000 grant, to help cover ongoing business costs
  • Coronavirus Business Interruption Loan Scheme

Click here for the full list of government support available for businesses.

Global Recession

In line with it’s name, The International Monetary Fund (IMF) monitors the international monetary system. This means monitoring its members’ economic policies as well as economic developments across the globe.

“It is clear that we have entered a recession – as bad or worse than in 2009.”

Kristalina Georgieva (IMF Chief)
Kristalina Georgieva – Image Credit: Flickr

IMF Chief, Kristalina Georgieva, implied that the pandemic has stunted the global economy. Georgieva further explained that this recession will be at least as bad, if not worse, than the 2007/08 financial crisis.

A hopeful recovery is projected in 2021. However, the rebound depends on how COVID-19 continues to be managed and contained.

For a lighter read, check out our article detailing How to Stay Sane in Self-Isolation. Or for a tearjerker, read our Love Letter to the NHS.

Feature Image Credit: Flickr