Oxford Economics: Economic Update – 24 March 2020

25 Mar 2020

BFPA’s latest update from Oxford Economics (OE) was released on 24 March. Some members will be aware of the work BFPA carries out each year in conjunction with the BFPA surveys to produce a background update on the economy as well as a five year industry forecast. Subscribers from 2019 will have received a copy of the slides on which this summary is based, but all members might find some of these points interesting in the short synopsis below:

  • The 3 main channels of economic impact as a result of the coronavirus outbreak so far are:
    • Business confidence has fallen
    • Damage to supply chains and availability of workforce
    • Reduction in demand from businesses and consumers
  • GDP will fall sharply in Q2 2020, with some offset from home workers, demand substitution and fiscal and monetary policy support (Jobs Retention Schemes, extra welfare spend, VAT payment deferrals, business support, extra NHS funds and £330bn of government loans)
  • OE’s current forecasts for GDP assume the economy will bounce back strongly, based on experience of short recessions and previous pandemics

But the main risks are: 1) how long the outbreak will last and will there be further waves? 2) More draconian measures may be needed to limit the spread 3) Has enough been done to limit unemployment? 4) will the crisis leave long lasting, adverse effects on the behaviours of firms and individuals?

  • Lower oil prices and monetary and fiscal stimuli should reduce inflation
  • OE highlight the uneven impact of coronavirus on the various sectors of the economy below:

  • Different regions of the UK will be affected to different degrees depending on the location of “high risk sectors” (accommodation and food services, arts and entertainment, manufacturing and transport).

Please note the information supplied above is protected under copyright by Oxford Economics and may not be distributed outside your organisation without permission from Oxford Economics.

If you have any questions on any of the above please contact Sarah Gardner sarah@bfpa.co.uk

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