UK POPULATION AND DEMOGRAPHICS
The UK economy, after the outbreak of Covid 19 it to a large extent, had a reduction in its Gross Domestic Product, which is estimated 25% below than others. Souring of the spread led to further restrictive measures to contain the spread. There were different ways the virus affected different people; consumers were not willing to spend more. A decrease in their salaries caused the unwillingness to spend. There was also the decline in investment by businesses; they feared indulging in any activity which might have resulted in a loss. Some businesses, due to restrictive regulations, ended up shutting down like hospitality. Unemployment was the most widespread, which increased at a rate of 12%. However, some measures were put in place to solve the people experiencing the pandemic. The government has increased its external borrowings to increase its financial base. The government spending increased to support businesses, workers and supplement the workers’ income. The outline of the effects on demand and supply forces and the government’s measures to solve the issues is discussed below.
There has been a high rate of infection of covid 19. It has led to a high mortality rate. A high mortality rate increase leads to a decrease in population, which will, in turn, a decrease in the availability of the market for goods and services. The high mortality rate has led to a shift in the demand curve from right to left to illustrate a contraction in consuming their goods and services.
There has been an excess of demand for some products meant to help curb the spread of the covid 19 referred to as stockpiling. The uncertainty of the future has led to an expansion in buying essential goods to keep a full supply during the covid 19 times. The resulting demand for products such as tissues and hand sanitizers to curb the spread of covid 19 has led to the shift of the demand curve to shift to the right, indicating an increase in demand for goods increased uncertainties in the future shortages. There was a decrease in the supply of essential goods and services by the government of the UK. The decrease resulted from unexpected future changes with the large population, which results in the shift of the supply curve from right to left.
INCOME
There has been an increased income cut off to most UK citizens after the outbreak of coronavirus. The estimated number of households that went through an income decrease was t 31%, almost a quarter loss on their income. The decrease in the incomes of most households resulted in a decrease in spending on their income. A decrease in income reduces the consumers’ ability to spend as they did before since they can only buy fewer units than they had before. The effect has led to a shift in the demand curve from right to left.
The reduction of income has led many people to stash their money by saving their money. People have resulted in mainly keeping their money to avoid the risk associated with any further pay cuts. The majority of people have foregone their holiday expenses and entertainment for their savings to cut their inessential spending. This has been proved through the recent increase in the proportion of cash allocated to savings by the UK citizen; the proportion of income allocated to savings has been increased from before, which was 6% to 29% after the pandemic. The demand curve’s effect will shift the curve from right to left to illustrate the decrease in demand.
There has been a widespread loss of jobs for most people. In some jobs such as in entertainment and hospitality, due to restrictions in the number of customers that any joint should hold, there has been a total closure of the no-essential facilities in some cases. The increased unemployment rate has led to a resulting inability for most households to pay up their bills; job losses have had an estimation of 2 million. The demand curve’s effect will shift the curve from right to left to illustrate the decrease in demand.
Government
There has been an increase in the total government spending due to the outbreak of covid 19 to help out most households cater to their expenses. The government increased its financial basis through an increased borrowing to help it in its spending. The government has covered 80% of the people’s employed wages and are on pay cuts instead of being unemployed. In doing this, the government ensures there is no risk of being unemployed at any given time. This has increased the consumption of goods and services as the income can cover more units than a pay cut. The government has supported its citizens by paying their covering for the people’s rent to ease their expenses. The government issued a billion pounds to support the renters who would cover 30% of market rents. The resulting increase in consumption will lead to the shift in the demand curve from left to right to illustrate the increased demand for more units.
The government has intervened in the business, the increase in the length of loan repayment. There has been a loan repayment extension from 6 months before the outbreak to 12 months after the coronavirus outbreak. The government has reduced the taxes for businesses by offering subsidies, which are estimated to be around 30 billion pounds of cash to businesses. The government’s measures are meant to help in the provision of goods and services to the people. The resulting increase in consumption will lead to the shift in the demand curve from left to right to illustrate the increased demand for more units.
Complementary and Supplementary Goods.
The Uk citizens have decreased the consumption of the goods and services directly affected by the coronavirus by increasing prices or restrictions. The consumption of those goods has resulted in the shift to the other substitute goods, which have not been affected directly, making them less cheap or having extensive government support making the accessibility easy. The complementary goods demand has decreased if there is a rise in the prices, the people result in not consuming them at any risk to consume more of the goods and services rather than consuming the products.
The UK government is cushioning its citizens with a loan scheme Known as Coronavirus Business Interruption Loan Scheme. This scheme provides financial assistance to small businesses that have been adversely affected by the emergence of Covid 19. The government is working together with other partners such as lending institutions, both private and public, to make this program a success. The scheme is lending up to £5 million to both small and medium-sized businesses. The government guarantees 80% of the funds to the lender and pays interests and anything else involved for one year. This makes lenders shy away from giving loans as somehow they are guaranteed to get the funds back.
Businesses eligible for the loan scheme must be based in the UK. They should also prove that they would have been viable if it was not for the pandemic, and the business has to be adversely affected by the pandemic. So far, the scheme has shown great signs as there about 50 lenders that include the main retail banks in the UK. The period of the loan will depend on the type of loan one will apply for. Overdraft and invoice facilities have up to three years, while loans and asset finances have up to six years. Provided a business complies with all the recommendations and provides all necessary documents, then there is no reason to qualify for the loan scheme. If a lender fails to approve a loan request, one can proceed and apply for the loan to other lenders provided they are on the scheme. One may also use a finance broker to assist in finding the right lenders. Doing one’s research on finance guides provided by the British Business Banks can also be viable.
Stimulus packages in terms of Billions of dollars have been injected into the economy to ensure consumer spending. In the United Kingdom, consumer spending on retail goods and services is undoubtedly the UK economy’s backbone. The government deemed it necessary to develop stimulus plans to ensure that this sector of the economy does not dwindle completely. The latest stimulus package has been up to $38 billion, announced as the country tried to exit some of the lockdown measures. The finance minister said the stimulus package was to cushion the economy from snowballing into a slowdown that could leave the country in deep scars on the economy and businesses. Since lockdown in March, which was designed to contain the virus from widespread, the UK government has allocated billions to the economy, especially on sectors touching consumer spending. This has been aimed at ensuring the survival and continuity of household incomes as the number of working hours has reduced due to lockdown. The government has targeted loans, guarantees, and equity in this phase of the stimulus package. Also, tax cuts have been incorporated in this phase to increase demand and give employers the confidence to recall their workers’ work. The UK government treasury chief Rishi Sunak told lawmakers that the government wants businesses to regain their confidence to drive growth and create jobs. The UK economy is so much dependent on consumer spending; thus, policies should be erred more on overstimulation. The stimulus package had payments to businesses for retaining workers and employing young people. Grants that were given were to make buildings and private homes energy sufficient. The hospitality industry and some home appliances were exempted from tax, or they received tax cuts.
Retail subsidies offered by the government have also seen several sectors of the economy start to improve. One such subsidy is the “Eat out to Help Out’’ program. The government developed this initiative to cushion the hospitality industry, which has struggled recently following lockdown. The initiative offered a 50% price cut on the cost of meals on the first three days of the week in all participating restaurants. The government would pay up to ten dollars. The government has urged diners to embrace this program to save the hospitality business. The program has become so popular that at first, about 84,700 restaurants had applied for the program by August.
Data from the booking site open table has shown that the restaurants’ reservations have gone up by 53%. The program has been a success as more than 64 million meals had been ordered under the program by August 27. The UK population loves to dine out, which explains the high numbers of meals ordered in such a short period. This is undoubtedly helping in the hospitality industry’s economic recovery, which has been hard hit by the pandemic. In July this year, restaurant bookings were down by a whooping 54% compared to last year in July.
August 31, the last day of the scheme, saw a 216% spike in the number of bookings than the same day in 2019. Since the imposition of lockdown in March, the hospitality sector has been hard hit as, by mid-May, most of the restaurants had stopped offering their services. This was followed by laying off workers. It is almost important to note that the hospitality industry has been the hardest hit sector of the economy. After the government-sponsored dining initiative on August 31, some restaurants have decided to continue with the program. This is by offering their discount to attract customers and remain in business during these tough economic times.