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COVID-19: UK Industry Fast Facts

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by IBISWorld
Nov 25 2020

IBISWorld presents a collection of fast facts that outline how the spread of COVID-19 (coronavirus) has affected the different sectors of the UK economy.

 

  • According to the National Farmers’ Union, steep falls in liquid milk prices and demand meant that one-quarter of UK dairy farmers became financially unviable in April 2020. 
  • A ‘bounce back’ plan of trade measures for the agriculture, food and drink industry has been announced to help support businesses that have been affected by the coronavirus pandemic. 
  • According to the Office for National Statistics (ONS), agriculture output recorded a 7.7% increase between April and September 2020, following coronavirus-induced lows recording in April. However, output remained 0.7% below pre-pandemic levels. 
  • Many farmers are hopeful that the coronavirus outbreak will highlight the importance of domestic food supply, which could shape the government’s long-term policy approach after leaving the EU’s Common Agricultural Policy. 

 

  • Despite a lift in aviation and demand for air passenger transport, it remains historically low and the price of Brent crude has followed the same downward trajectory. As of 23 November 2020, the price of Brent crude was US$45.58 per barrel, down 22.5% year on year.
  • In early August 2020, gold prices shot to record highs and broke through the US$2,000 (£1,600) an ounce mark for the first time in history. Prices spiked as coronavirus cases rose and governments unveiled multi-billion stimulus plans and lowered interest rates. Prices have fallen since and stood at approximately US$1,867 per ounce as of 23 November 2020.
  • Steel prices have been negatively affected by the pandemic, with the World Steel Association expecting global steel demand to drop by 6.4% year-on-year in 2020, largely due to the lockdown measures introduced in March 2020.
  • Oil giant Royal Dutch Shell plans to cut between 7,000 and 9,000 jobs, mainly due to slump in oil demand amid the pandemic.
  • As of 18 November 2020, copper traded at US$7,120 per tonne and according to the London Metal Exchange, three-month copper price is up by 15% on the start of 2020 and by 63% from the March lows, according to Reuters UK. This is due to a wave of mine lockdowns earlier in the year with smelters struggling to find raw material.

 

  • According to the National Grid, electricity demand fell by as much as 20% during the height of the initial lockdown period, and demand remained 9% lower in July 2020 compared with the same month in 2019. This necessitated a 39% increase in balancing costs between March and July 2020, to £718 million. Nevertheless, balancing costs declined slightly to £102 million for August 2020. The electricity systems operator also expects electricity demand to record a year-on-year decline of up to 6% during the winter period. 
  • The National Grid recorded 17.4% decline in operating profit from its UK operations over the six months through September 2020. The company estimates that during the six months, the coronavirus impacted underlying operating profit across its UK and US operations by £117 million, with a £400 million hit expected throughout the full year.
  • In June 2020, Ofgem launched a £350 million support scheme to help energy suppliers that do not qualify for the government’s industry-wide support packages. Meanwhile, in a consultation document published on 20 November, Ofgem proposed a £21 rise in the energy price cap in order to cover bad debts from customers that have been unable to pay. If approved, the new price cap level will apply from April 2021.
  • Total business investment in the utilities sector fell to £1.7 billion in the second quarter of 2020, down from £3.9 billion in the same period last year, the latest ONS figures show. 
  • The slowdown in electricity demand helped renewables overtake fossil fuels as the main source of electricity in Great Britain during the first half of 2020. According to data published by the Department for Business, Energy and Industrial Strategy, 46.4% of the UK’s electricity was generated from renewables over the six months through June 2020, compared with 35% generated from fossil fuels. 
  • Great Britain recorded 67 days, 22 hours and 55 minutes without burning coal to generate electricity between April and June 2020. This represents the longest coal-free stretch in almost 140 years and contributed to the share of electricity generated from coal falling to 0.5% over the three months through June 2020.

 

  • According to the ONS, growth in construction output slowed to 2.9% in September 2020. Output in the sector remains 7.3% lower than the level recorded in February 2020. 
  • The IHS Markit UK Construction PMI decreased to 53.1 in October 2020, from 56.8 in September. This represents the slowest rate of expansion for five months. 
  • In the ONS Business Impact of COVID-19 Survey between 19 October and 1 November 2020, 55.4% of construction firms surveyed stated that their revenue remained below what they would usually expect for the time of year. 
  • On 30 June 2020, the government announced radical reforms to the UK’s planning system as they seek to rebuild the economy following the coronavirus outbreak. Under the relaxed rules a wider range of commercial buildings will be allowed to change to residential use without the need for a planning application. Additionally, builders will no longer need a normal planning application to demolish and rebuild vacant and redundant residential and commercial buildings if they are rebuilt as homes, and property owners will be able to build additional space above their properties via a fast-track approval process. 
  • According to a new report from the UK’s Construction Equipment Association (CEA) construction machinery, sales in the first three quarters of 2020 were 31% below those for the same time period in 2019. However, sales for the third quarter have shown an improvement on the position at the end of the previous quarter, when sales were 38% below 2019 levels.  
  • According to the ONS, the number of people employed in the construction sector dropped to its lowest levels since 2013 during the third quarter of 2020. This followed a 4% decline in construction employment during the second quarter and a 2.2% decline in the third quarter.

 

  • Major aerospace manufacturer Rolls Royce has announced that it is to cut 9,000 jobs as a result of the coronavirus. UK supercar maker McLaren also plans to cut more than a quarter of its 4,000-strong workforce. 
  • According to the ONS, monthly growth in UK manufacturing output slowed to 0.2% in September 2020. Nevertheless, this represents the fifth consecutive month of expansion following record declines in March and April 2020. Despite this sustained period of growth, manufacturing output remained 8.1% below February 2020 levels. 
  • The IHS Markit UK Manufacturing PMI fell slightly to 53.7 in October 2020, from 54.1 in the previous month. Nevertheless, this represented the fifth consecutive month of expansion in output in the sector, with business optimism levels at the highest levels since January 2018. 
  • According to the SMMT, new car registrations were down 4.4% in September 2020 compared with the same month in the previous year, marking the worst September for car production since 1999. Year-to-date registrations were down 33.2% compared with 2019. 
  • In the ONS Business Impact of COVID-19 Survey conducted between 19 October and 1 November 2020, 33.2% of firms in the manufacturing sector stated that their revenue remained below what they would usually expect for the time of year. 
  • The Confederation of British Industry’s (CBI) quarterly SME Trends Survey, manufacturing output among small to medium sized manufacturers (SMEs) fell by 15% in the three months through October 2020, compared with the same period in 2019. This is compared with a 53% decline recorded over the three months through July 2020.

 

  • UK new car registrations fell 1.6% year-on-year in October 2020, with over half of the decline due to the ‘firebreak’ lockdown in Wales. Only 140,945 new cars were registered. The UK car industry was expecting to register 1.66 million new cars by the end of the year as of mid-October 2020; however, since England announced lockdown from 5 November 2020, the figure has been downgraded to 1.56 million, equating to a total annual loss of 750,000 new car registrations and a £22.5 billion loss in turnover.
  • Over half of UK manufacturers expect to make cuts by the end of the year, with automotive and other sectors anticipating a sustained downturn in demand. Such cutbacks in operations would also have a negative effect on the wholesale trade sector.
  • The ONS’s Coronavirus and the economic impacts on the UK: 19 November 2020 report states that the wholesale and retail trade industry had the highest percentage of businesses experiencing an increase in turnover, at 15%, over the period 19 October to 1 November 2020. They also experienced a 12% increase in profits over the same period, the second highest of all industries, only after the transportation and storage industry.
  • Due to the reopening of car showrooms in June 2020, wholesale and retail trade and repair of motor vehicles has recovered to above its February 2020 level, supporting a 7.1% rolling three-month growth in services output in August 2020.

 

  • The ONS retail sales index rose 1.2% in October 2020 on the previous month, as shoppers brough forward Christmas shopping ahead of the second lockdown. Online stores saw the strongest sales boost by the range of offerings. Sales in stores with no physical presence up 6.4% over the previous month and up a remarkable 45% compared with February’s level. Overall, 28% of all spending was conducted online, up from 19% in October 2019. Food, gifts and loungewear topped consumer shopping lists.
  • The second lockdown in November 2020 has accelerated the closure of retail establishments. For instance, J Sainsbury announced plans to close more than 400 Argos stores, putting more than 3,500 jobs at risk, following the COVID-19 pandemic. 120 Argos stores that did not reopen after the UK’s first lockdown would now close permanently and the overall estate would be cut to about 100 stores by the end of 2024.
  • Luxury goods may be headed for a more K-shaped recovery as appetite remains strong. Unlike previous economic crises, luxury goods retailers remain more optimistic about a second lockdown in England as consumer shopping habits shift. Consumers are unable to travel and are reluctant to go to public locations to eat or drink out, so they may spend more on discretionary items and luxury goods. However, the luxury market now faces a fresh challenge, as the duty-free scheme is due to end on 31 December 2020.

 

  • Major UK airline easyJet reported a 53% decline in passenger revenue over the 12 months through September 2020, as a result of a 47.5% reduction in capacity due to the coronavirus outbreak. A £1.3 billion loss recorded by the airline adds to a £5 billion nine-month loss recorded by British Airways and Aer Lingus owner International Airlines Group (IAG) to bring coronavirus-induced losses for UK airlines to almost £7 billion.
  • Virgin Atlantic has announced that it is to cut a further 1,150 jobs on top of 3,500 jobs already cut earlier in the year as a result of the coronavirus. British Airways has announced plans to make 13,000 of its staff redundant due to the global collapse in air travel. Meanwhile, London City Airport has announced plans to make more than a third of its staff redundant. 
  • According to the Civil Aviation Authority, the number of terminal and transit passengers at all UK reporting airports over the three months through September 2020 was 84.6% lower than in the same period in 2019. However, this represents a significant improvement on the previous quarter, in which passenger numbers were 98.2% than in the same period in 2019. 
  • According to estimations from the International Air Transport Association, international air passenger numbers will decline by 66% overall in 2020, with passenger numbers only returning to pre-coronavirus levels in 2024. 
  • In the ONS’s Business Impact of COVID-19 Survey, 34.6% of firms in the sector reported that their revenue was lower than would normally be expected for the time of the year over the two weeks through 1 November 2020. 
  • In response to a significant decline in public transport usage, the government suspended all rail franchise agreements from March 2020, with all fares paid to the government, which in turn took on the financial risk of running the network at a cost of up to £3.5 billion between the start of the pandemic and September 2020. With rail passengers at just 30%-40% of 2019 levels, the government has announced new arrangements known as emergency recovery management contracts (ERMAs), through which the government will continue to underwrite losses for the next 18 months, bringing the rail franchising system to an end. 
  • After receiving an initial £1.6 billion bailout in May 2020, a further £1.8 billion of government grant and borrowing has been made available to Transport for London (TfL) to ensure that services can be maintained until late March 2021.

 

  • The pandemic has fostered an online boom, although cyber security threats have quickly followed. According to data from cybersecurity company Darktrace, the proportion of attacks targeting home workers increased from 12% of malicious email traffic before the UK’s lockdown began in March to more than 60% six weeks later. Other common methods have included fake requests to reset virtual private network (VPN) accounts and fake sign-in pages for video conferencing accounts. Meanwhile, HM Revenue and Customs (HMRC) is investigating 10,428 reports of phishing scams designed to exploit the coronavirus pandemic, although numbers have fallen as lockdown measures have eased. 2,558 incidents were reported to HMRC in June, involving email, SMS, social media, and phone scams, compared to 5,152 in May.
  • Ofcom has reported that UK internet usage as reached new highs during the lockdown, with UK adults spending a quarter of their waking day online.
  • Figures from TalkTalk show that internet usage surged on 5 November 2020, the first night of the second lockdown, as people stayed at home. Usage on the night was the fourth highest for 2020.
  • Public Health England has increased ad spend by 5,000% year on year between the start of lockdown on 23 March 2020 and the end of June 2020 to £43.9 million, as it has published information and campaigns to control the spread of the coronavirus.
  • UK national newspaper sales have plunged since the lockdown, with thousands of independent newsagents having closed. The Reuters Institute at the University of Oxford warned that the economic effects of the coronavirus could remove 10% of all frontline journalism jobs in the United Kingdom.
  • Online publishers and broadcasters are benefiting from a surge in demand. Software publishers may also benefit as people work remotely.

 

  • Nationwide has approved about 246,000 mortgage payment holidays since the spring lockdown. Only 15,000 mortgage customers have required more financial support after six months. While Nationwide has extended its pledge to keep its 663 branches open until at least 2023, Garner has not ruled out further job cuts. The building society in the process of cutting about 100 roles through a voluntary redundancy programme first revealed to staff in June 2020.
  • Lockdowns cut the amount of traffic and accidents, leading to fewer claims, helping to boost profit for UK motor insurers. Premium prices have also been falling. According to the Association of British Insurers, the average cost of motor coverage was £460 in the third quarter, £8 lower than in the same period last year. Claims and premiums also falling in the Home Insurance segment with individuals stuck at home. According to insurance comparison platform, HelloSafe, prices across, South East and the North West fell 19.3%, 18.3% and 19.1%, respectively.
  • Tighter lockdown rules, including new restrictions in England, are expected to lead to a slower, bumpier recovery. The Bank expects the economy to shrink by 2% in the final three months of 2020, before bouncing back at the start of 2021, assuming current restrictions loosen. Policymakers also kept interest rates on hold at a record low of 0.1%. Gertjan Vlieghe, a member of the Bank of England’s Monetary Policy Committee, warned that the bank’s scope for stimulating lending with cheap credit was beginning to wane and that UK interest rates may need to be cut below zero. A negative interest rate would erode earnings and margins for the majority of financial institutions and insurance firms. While the economy is expected to avoid another recession, the Bank believes unemployment will rise sharply as government support schemes wind down.

 

  • Young people are staying in education rather than looking for work. According to the ONS, the number of 16-24-year olds who were not in education, employment or training fell to 757,000 or 11% of the age group, in the third quarter of 2020. This was down by 0.6 percentage points from the same period of 2019. The figures suggest that the education system is helping to absorb the shock of a huge rise in youth unemployment. According to the Trades Union Congress, 59,000 16-24-year-old workers were made redundant between July and September this year, more than in all of 2019.
  • The pandemic could be fuelling an increase in the number of children moving out of full-time schooling. The Local Government Association says some areas have seen significant rises in registrations for home schooling. For example, in Kent the figure rose by almost 200%, and in Leeds by almost 150%. The LGA, which represents councils in England estimates the number could be around 280,000.
  • The Institute for Fiscal Studies warns that universities could be exposed to a range of financial losses, such as falling international student numbers and more students failing to complete their degrees. However, the largest source of financial risk for universities is pension costs. The IFS suggest the additional cost to universities of meeting existing pension promises may well be as high as £8 billion. Universities could only reduce this by making further reductions in the pensions provided by the schemes, although such measures are likely to be controversial - last academic year, lecturers went on strike over pensions, as well as pay and conditions.
  • Thinktank the Education Policy Institute has called for the UK government to allow grade inflation in GCSEs and A-levels next summer to offset months of learning lost to the pandemic. Ministers are coming under mounting pressure to ensure school pupils sitting school exams in England are treated fairly. The think-tank has also argued for students to sit rigorous back-up assessments in case their exams are cancelled. If exams go ahead, they should offer a broader range of questions, the think-tank recommended.

 

  • Some consultancies have benefited from businesses trying to understand the economic impact of the coronavirus on their operations and needing advice on how to deal with the challenges. However, plummeting business confidence and revenue are expected to lower budgets and spending, reducing demand and fees. Low consumer spending on non-essential services is also expected to contribute to the drop in demand.
  • The legal market contracted by 2.5% in the first quarter of 2020, but there are pockets of growth. Employment law is booming as firms seek to find out the legal ramifications of placing over nine million workers on furlough and prepare for the likely coming wave of redundancies. Meanwhile, commercial practice areas are on the frontline of managing the legal response to COVID-19 and insolvencies. Smaller firms are likely to fare better during the crisis as they are less exposed to areas that are anticipated to contract.
  • UK advertising expenditure on traditional media, such as TV, print, radio and cinema, fell by from £2.3 billion to £1.1 billion, or 48%, between the start of lockdown on 23 March and the end of June. With the public told to stay at home, high streets shut and travel halted, many companies froze marketing budgets. The Institute of Practitioners in Advertising stated that UK advertising budgets fell to their lowest ever levels over the three months to July 2020, with funding for events marketing hit hardest, followed by main media advertising, which includes TV.
  • An article by CityAM from 22 October 2020 states that, according to the latest IPA Bellwether report, a net balance of -41% of UK firms reported a reduction in their marketing budget in the third quarter of the year. This marks the second-fastest quarterly decline since the survey was created in 2000, second only to the record -50.7% decline recorded in the second quarter of this year. Over half of respondents reported a decrease in budgets from three months ago, compared with just 11.6% citing an increase. Firms have often cut advertising budgets in an attempt to maintain profitability in the current year.
  • A report from the Advertising Association, in partnership with Credos and conducted by PwC, finds that 22% of UK ad agencies reported growth in one or more international revenue streams, highlighting the importance of having such broad streams to fuel growth and not be dependent on the UK’s domestics markets.

 

  • The Financial Conduct Authority has said that mortgage, loan and credit card borrowers can seek further repayment holidays for up to six months, following the announcement of a new lockdown in England from 5 November 2020.
  • The average UK house price jumped by 5.8% to £227,826 in October 2020 compared with the same month last year, according to Nationwide. Prices rose by 0.8% month on month in October. However, it states that the UK market is likely to face a slowdown if the labour market weakens, and particularly when the stamp duty holiday ends in March 2021.
  • ONS data shows that the average house price in the UK increased 4.7% in the year to September 2020, up from 3% in the year to August 2020. The pandemic may have led to buyers changing their housing preferences, choosing larger properties with gardens. The average price of detached houses rose 6.2%, while flats and maisonettes increased 2%.
  • According to Zoopla at the end of October 2020, 418,000 property sales are in the pipeline, compared with 280,000 at the same point in 2019. However, as many as 325,000 buyers face missing out on the temporary stamp duty holiday, as the time between agreeing a sale and completing has expanded to an average of five months, according to separate research this week by consultancy TwentyCi. Zoopla warned that in any normal year only 25% of sales agreed in the first quarter complete by the end of March.
  • In November 2020, shopping centre landlord Westfield has threatened retailers such as Pret A Manger and Hugo Boss with legal action over unpaid rent. Figures from trade body UKHospitality show that by the end of the year the sector will owe nearly £3 billion in unpaid rent, and commercial landlords are losing out on £1.5 billion every three months in lost rent, according to analysis by Remit Consulting.
  • Property firms have suffered during the pandemic as commercial clients have downsized the space they need, while work on construction sites has been delayed, according to an article by the Financial Times. London landlord Great Portland Estates said it had written down the value of its portfolio by 6% overall. The value of its retail properties has been cut by 18% as vacancies in central London have risen and rents dropped. The company has stated that, although it has collected 80% of the rent that was due for September 2020, rates were much higher for offices than for retail and hospitality locations.

 

  • The UK health secretary said that patients could start receiving the COVID-19 vaccine developed by Oxford university and AstraZeneca as soon as December 2020, subject to regulatory approval. The trial results showed that nobody who had received the vaccine was hospitalised with the virus and there was ‘some evidence’ that the vaccine also reduced transmission of the virus.
  • NHS prepares dozens of mass vaccination centres around England. Approximately 1,560 GP-led designated sites will be the first places to issue the vaccine, initially to vulnerable groups, such as those who are shielding due to serious medical conditions and the over-80s. There will be at least one mass vaccination centre in each of the NHS’s 42 sustainability and partnership areas and the centres will be sited in cities and larger towns for the second phase of the deployment programme. Each mass vaccination centre is anticipated to vaccinate between 2,000 and 5,000 people a day. The NHS plans to hire 6,000 staff to run the centres in the south-east and 5,000 in London, suggesting that it will have to use 30,000 to 40,000 extra personnel.
  • The NHS waiting list number continues to rise. The number of people forced to wait for more than 12 months for surgery in England has increased from 1,305 in September 2019, to 139,545 in September 2020, a multiple of 107 in just a year. The mounting delays reflect the widespread suspension of much normal NHS care, including planned surgery, that began when the lockdown started on 23 March 2020. Meanwhile, the total number of people admitted for routine treatment in hospitals in England was also down 27% in September compared with a year ago. The number of accident and emergency attendances at hospitals in England continue to be below the level a year ago. A total of 1.6 million attendances were recorded in October 2020, down 26% in the same month in 2019.

 

  • Following the announcement of a second lockdown in England from 5 November 2020 until 2 December 2020, operators in the hospitality sector have had to close. Only takeaway food and drink is permitted. This deals a further blow to the sector.
  • Boris Johnson announced on 23 November 2020 that once the lockdown ends on 2 December 2020, England will return to the three-tiered regional levels that were previously announced on 12 October 2020. Tier allocations will be reviewed every 14 days, and the regional approach will last until March 2021.
  • In tier two, only pubs that serve meals can reopen, while in tier three, hospitality venues will close except for delivery and takeaway. Where pubs are allowed to reopen, last orders will be at 10 pm, with sites closing at 11 pm.
  • Estimates prior to the second lockdown in England suggest more than quarter of UK’s 39,700 pubs may not survive pandemic.
  • According to ONS data, overseas residents made 398,000 visits to the UK between April and June 2020, representing a 96% decline than the same period in 2019. They also spent 97% less over the same period. In turn, operators that generate a considerable revenue from tourists, such as hotels and food services in tourist spots, are expected to be significantly affected.
  • There has been an increasing competition for drive-through properties and sites away from high streets that have been deserted due to the high restrictions in place. According to the Financial Times, large chains such as Starbucks, Greggs, Burger King and Costa have indicated plans to expand their drive-through presence. Starbucks plans to have 80% of its new openings next year with a drive-through lane.
  • The Financial Times reports that, according to Barclays data, UK consumers spent 33% less in restaurants in October 2020 than in the same month last year, and even less than in September 2020 when spending was down 19% from a year earlier. Additionally, hotels and other accommodation recorded an even larger contraction, with spending in October down by an annual rate of 37%, 18 percentage points lower than in September.

 

  • Cineworld is lining up a rescue package after coronavirus restrictions left it struggling under the weight of its massive debt pile. The world's second-largest cinema chain, which owes £6.2 billion to its lenders, wants to slash its rents and potentially shutter sites as it battles to survive the COVID-19 pandemic. It is considering a company voluntary arrangement (CVA) which would allow it to only pay a portion of its debt back to creditors such as banks, bondholders and landlords.
  • According to consumer watchdog Which?, more than £1 billion of holiday refunds are still owed to customers in the United Kingdom, despite legal obligations to reimburse within seven days of a flight cancellation. Travel agents are asking for regulators to speed up the process of issuing refunds. Delays are forcing agents to refund passengers from their own resources, putting further pressure on finances.
  • In mid-October 2020, the Department for Digital, Culture, Media and Sport announced a £500 million Film and TV Production Restart Scheme to help screen productions struggling to restart due to a lack of coronavirus-related insurance. The scheme is anticipated to support over 40,000 jobs across one of the country’s leading creative sectors by ensuring planned productions can proceed after a period of disruption due to the pandemic.

 

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