In Focus Commercial Credit
Covid-19 and financial capability: lessons from 2008
What can be learnt from the previous financial crisis that might be helpful in our current situation?
Dr Paul Thompson Studied Sociology and Management at the University of Reading: Henley Business School
pthompson@gabrielsnursing.com
With business bailouts already costing more than £100bn and unemployment rates forecasted to increase, it is hard to be optimistic when we brace ourselves for the biggest annual contraction in the UK economy in 300 years since 1720. Activity in the UK economy – having
fallen by 3% in the first three months of 2020 – is projected to drop by a further 25% in the second quarter and by 14% over the calendar year. It is, therefore, not surprising that there are
deep concerns about the future, particularly with regard to consumer high debt leveraged households , and the ability to service debts in the coming months.
Unprecedented steps The government has taken unprecedented steps to combat the pain of Covid-19 and there are voices concerned about the huge costs and the burden on taxation that this could bring. Among the costs included in the huge COVID-19 bailout are:
Activity in the UK economy – having fallen by 3% in the first three months of 2020 – is projected to drop by a further 25% in the second quarter and by 14% over the calendar year. It is, therefore, not surprising that there are deep concerns about the future
l £39bn Coronavirus Job Retention Scheme (furloughing). l £16bn public-services spending for health services, local authorities, measures to support vulnerable individuals, supporting rail services and funding for the devolved administrations. l £800m additional funding for charities. l £500m local-authority funding to support vulnerable people (hardship fund). l £10bn self-employed income support scheme. l £15bn small business grant schemes. l £13bn business rates package.
Slump Some economists are already predicting the UK face a 35% economic slump from COVID-19 lockdown and this may well be only the tip of the iceberg, with the effect of the COVID-19 debt burden, being around for generations, to cope with.
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www.CCRMagazine.com July 2020
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