Sunderland and Newcastle residents have flocked to the city centres this week to spend money as the Government allow shops to reopen to slow down the falling economy.
After months of being told to stay at home by the British Government, we have been given more freedom as high street stores reopen to the general public. However, we are still on a tight leash which could be pulled straight back if a second spike occurs.
The British economy has definitely taken a punch over this lockdown period as it shrank down by 20.4% in April, the lowest on record. Understandably, this has prompted the Government to take action to try and reopen stores across the country, as a way to stop the economy from bleeding further.
The similarities between the current pandemic and the Spanish Flu gives the sense of history repeating itself.
The Spanish Influenza (1918)
The infamous Spanish Flu, a similar categorised pandemic, was one of the worst influenza’s ever recorded in human history. It was estimated the flu killed between 50 million to 100 million people worldwide, which was around 3% of the worlds population at the time.
According to National Geographic, social distancing – as we are now – was an important instruction towards ‘flattening the curve’ in the fight against the 1918 pandemic. However, it also reported that when a city eased lockdown restrictions too early it saw a relapse in new cases.
Undoubtedly, COVID-19 is the worst pandemic in living memory. However, using history to try and predict our economy would be fairly difficult due to the year it started: 1918.
1918 was an important and well-remembered year but not for the pandemic but for the end of the First World War. Due to this, the economic implications are hard to blame on the Spanish Flu, as the war effort had also injured our country’s economy. Although, the Bank of England reported in May’s Monetary Policy, through literature, that there was an average fall of 6% in GDP (gross domestic product) in the affected countries during this time. However, this figure could be from both events rather than one or the other.
The Coronavirus Recession
The lockdown, issued by the Prime Minister, Boris Johnson, in March, meant only ‘essential businesses’ were allowed to remain open. This resulted in many businesses being forced to close their doors to consumers.
The workforce could hold the potential to be damaging for our economy – although it is necessary – with the mandatory 14-day self-quarantine period. As a way to battle the virus, those who show symptoms of the virus have to isolate for seven days, while those in the same household have to isolate for 14 days. This isolation period could result in labour shortages and ultimately affect businesses.
The Bank of England has estimated that the country has suffered a drop in GDP of 4% in the first quarter, and is expecting a larger drop in the second quarter.
Even though it hasn’t been announced officially, it is very likely – if not, guaranteed – we are heading towards a recession, if we’re not already in one. On the bright side, in the last recession of 2008, which was not caused by a global pandemic, the Government were able to steer us towards an exit within a year and three months.
However, these are unprecedented times and the fight out of a recession may just be as hard as fighting off the virus. Predictions can be wrong and in the end, what will the Government be willing to do to get the economy back on track? make an significant increase in inflation? increase taxes? budget cuts?