As the UK lockdown continues, the Centre for Economics and Business Research’s (Cebr) suggests the restrictions will lead to a reduction in economic output of 31%
This figure varies between sectors across the economy. The manufacturing sector is set to see the highest fall in economic output in absolute terms, as workers producing goods and services that are not deemed as essential cannot work from home.
This is estimated to cost the economy over £500m per day with production in the sector down 69%. The scale of the fall is important since most of the government schemes to provide relief for businesses are focused towards the service sector.
Construction sector to be disproportionately impacted
The construction sector is expected to be “disproportionately impacted”, as the Cebr estimates GVA per day falls of £237m (50%).
The services sector is likely to be less severely impacted, due to a greater ability to work remotely. Had this crisis occurred at a time when remote working was less feasible, the loss of economic activity would likely have been significantly higher. However, worker sickness and reduced business confidence is still expected to have a significant impact.
A few sectors are likely to contribute more to the economy due to the corona-driven lockdown.
Cebr state: “Evidence from China suggests that it won’t be easy to immediately revert to pre-crisis levels of production, as businesses will continue to be constrained by strict public health measures to prevent a second outbreak.”
Across the economy, these findings are very similar to the results of a previous Cebr study into the impact in London, which showed that a London lockdown could reduce London GDP by 31% on a weekly basis.
Given the global nature of the outbreak, this significant economic shock is clearly not limited to the UK. Cebr’s Global Prospects Report estimated that global GDP will fall by at least 4.0% this year – albeit clearly with a significant margin of error.
If this is correct, the fall will be more than twice as large as the post-financial crisis in 2009 and will be the largest non-wartime single-year drop in GDP since 1931.