Post-Pandemic Economic Issues Guaranteed to Hit the UK Most

UK Economy CAPX
UK Economy
Image Credit: CAPX

As everybody prepares to finally take a breather from the COVID-19 pandemic, the United Kingdom is barely holding on for its already collapsing economy. The island nation was already facing some serious financial hurdles well before the pandemic was even considered to be a thing. Way before COVID-19 was even a word, the UK was already experiencing massive losses due to obvious political decisions.

Although the government tried to see at least some kind of merit from the Brexit deal recently made with the European Union, ultimately it came down to the United Kingdom losing much of its influence over the international markets and having to start rebuilding from scratch.

The process was still well underway when the pandemic hit, ultimately rendering the country frozen in time. All of the plans of meeting foreign officials and establish long-lasting trade relationships were postponed. Every other country started focusing more on its own wellbeing and didn’t devote too much attention to striking new bargains with a declining economy.

Job losses and recession

It’s already a fact that more than 1 out of every 4 UK citizens have their job furloughed, meaning that there is either not enough income to cover their basic needs or no income at all. This has essentially resulted in non-essential enterprises to shut down until further notice as there was no hope of seeing any clients during the pandemic.

The companies that do represent essential status though, things like pharmacies, retail stores and etc, did see some kind of gain during the first months of the pandemic, but once the economic hurdles started affecting the general population, the revenue for these essential businesses started to massively decrease as well, due to consumers simply not having enough to shop as much as they did before the pandemic.

This then led to massive layoffs in the retail sector, previously considered to be something untouchable by the virus. At this very moment, almost 75% of the UK’s population is keeping the country’s economy alive, and it’s only a matter of time before they run out of steam.

Considering the diversity layout of the UK economy, most companies will soon start losing their largest clients as well, thus leading to layoffs in even the most effective companies during the pandemic. Overall, things are turning to the worst.

GBP is thrown under the bus

The GBP has been having a rough couple of weeks. The exchange rate has become so unpredictable that Forex brokers are not even recommending their clients to place trades on any pair containing the GBP. In fact, it’s even more apparent when we see the rapid decline in numbers for Forex bonus offers available in the UK and in the EU in general.

Even institutional investors have refrained themselves from placing any trades on the GBP, only leaving the most daring of banks and the Bank of England to carry the weight and somehow dance through the volatility of every single GBP paired currency.

Many remaining partners that decided to continue their association with British businesses are now starting to request a transfer to EUR to continue their operations on the island, thus creating an even smaller demand for the GBP, thus sending it even further down on a spiral.

The only consolement that GBP investors could possibly have is that the USD is in a very similar situation.

Is there a saving grace?

The only saving grace that the UK can possibly hope for is complete control of the pandemic. They need to hope for 0 new cases starting from at least this quarter to hopefully have most of the profitable industries open up once more.

However, there is almost nothing that can save them from the Brexit deadline that is fast approaching.

Relying on allies

Although the United Kingdom can always look towards the United States as a trusted ally and a potential financial relief, the situation in the world may prevent help from arriving for quite a while.

The United States is already suffering from its plethora of problems and facing the danger of becoming the new center of the COVID-19 pandemic. Pair that up with the severe civil unrest in all 50 states of the country and we get a not-so-reliable ally with the US.

Overall, there is very little that the UK government could potentially do at this point. Many experts say that the most effective strategy now would actively devalue the currency in order to have a chance on the export market once the world actually opens up completely. Should the UK remain on its current path, it’s likely for the economic decline to continue well into 2021, but a devalued currency could at least give it a chance at survival.