United Kingdom / Coronavirus Insights
COVID-19: UK Industry Fast Facts

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by IBISWorld
Sep 17 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.

 

  • Crop farming industries are expected to be negatively affected by reducing prices of global crops. Soya, rapeseed and wheat have already fallen in price.
  • Sales by liquid milk processors serving food service or wholesale markets are reported to have dropped between 50% and 60%. According to the National Farmers’ Union, steep falls in liquid milk prices and demand meant that one-quarter of UK dairy farmers had become financially unviable in April 2020.
  • Dairy farmers that have lost more than 25% of their income over April and May due to the coronavirus are able to access up to £10,000 in funding to help overcome the impact of the outbreak.
  • The outbreak has caused a severe demand shock for British fishers, as a result of plunging demand from export markets and domestic restaurants.
  • According to the Office for National Statistics (ONS), agriculture output fell by 4.8% during the three months through June 2020. However, 1.1% growth in output in July 2020 represented the third consecutive month of expansion.
  • 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.
  • 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.

 

  • 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 15 September 2020, the price of Brent crude was US$39.94 per barrel, down 42.1% 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 have spiked as virus cases have kept rising and governments have unveiled multi-billion stimulus plans and lowered interest rates. Prices have fallen slightly since and stood at approximately US$1,940 per ounce as of 15 September.

 

  • According to the National Grid, electricity demand fell by as much as 20% during the height of lockdown, and demand remained 9% lower in July 2020 compared with the same month in 2019. This necessitated rebalancing costs of £139 million in July 2020, 96% higher than in July 2019. Overall, year-to-date rebalancing costs in 2020 are 60% higher than the same period in 2019, at £996 million.
  • 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. This is intended to avoid the collapse of electricity and gas suppliers, which face an expected rise in bad debt in the coming months in line with the end of Coronavirus Job Retention Scheme (CJRS).
  • Based on data published by the ONS, a report by Catax estimates that total business investment in the utilities sector fell by 9% in the first quarter of 2020 to £3.9 billion, from £4.3 billion in Q1 2019. This was due to concerns over a potential rise in future bad debt caused by the coronavirus outbreak.
  • The slowdown in electricity demand helped renewables overtake fossil fuels as the main source of electricity in Great Britain so far in 2020, according to Carbon Brief. 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.
  • According to research from Comparethemarket.com, a surge in usage of household appliances and electronics during lockdown means utility bills could rise by £32.31 per month. However, this is expected to be offset by lower wholesale gas and electricity prices, which were 42% lower during the three months through June 2020 then during the same period in 2019.
  • A considerable reduction in allowance demand, caused by a significant decline in industrial activity due to lockdown measures, spurred a reduction in carbon prices in the EU Emissions Trading Scheme to €15 per tonne in March 2020. However, allowances have now recovered, even climbing above pre-lockdown levels to reach €27 at the end of June.

 

  • According to the ONS, output in the construction sector fell by 35% over the three months through June 2020; this includes a 51.2% decline in private new housing output and a 33.4% decline in private commercial output. However, having increased in May and June, construction output continued its recovery in July 2020, recording growth of 17.6%.
  • The IHS Markit UK Construction PMI decreased to 54.6 in August 2020, from 58.1 in July. Nevertheless, this represents the third consecutive month of expansion in the sector, with housebuilding registering the strongest rebound since the stoppage of on-site work.
  • 44% of construction firms surveyed in the ONS Business Impact of COVID-19 Survey between 10 and 23 August 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.
  • Building site closures are expected cause the United Kingdom to miss out on key housing targets. According to Savills, lockdown measures brought work on 220,000 new homes to a standstill, undermining the government’s target of 300,000 homes built a year by 2025. Research from property agency Savills and housing charity Shelter has forecast a shortfall of 85,000 new homes in 2020.
  • Construction output is expected to fall by 25% in 2020 in a best-case scenario forecast by the Construction Products Association.

 

  • 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, manufacturing output fell by 20.2% during the three months through June 2020. This was driven by declines in 12 out of 13 subsectors, most notably the manufacture of transport equipment, which fell by 49.1%. However, manufacturing output recorded growth of 6.3% in July 2020, representing the third consecutive month of expansion.
  • The IHS Markit UK Manufacturing PMI rose to 55.2 in August 2020, from 53.3 in the previous month, pointing towards a stabilisation in operating conditions in the sector. According to the survey, production rose at the fastest rate since May 2014.
  • Every major carmaker in the United Kingdom suspended or cut production during the height of the coronavirus outbreak. This includes Vauxhall owner Peugeot, Nissan, Honda, BMW and Toyota. The Society of Motor Manufacturers and Traders (SMMT) estimates that this will cause an 18% drop in UK car production in 2020.
  • According to the SMMT, new car registrations were up down 5.8% in August 2020 compared with August 2019. Year-to-date registrations were down 39.7% compared with 2019.
  • In the ONS Business Impact of COVID-19 Survey conducted between 10 and 23 August, 45.6% of firms in the manufacturing sector stated that their revenue remained below what they would usually expect for the time of year.

 

  • The closure of non-essential retail establishments prompted food and drink wholesalers to rethink their businesses. While some, such as Brakes, started supplying products to supermarkets, others ventured into supplying the public directly. While this is regarded as more of a short-term solution than a long-term move, it has prompted some food and drink wholesalers, such as Dunns, to rethink their existing business model.
  • In the coming months, car dealers are preparing to cut tens of thousands of jobs across the United Kingdom in the best-case scenario and 150,000 jobs in the worst case, according to forecasts from executives.
  • A total of 85,696 cars were manufactured in Britain in July, 51% more than in June but 21% fewer than in July 2019, the SMMT said.
  • Car sales have slumped in Britain this year because of the pandemic, with car showrooms closed from late March until at least June. Sales rose in July for the first time this year, but year-to-date sales are still far below 2019 levels. Total applications for new and used cars processed by the UK’s largest credit check group Experian rose to 597,000 from 1 July to 24 August, compared with 481,000 in the same period during 2019 — a rise of just over 24%.
  • 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 impact on output in the UK economy: July 2020 report states that, both maintenance and sale of accessories in the motor trades industry have returned to their pre-COVID-19 levels. In July 2020, turnover from the sale of motor vehicles was 18% above the July 2019 level. However, wholesale trade except of motor vehicles and motorcycles was 6.6% lower than in February 2020.

 

  • According to data from Barclaycard, consumer spending was 0.2% higher in August 2020 than in the same month in 2019, up from a 2.6% decline in July and representing the first expansion since February. Growth has largely been driven by supermarket spending, which was up 14.9% year on year; pubs and bars, up 9.3% year on year; and clothing, which returned to growth for the first time since February. However, spending growth was also largely driven by online purchases. According to the survey, almost 40% of non-food sales occurred online in August, up 10 percentage points on August 2019. In contrast, in-store sales of non-food items shrank by 17.8%.
  • Despite a surge in supermarket sales, some operators are still struggling and the cost of adapting during the pandemic has eaten into margins. For instance, Wm Morrison said the direct costs of responding to the pandemic amounted to £155 million over the six months to August, resulting in a 25% fall in underlying pre-tax profit to £148 million, although additional costs are expected to taper off as business rates relief continues over the whole year. A supermarket price war may also be looming, as Morrisons has already announced price cuts for more than 400 items and said a basket of typical Christmas food would be significantly cheaper than last year.
  • UK high streets continue to struggle, with the likes of New Look warning of collapse without renewed rent cuts. New Look, which has almost 500 stores and employs more than 12,000 people, is proposing its second company voluntary arrangement in as many years as it contends with a hit to sales during the pandemic. Meanwhile, Halfords benefited from the cycling boom during lockdown but expects this to taper in second half of year
  • In an August 2020 survey by the Confederation of British Industry, two out of three retailers reported falling employment, the largest share since records began in 1983. Unemployment rates are anticipated to continue to rise as the CJRS draws to a close in October 2020 because, according to the latest statistics from HMRC, 74% of eligible retailers claimed help from the CJRS. For instance, in late August 2020, M&S announced it would cut 7,000 job over the next three months.

 

  • On 3 July 2020, the government published a travel corridor exemption list, containing 59 countries and territories from which people will not have to self-isolate when arriving back in England from 10 July. However, more than a dozen countries have since been removed from the list, including Spain, France and the Netherlands, with the Foreign and Commonwealth Office advising against all non-essential travel to these countries and enforcing a 14-day self-isolation period for people returning from any of the countries. As of 14 September 2020, just two countries, Sweden and Cuba, have been added to, and remain on the list.
  • British Airways has announced that it will retire all of its Boeing 747 fleet following the sharp downturn in travel caused by the coronavirus outbreak.
  • Virgin Atlantic has announced that it is to cut 3,000 jobs in the United Kingdom and end its operation at Gatwick Airport as a result of the coronavirus outbreak. British Airways has announced plans to make 12,000 of its staff redundant due to the global collapse in air travel, as its parent company, International Airlines Group, announced a €1.7 billion (£1.5 billion) loss after tax during the first three months of 2020, compared with a profit of €70 million in 2019. Additionally, easyJet has said that it will cut 30% of its workforce, equating to around 4,500 jobs. 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 was up 200.6% in July 2020 compared with June 2020. However, the number remained 93% down on the same month in 2019.
  • According to sample estimations from the International Air Transport Association, international air passenger numbers will decline by 55% overall in 2020, with passenger numbers only returning to pre-coronavirus levels in 2024.
  • In the ONS’s Business Impact of COVID-19 Survey, 22.2% of firms in the sector reported that their revenue was more than 50% lower than would normally be expected for the time of the year over the two weeks through 23 August 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 will in turn take on the financial risk of running the network. According to government estimates, this is expected to come at a cost of £3.5 billion, with this figure set to rise further with a fresh round of financial support in the pipeline. The government has also provided bus services with a £400 million bailout to ensure that they can keep running amid falling revenue and profit, as well as guaranteeing a further £200 million of planned investments. Transport for London has also received a £1.6 billion bailout in order to ensure that services can be maintained.

 

  • 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, 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 with 5,152 in May.
  • 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. Daily Mail and General Trust (DMGT), which owns The Daily Mail, Mail Online, Metro and the i newspaper, has started consultations with staff across its publishing arm DMG Media. As part of the cutbacks, DMGT is set to shut down the Mail on Sunday’s Event magazine, while redundancies are also expected at You.
  • Online publishers and broadcasters are benefiting from a surge in demand. Software publishers may also benefit as people work remotely.

 

  • According to the Bank of England, the outstanding value of all residential mortgages loans was £1.5 billion at the end of 2020 Q2, 3.2% higher than a year earlier, while the value of gross mortgage advances in 2020 Q2 was 33.3% lower, at £44.1 billion. Meanwhile, the value of new mortgage commitments, which is the lending agreed to be advanced in the coming months, was 53.2% lower than a year earlier, at £34.3 billion. This suggests a tightening mortgage market, characterised by lower payments and more stringent criteria.
  • Lower mortgage repayments are likely due to the implementation of the payment deferral scheme, which ran between April and June. Despite coming to an end, the total number of payment deferrals still stood at 731,000 as of September 2020. Mortgage arrears have been contained and the figure of 74,000 mortgages in arrears at the end of Q2 was only 2% higher than the number in Q1 and 3% below the number in Q2 2019.
  • Consumer credit card borrowing fell by 40% in Q2 compared with Q2 2019, following a 12% annual decline in Q1. Spending in supermarkets and on home leisure and fitness equipment was not enough to offset the decline in tourism and hospitality industries, according to UK Finance. Meanwhile, amounts held in deposit accounts rose by 5% over the same three-month period through June 2020, helping consumers manage unsecured debt.

 

  • The University and College Union has urged universities to keep teaching online-only until Christmas, warning that more than migration of more than one million students could fuel a surge in coronavirus cases. The union claimed that the push to reopen campuses was being driven by financial concerns and called on the government to step in and underwrite any lost funding for the sector.
  • Following the recalculation of A-level results across the United Kingdom, prospective students quickly found their initial places had been filled. In response, institutions such as Durham University are offering bursaries to students willing to defer entry or placements.
  • The Institute for Fiscal Studies estimates that universities could lose anywhere between 7.5% and 50% of their yearly income over the next four years as the number of international students falls owing to the pandemic. In response, institutions are cutting the jobs of thousands of academics on short-term contracts. 13 universities are at risk of insolvency and require a bailout in order to survive due to declining student numbers, mounting pension liabilities and losses totalling £11 billion. Less prestigious institutions with lower cash reserves are expected to bear the brunt.

 

  • 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 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. International law firms with offices in the United Kingdom, such as Reed Smith and Bryan Cave Leighton Paisner, have launched redundancy rounds over August, as a result of the CJRS starting to unwind. 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. For instance, McDonald’s cut its marketing budget by 97% from £43.5 million to £1.3 million. Major advertising agencies, such as WPP and Publicis, have had to cut staff numbers and undertake large cost-cutting initiatives, as demand has deteriorated significantly. 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.

 

  • A number of firms have reported improved demand for properties since May, when estate agents’ offices and show homes could reopen from lockdown. A further jump in enquiries came in July after Chancellor Rishi Sunak announced a suspension of stamp duty on property sales of up to £500,000 until March 2021. A two-month extension to the Help to Buy scheme in England has also been offered. According to the Managing Director of real estate agency Chestertons, the number of new buyers registering and making offers on properties was 36% higher in July than a year earlier.
  • According to Rightmove, the UK property market is experiencing a record-breaking summer boom, with the number of sales agreed from mid-July to mid-August totalling more than £37 billion. Over the past 10 years, the average monthly fall in asking prices during the summer months, although figures indicate asking prices are up, has been 1.2% in 10 out of 12 regions as individuals continue to escape the city in favour of commuter belts and coastal areas.
  • According to Nationwide, house prices rose by 2% in August and were 3.7% higher than in the same month in the previous year, taking the average price to £224,123. This increase is due to pent-up demand and the suspension of stamp duty for some homes. House prices have now reached a new all-time high, overcoming the losses made in May and June. However, forecasters expect a drop in prices again when the effect of the coronavirus pandemic is felt on employment.
  • A rise in sales agreed has mostly been due to wealthier buyers being active, with pricier properties making up a larger share of total UK sales than in 2019.
  • The Royal Institute of Chartered Surveyors states that demand for properties with gardens and near green spaces has increased, showing how the pandemic is reshaping buyers’ preferences. Its survey from August shows that house prices are spiking in every region except London.

 

  • Testing laboratories across the United Kingdom are facing a backlog of nearly 200,000 COVID-19 tests, according to the Department of Health and Social Care (DHSC). Some samples are being sent to Italy and Germany to help reduce the stress on the system amid growing concern about the lack of a robust test and trace programme. A leaked DHSC document states that 75% of test results were not being provided within the government’s 24-hour target timeframe, while 25% were not being processed within 48 hours, and 4.3% of tests were ‘voided’.
  • Adar Poonawalla, chief executive of the Serum Institute of India, the world’s largest vaccine manufacturer by volume, has warned that not enough COVID -19 vaccines will be available for everyone in the world to be inoculated until the end of 2024 at the earliest. Peter Hale, the executive director of the US-based Foundation for Vaccine Research, concurs and says that assuming there are two or more vaccines that are at least 75% protective against infection, three-quarters of the world’s population could be vaccinated by mid-2023. There are increasing concerns that large pre-orders from the United States and Europe will leave developing countries behind.
  • Two British bio-technology firms, iAbra and Halo, have launched two rapid saliva tests for COVID-19 amid growing calls for more testing capacity in Britain as employees head back to their offices and students return to school. IAbra claims results are delivered in just 20 seconds and the test is currently being piloted at Heathrow Airport. Halo claims results can come back within 24 hours. Clients can take the test at home by spitting into a tube, and sending the sample off for processing at the company’s lab at Imperial College London.
  • Trials of a COVID-19 vaccine being developed by AstraZeneca and Oxford University have resumed after being temporarily paused on 8 September due to a reported side effect in a patient in the United Kingdom.

 

  • According to the July 2020 CJRS statistics, the accommodation and food services sector had the highest uptake of the scheme, at 87%.
  • According to the latest HMRC figures, the Eat Out to Help Out (EOHO) scheme was used more than 35 million times in the first two weeks. The government has set aside £500 million to fund the scheme. According to Springboard, which measures footfall, the number of people in retail destinations after 6.00pm on Monday 3 August, the first day of the scheme, was 19% higher than the week before. Meanwhile, lunchtime visits were up 10%. The scheme ended on 31 August and according to Big Hospitality in late-August 2020, more than a third of customers are expected to dine out less often in September now that the EOHO scheme has ended.
  • According to Harpers, the EOHO scheme enabled 200,000 staff in the pub and hospitality sector to come out of furlough early to cope with increased demand, saving the government almost £150 million in furlough costs. Moreover, £30 million was generated by VAT on food and soft drink sales as a result of the scheme.
  • According to Treasury statistics released at the end of August, 84,000 outlets signed up to the EOHO scheme, with claims made for more than 64 million meals. OpenTable data indicates there were 106% more seated diners on Tuesday 25 August than the same day in 2019. Nevertheless, some restaurants located in city centres stated they were still struggling, particularly in London.
  • Research by food and drink consultancy CGA suggested that across the scheme's third week, food sales were 15% higher than in the equivalent period in 2019.
  • The ban on social gatherings of more than six people from 14 September 2020 is expected to negatively affect the accommodation and food services sector and slow its recovery, with industry bosses claiming the ban risks reversing the positive impact from the EOHO scheme.
  • The Centre for Retail Research has stated that the total number of restaurants and casual dining outlets to have closed this year by the start of August 2020 was 1,467, 59% higher than the 922 that closed in the whole of 2019. In turn, tens of thousands of people have lost their jobs. Some argue the sector needs more aid before many are due to pay rents in September, as this could force more restaurants out of business.
  • In September 2020, Pizza Hut confirmed a list of 29 restaurants up for closure as part of a rescue deal that could lead to the loss of 450 jobs. Similarly, in August, Pizza Express announced it is considering closing 67 UK restaurants, equivalent to the loss of 1,100 jobs.
  • Staycation bookings have boomed as quarantine rules have tightened. According to holiday accommodation website Awaze, site traffic increased by 25% on Friday 14 August compared with the previous day, as France and Belgium were added to the self-isolation list. Out of the 19,000 houses the company offered in the United Kingdom, only 60 were still available in August and more than half of those were in Scotland, while many were for groups of 20 or more. As demand has increased, prices have followed. Prices across Awaze’s UK businesses were up 18% year-on-year in August.

 

  • From 14 September 2020, new government guidelines prohibit social gatherings of more than six. However, the rule also does not apply to gatherings for work or education purposes, or to weddings, funerals, and team sports organised in a COVID-19 secure way. Venues following COVID-19 secure guidelines, such as museums and gyms, can still hold more than six people in total. However, within those venues, there must not be individual groups larger than six, and groups must not mix socially or form larger groups.
  • Streaming service Netflix is expected to outspend rivals on film and TV production and rights. Due to the pandemic and delays to production, fewer shows have been commissioned this year, particularly in TV drama. Meanwhile, a sharp fall in advertising revenue is also expected to dent broadcasters’ budgets, resulting in further delays and limited production content.
  • UK theatres are facing financial trouble after being forced to postpone their 2020 pantomimes. Annual pantomime performances usually bring in a large audience of school children and families to theatres over the Christmas period, but theatres remain unable to reopen at full capacity due to the social distancing guidelines. For instance, Inverness’s Eden Court, the largest arts venue in the Scottish Highlands, has stated that pantomime ticket sales bring in a third of its annual income. By postponing this year’s pantomime, Cinderella, the venue will lose £350,000 in revenue, with the jobs of 14 performers affected.

 

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