The current state of global economic affairs is far from normal. Due in no small part to the worldwide health crisis, many developed nations have taken massive financial hits in recent times. This contraction has been particularly painful within the United Kingdom, as experts were warning for months that the nation could be on the cusp of a protracted recession. It now seems as if these prognoses have come to pass. Not only is the UK continuing to grapple with the effects of the pandemic, but many shops and retail centres have been forced to remain shut for extended periods of time. What might this situation signify for the FTSE as well as the domestic economy as a whole and might there be a light at the end of the proverbial tunnel?
Truly Unprecedented Figures
Recent figures have shown that the UK economy shrunk by a disturbing 20.4 per cent during the first quarter of 2020. This represents the worst contraction since the global economic crisis of 2009. The main issue here is that unlike other bearish periods in the past, such figures have little to do with the rather cyclical nature of the markets. They have instead been caused by a pandemic that is unprecedented in terms of its scope on a human and economic basis. To put it simply, most financial experts are wary about making any predictions due to the simple fact that we have entered into uncharted territory.
Another major concern centres around how the economies of other major trading partners will further dampen the financial situation within the United Kingdom. This is especially relevant when referring to the United States. While signs of a slight North American recovery may be on the horizon, this is far from certain at the present time. Assuming that the US also officially enters into a recession, there is no doubt that this will have a further impact upon the UK economic outlook.
The Return to a New Normal?
We are now forced to ask a rather difficult question. When might things improve? The only way to provide any type of logical answer is to highlight the fact that things will not return to as they weere for some time. This is why the phrase “new normal” is being used on a more frequent basis. Some of the medium-term changes that we can expect may include:
- Curtailed consumer spending
- Further bankruptcy declarations within certain sectors (such as the travel and tourism industries)
- A greater focus upon digital retail sales
Still, we need to keep in mind that the economy of the United Kingdom has already bounced back after many lockdown restrictions were lifted in early June. This is why it is still too early to tell the long-term effects of this recent crisis. Most experts nonetheless agree that the domestic economy will steadily improve over the coming months as a greater amount of stability becomes present. To put it simply, every fiscal cloud has a silver lining.