Counting Down the Days to a UK Economic Recovery

An estimated 20% of FTSE 100 companies are currently taking assistance from the UK government to pay wages and salaries. On the plus side, just a handful of them (5%) have implemented widespread job cuts on a permanent basis. Companies listed on the LSE which sell non-essential goods and services, including clothing, air travel and the like have been hardest hit by current economic conditions, and they have applied for government bailout assistance for the purposes of job retention.

While consumers largely remain at home, companies are looking to shore up job security, with the government implementing measures to keep the economy ticking over. The latest statistics compiled in May 2020 indicate that some 47 industrial/consumer discretionary companies which are listed on the FTSE 100 index have let employees go, while a smaller fraction have made permanent job cuts including 12 industrial groups and 16 consumer discretionary businesses.

The UK government has pledged to pay 80% of wages, up to £2500 per month, effective through October 2020. As from August 2020, workers may return to their jobs on a part-time basis, while companies start contributing towards payment of salaries. This is likely going to have a strong impact on the food and beverage, recreational, and hospitality industries across the UK. With a thriving gambling sector, it is unlikely that current measures will impact online blackjack in the United Kingdom, given the online gaming sector’s relative immunity to current global concerns.

Among the many leading companies on the FTSE 100 index who have implemented austerity measures to cope with the current conditions, Meggitt and IAG publicly announced that they had complied with all government mandates. 5% of FTSE 100 corporations have implemented job cuts, while 20% have signed up to receive government assistance for payment of salaries and wages. Interestingly, an estimated 50% of the FTSE 100 companies will continue paying dividends, irrespective of the bleak economic situation for short to medium term. Companies like Meggitt and IAG have cancelled, suspended or reduced dividend payments to shareholders. The same companies have implemented the largest proportion of job cuts. In contrast, the majority of consumer discretionary companies, financials, industrials, basic materials, and consumer staples have not cut jobs.

The Current State of the UK Housing Market

Counting Down the Days to a UK Economic Recovery

From the housing perspective, Trading Economics indicates that the UK’s current reference point for housing starts (construction new figures) for Q1 2020 is at 4%, up from the previous figure of 1.2%. This follows a lacklustre lead up into 2020, with anaemic growth recorded. The current uptick of construction orders (4% Y-o-Y) for Q1 2020 marks the largest such increase in over a year in the UK. The lag effect of the economic malaise is likely to hamper growth moving forward, as indicated by the Office for National Statistics. Now that the government is allowing real estate agents to put homes on the market, a slow recovery is likely to ensue.

All estate agents are being asked to bring PPE and sanitizer with them to show houses, as precautionary measures. Draft guidance has been issued for maintaining a safe distance and implementing new norms in the post-crisis era. Buyers will be required to set up appointments with agents, and only two clients per showing will be permitted. Safe working practices for the UK housing industry are being drafted and implemented in anticipation of a return to the new normal. With lacklustre sales for 2020 to date, the UK housing market is but one of many ailing UK industries looking to reverse the rot and begin the process of recovery.

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