Estimates of daily economic impact of the UK’s lockdown by sector – April 2020
- As the UK remains locked down this has extremely severe economic consequences. Our modelling suggests that as restrictions currently stand, the lockdown is leading to a reduction in economic output of 31%. However, this figure varies between sectors across the economy.
- The manufacturing sector is set to see the highest fall in output in absolute terms, as workers producing goods and services that are not deemed to be essential cannot do so remotely and because export demand and sometimes domestic demand have fallen sharply. 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.
- The accommodation and food services sector, non-food retail and construction sector are also expected to be disproportionately impacted. Here, we estimate GVA per day falls of £172m (79% of pre-crisis levels), £156m (55%) and £237m (50%) respectively.
- For non-food retail sales, there is likely to be some substitution to online sales, although not nearly enough to outweigh the closure of physical stores.
- In relative terms, 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. Most notably we anticipate food and drink retail trade to be up 22%. This is due to both stockpiling and the temporary closure of restaurants and cafes causing more household consumption.
- These impacts only consider the fall in output under the current level of restriction, which is scheduled to run until at least April 12th. However, 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.
- The full results of the analysis are at the end of this release.
Methodology and wider context
- A Cebr economics team led by Cebr economists Daryn Park and Owen Good considered the economic impact of the lockdown through the 105 major industries of the economy, using the UK’s national accounting framework. This was done by considering the ability of the various industries to produce goods/services – with some essential industries still operating as usual, some constrained by remote working/employee sickness/self-isolation and some shut down entirely.
- The team then separately analysed anticipated changes in demand for the industry’s products, with the final estimate taking both factors into account. Aggregating these results into 20 groups gives our sectoral estimates.
- 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.
- These are also broadly in line with data from the French National Institute of Statistics and Economic Studies (INSEE). They found that French economic activity is approximately 35% lower due to their own nationwide lockdown.
- 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 post-financial crisis in 2009 and will be the largest non-wartime single year drop in GDP since 1931.
Commented Cebr founder and Deputy Chairman Douglas McWilliams:
‘these results show that the manufacturing sector, as well as the more obvious sectors such as retail and leisure, is one of the more badly hit by the virus and economic slowdown. Many of the government measures do little to help capital intensive sectors like manufacturing, which benefits relatively less from furloughing employees and is essentially excluded from rate relief. It is likely therefore that Chancellor Rushi Sunak will need to look again at how to help this sector to prevent fundamentally viable firms from going under’.
 Comparing estimated GVA per day under the restrictions to average GVA per day in 2019.
NOTES TO EDITORS:
For more information, please contact:
Douglas McWilliams +44 7710 083 652
Daryn Park +44 7725 096 246
Owen Good +44 7367 065 075