UK Economic Outlook A presentation for the BVRLA Residual Value and Remarketing Forum, 18 June 2020 Š Centre for Economics and Business Research ltd
1. Global Context
2020
2. Impact of Covid-19 on UK economy
2
3. Forecasts and Conclusions
2020
CPB World Trade Monitor, Volume, year
3
World trade has collapsed amid the coronavirus outbreak
-
on
-
year change
China records first GDP contraction since comparable records begun in 1992 following lockdown enforced in late January China, Gross Domestic Product, National, Total, Constant Prices, Change Y/Y
17.5
15.0
12.5
10.0
Percent
2020
7.5
5.0
2.5
0.0
1992
1994
1996
1998
2000
China, Gross Domestic Product, National, Total, Constant Prices, Change Y/Y
4
2002
2004
2006
2008
2010
2012
2014
2016
2018
2020
-
2.5
-
5.0
-
7.5
Annual change in GDP - 2020 forecast -5.0%
Japan
-6.0%
2020
United States
GDP expected to contract at rates not seen since the Great Depression
Germany
-6.5%
Australia
-6.5% -7.0%
Canada Spain
-9.0%
France
-9.0%
Italy
-10.0%
United Kingdom -11.1% -12.0%
5
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
Source: Cebr Global Prospects, June 2020
Global economy to contract sharply in 2020, with bounceback expected for 2021 World GDP growth, annual change 6% 4%
2020
2% 0% -2% -4%
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
6
2000
-6%
1. Global Context
2020
2. Impact of Covid-19 on UK economy
7
3. Forecasts and Conclusions
UK GDP, quarterly change
2020
1.5%
Q2 expected to dwarf contraction during first three months of the year
1.0% 0.5% 0.0% -0.5% -1.0% -1.5% -2.0%
8
2020 Q1
2019 Q3
2019 Q1
2018 Q3
2018 Q1
2017 Q3
2017 Q1
2016 Q3
2016 Q1
2015 Q3
2015 Q1
2014 Q3
2014 Q1
2013 Q3
2013 Q1
2012 Q3
2012 Q1
2011 Q3
2011 Q1
-2.5%
Source: ONS
Claimant Count, thousands (LHS)
Unemployment, % (RHS)
3,000
10.0 9.0
2020
2,500
Unemployment data are lagging but claimant count shows large labour market impact
8.0 7.0
2,000
6.0 5.0
1,500
4.0 1,000
3.0 2.0
500
1.0 0.0 2006 May 2006 NOV 2007 MAY 2007 NOV 2008 MAY 2008 NOV 2009 MAY 2009 NOV 2010 MAY 2010 NOV 2011 MAY 2011 NOV 2012 MAY 2012 NOV 2013 MAY 2013 NOV 2014 MAY 2014 NOV 2015 MAY 2015 NOV 2016 MAY 2016 NOV 2017 MAY 2017 NOV 2018 MAY 2018 NOV 2019 MAY 2019 NOV 2020 MAY
0
Claimant Count: the number of people claiming benefits principally for the reason of being unemployed. Some employed people are eligible for benefits. 9
ILO Unemployment: all those who are out of work, actively seeking work and available to start work.
but the drop in hours worked clearly shows the sharp reduction in labour demand 1080.0
Total actual weekly hours worked (millions), UK, s.a.
1060.0 1040.0
2020
1020.0 1000.0 980.0 960.0 940.0 920.0 900.0
10
2016 2016 2016 2016 2016 2016 2017 2017 2017 2017 2017 2017 2018 2018 2018 2018 2018 2018 2019 2019 2019 2019 2019 2019 2020 2020 JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR MAY JUL SEP NOV JAN MAR
Source: ONS, Cebr analysis
Consumer spending collapses as households go into lockdown Volume of UK retail sales and real wage growth, annual percentage change 8% 6% 4%
2020
2% 0% -2% -4% -6% -8% Apr-20
Jan-20
Oct-19
Jul-19
Apr-19
Jan-19
Oct-18
Jul-18
Apr-18
Jan-18
Oct-17
Jul-17
Apr-17
Jan-17
Oct-16
Jul-16
Apr-16
Jan-16
Oct-15
Jul-15
Apr-15
Jan-15
Oct-14
Jul-14
Apr-14
Jan-14
Oct-13
-10%
Retail sales, three-month moving average 11
Real wage growth, annual percentage change, three month average Source: ONS, Cebr analysis
2020 12
Consumer confidence has bottomed out in April
20,247 cars registered in May – down 89% on the previous year (-51% in YTD)
2020
New Car Registrations, UK
13
Source: SMMT, Cebr analysis
2020
99.7% drop in production numbers in April – but things are getting better!
14
Source: SMMT
1. Global Context
2020
2. Impact of Covid-19 on UK economy
15
3. Forecasts and Conclusions
16
2020
GDP growth – annual change in per cent 15.0%
2020
10.0%
Three possible scenarios: Bad, worse and horrible
5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0%
2016
2017
Upside
17
2018
2019
2020
Downside
2021
2022
2023
2024
Central
2025
2026
What will determine which outcome we get? • No economic recovery is possible if the virus is not under control.
2020
• The safer people feel, the more likely they are to spend - many have build up savings! • A second wave and new, widespread lockdowns would push us towards the downside scenario: many firms and households will have used up savings during the current lockdown, so insolvencies could shoot up. • An effective treatment or a vaccine would push us towards the upside scenario. If most social distancing restrictions can be eased soon, things might return to ‘normal’. • Otherwise, a 2-phase recession looks likely: self-induced lockdown recession will change into a more classical recession where rising unemployment, business insolvencies and lack of demand reinforce each other. • Chancellor will need to draw up another stimulus plan for the autumn. 18
Any follow-up questions please contact:
2020
Kay Neufeld, kneufeld@cebr.com Head of Macroeconomics Centre for Economics and Business Research
Š Centre for Economics and Business Research ltd www.cebr.com 19