The British economy reportedly contracted by 2.2%, facing the sharpest decline in over 40 years in the aftermath of the ramifications triggered by the Coronavirus pandemic. Significantly, a study published by Oxford Economics has suggested that the pandemic can possibly cause five permanent changes to the UK economy.
Increased Participation of Government in The Economy
In a bid to improve the current state of the economy, the government is expected to increase public spending with an expansion of the power of public policy. This will be crucially beneficial for millions of unemployed whose jobs have been impacted by the pandemic lockdown.
Continuous Surge in Borrowing
UK’s borrowing has surpassed the size of its economy in over 50 years after the government borrowed a record £55bn in May. Noting this, the Oxford report suggests that the ratio of government debt-to-GDP is likely to remain high which will make it difficult for the government to pay back its debt.
Focus on Self-Efficiency in The Economic Sector
Amid the pandemic restrictions, Britain faced severe disruptions in the supply chain, particularly while procuring essential medical equipment. This can essentially result in the diversion of the government’s focus on increasing self-efficiency in domestic production and repatriation of raw material supply chains. According to the Oxford report, the government is emphasizing on a ‘UK-first’ approach while tightening its laws on foreign takeovers. ‘UK-first’ approach is also likely to be the foundation of the Brexit trade deal between the UK and the EU in the coming months.
Increase in Alertness Among Consumers and Investors
While the economic downturn that the UK is experiencing due to COVID-19 is shortlived, it will adversely affect both investors and consumers alike. Keeping the impact of economic recession on business development, the private sector is likely to take a precautionary approach which can lead to lower growth and a dynamic economy in the years to come.
A Brighter Side for The Economy
A much-needed institutional and structural boost is coming to the way of the British economy. Proposals are coming from across the sectors for a green and clean recovery that will not only boost the economy but will also generate employment.
Meanwhile, the UK government is working recovering from the socio-economic ramifications of the Coronavirus pandemic. Recently, IMF’s chief economist Gita Gopinath also suggested that the UK will see a prolonged economic recovery. According to the economist, the British economy could see V-shaped recovery in the beginning, but will quickly flatten out.