Half of UK firms predict coronavirus will cause recession

By Ellen Daniel

Almost half of UK and US firms predict that their respective countries will go into recession in 2020 due to the coronavirus.

This is according to a survey, conducted by Atomik Research, of 706 senior decision makers at medium-large sized businesses, across the UK, US, and Chinese markets on behalf of trade finance provider Stenn.

46% of UK companies and 45% of US companies predict a recession in 2020, and a third of firms expect a global recession.

In the UK, a third of firms expect the economy to shrink in 2020, and a further 6% expect the UK economy to stay flat.

A recession occurs when GDP falls for two successive quarters, caused by a slowdown in trade or industry.

Normally, if a country is heading towards a recession, the central banks will use a policy known as quantitative easing. This is when money is injected into the economy through the purchase of government bonds in order to lower interest rates and encourage spending. However, the Bank of England has reduced interest rates to 0.1%.

Global economy growth weak as coronavirus-linked recession looms

According to Reuters, The global economy is predicted to grow 1.6% this year, about half the 3.1% predicted in January, and the weakest since the global financial crisis of 2007-09. Although the Dow Jones Industrial Average, S&P 500 index and the Nasdaq all rose by end of trading on Thursday, the global economic situation is looking increasingly uncertain.

Dr Kerstin Braun, President of Stenn Group, commented:

“2019 was weaker than expected and the stakes are only higher for 2020. Governments around the world are having to act forcefully to prevent the economic hit from Covid-19 deepening, taking a coordinated approach and opening the liquidity pipe for both fiscal and monetary support.

“While a low interest rate provides an important cut in borrowing costs for businesses and consumers at this delicate moment, the coronavirus outbreak will be a real test of the health of the UK and US economies. Lowering rates alone isn’t enough to be effective in offsetting the economic impact of Covid-19. We already know the Chinese economy is going to be hit in the first and second quarter.

“For us, the plunge in oil coupled with the economic damage of Covid-19 marked the beginning of a global recession. Our research showed that at the beginning of the year, half of UK and US businesses predicted a recession and a third predicted an international global crisis, and just three months into 2020 and we’re starting to see this play out.”


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