Initial hopes of a V-shaped recovery from the Covid-19 crisis are fading fast as economic think tank EY Item Club predicts the economy will shrink by 20% in April to June, putting back a full recovery 18 months later than forecast.
Economic output in Britain is not expected to return to its 2019 level until the end of 2024 the EY Item Club stated on Monday in its latest report on the projections of the health of the UK economy. Previous estimates had predicted GDP to match fourth-quarter 2019 by early 2023, however, new estimates project that Britain’s economy will shrink by a record 20% in the April to June quarter, rather than 15% as it forecast last month. The economy expected to return to growth in the third quarter, with a quarterly expansion of around 12%.

With the UK slowly emerging from lockdown and more sectors of the economy opening, there was hope for greater growth in the figures, but May’s results showed weaker than expected figures with growth stalled at just 1.8%.

Howard Archer, chief economic advisor to the EY Item Club, said: “Even though lockdown restrictions are easing, consumer caution has been much more pronounced than expected. We believe that consumer confidence is one of three key factors likely to weigh on the UK economy over the rest of the year, alongside the impact of rising unemployment and low levels of business investment.

“The UK economy may be past its low point, but it is looking increasingly likely that the climb back is going to be a lot longer than expected. May’s growth undershot even the lowest forecasts. By the middle of this year, the economy was a fifth smaller than it was at the start. Such a fall creates more room for rapid growth later, but it will be from a much lower base.”

Unemployment rates are likely to increase by the end of the year which will further contribute to weak levels of consumer spending, but recovery is expected next year as the jobs market starts to recover.

Mark Gregory, EY UK’s chief economist, said: “Government measures have provided significant short-term support, but many businesses are waiting for more certainty over the economic outlook before making longer term investment decisions.

“Policies such as VAT cuts are welcome, but they aren’t a complete solution, as they don’t resolve the concerns consumers may have about going to restaurants and bars in the first place.”

All of this paints a bleak short-term picture but there is confidence that the economy will recover, although later than initially thought. This means that there are some difficult times ahead for business with a need for agility and adaptability in working methods.

For many businesses this will mean ensuring adequate cash flow and liquidity in the business to survive the coming months. Bounce back loans have been paid out to more than one million SMEs and the furlough scheme has been used by businesses of all sizes to protect both workforce and cashflow.

Streamlining efficiency and workflow will be crucial in the coming months. If your business spends time and allocates staff to chase overdue invoices, or as a business owner, you spend time worrying about how to recover money you are owed by clients, then it may be time to streamline your operation. Working with trusted and established partner to help in the areas of credit management and collecting money owed will save you valuable time and yield greater results than giving the work to untrained staff or pursuing these matters yourself.

Daniels Silverman is a family owned, respected and reliable agency who have been partnering with businesses of all sizes for over 25 years with fantastic results. We work alongside you, as part of your team, and offer a white label credit management service as well as a collection service. Modern times call for modern methods and we know the value of both your reputation and the relationship you have with your clients and work hard to protect both.

We are a friendly reminder for invoice payment and a point of clear communication for any disputes or problems. We are highly trained, ethical and diligent and want the best results for everyone we work with.

If you would like to find out how Daniels Silverman can help you protect your cash flow and partner you through these uncertain times, please do get in touch. You can chat to one of our agents via the website https://www.danielssilverman.co.uk/ or give us a call on 0800 953 3631 to speak to one of our operators and find out more about the services we provide, we look forward to hearing from you.