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The “Pandemic Economy”: One Year On

At this point, it sounds a little obvious to say that the pandemic has drastically reshaped the economy. We all know that Covid-19 has impacted the economy massively, globally, and in ways that nobody could have anticipated even 18 months ago. But, while we all know that the economy has been affected, it’s worth digging into exactly how things are different.

We’ve talked before on this blog about both negative interest rates and retirement saving in terms of the pandemic’s effects on both. But, in this post, we’re going to go a step further and give you a roundup on some key areas of the economy that have been affected by the pandemic. We’ll also be taking a little look forward, discussing some sentiment analysis that hopes to give us a sense of how things might develop in the future.

How has the stock market fared during the pandemic?

It’s been a difficult year for many of us, and the stock market hasn’t escaped this. Most markets have been extremely prone to fluctuation since a sharp 30-40% fall early in the pandemic.

While some markets have recovered to pre-pandemic levels, the FTSE 100 is still down year on year. Continued nervousness from investors and ongoing questions over vaccine rollouts amid the potential for further lockdowns or other measures have meant recovering confidence has been a slow process for many markets.

This is obviously bad news for those of us who own stocks directly, but it’s also affecting pension values and ISAs, meaning few people will have escaped the stock market uncertainty. There is some cause for positivity in the future, as many markets are starting to display signs of growth.

How has the pandemic affected jobs in the UK?

The picture in the job market isn’t much rosier. The pandemic has obviously caused huge issues in key industries which we’ll discuss below, but across the board there has been a massive increase in redundancies. The Office for National Statistics puts this rate at a high of 14.2 per 1,000 employees in September to November of 2020.

Many countries across the work are struggling with rising unemployment. The UK is no different, with unemployment running at a high 5.4%. While there is some anecdotal evidence of job opportunities beginning to increase, this seems to be limited to specific areas. Once the hospitality sector begins to re-open, we’ll likely have a better idea of what the “true” level of unemployment is likely to be going forwards.

Key industries: How bad is it for the travel and hospitality sectors?

While it’s true that most people and most industries have been affected by the pandemic, some key industries have really borne the brunt of its affects. Namely, the travel and hospitality sectors, which have been forced to close completely due to successive lockdowns and have very limited ways to generate income without physical travel being possible.

Many companies have been forced to declare bankruptcy, and millions of jobs have been lost, despite the furlough scheme providing a lifeline for many. The unfortunate answer here is that we’re simply not sure when these sectors will properly recover. It remains to be seen when free international travel will resume, and people’s attitudes towards tourism and holidaymaking may have been permanently changed by the pandemic.

The boom in online shopping

However, on the flip side of this, one industry in particular has benefited from the pandemic, and is experiencing real growth. Online shopping was popular before the pandemic, but since lockdown has made it the only way for most to get their retail therapy, the industry has grown significantly.

Online shopping seems poised to continue this growth, with many shoppers both feeling anxious about returning to physical stores alongside simply getting used to the convenience that online shopping offers.

Economic sentiment: looking ahead

So far, it’s all been fairly doom and gloom. But there is a positive note beginning to sound in some forecasts. The McKinsey Global Survey analyses global economic sentiment, and the respondents there have begun, through the end of 2020 and early 2021, to become more positive about the scale and timeframe of the economic recovery.

However, even this positive note is tempered. While a strong end to the year buoyed expectations in December, many respondents in January answered that they were less optimistic than before.

The simple fact here is that the pandemic has massively affected the economy, and we are doubtless going to be feeling its impacts for years to come. For a lot of industries, it’s simply too early to tell when the recovery is coming. Unfortunately, it seems that, even 1 year on, we’re still deep within the “pandemic economy”.

The ongoing economic uncertainty makes it even more important to have an effective financial plan. Whether it’s for retirement, investments and savings, income protection or equity release, Face to Face Finance can help. Get in touch with us for a friendly chat about your needs and what we can offer.

Sources:

https://www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/redundancies/timeseries/beir/lms

https://www.bbc.co.uk/news/business-51706225

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-coronavirus-effect-on-global-economic-sentiment#

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