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Experian’s COVD-19 analysis

Global financial markets remain volatile as the number of Coronavirus continue to rise. In Italy 60 million people are now under effective quarantine and the virus… View Article

RETAIL SOLUTIONS

Experian’s COVD-19 analysis

Global financial markets remain volatile as the number of Coronavirus continue to rise. In Italy 60 million people are now under effective quarantine and the virus is increasingly having economic as well as health impacts.

We are closely monitoring the latest developments in the Covid-19 crisis, and as part of our Economics Scenario Service we will be publishing analysis to assess what the spread of the virus means for the UK’s regions, industries and households.

Sector-Specific Impacts 

Early indications suggest that the sectors most at risk of exposure from a Corona-shock are the following.

  • Hospitality-Sector: Owners of hotels, nightclubs, bars and restaurants calling on government to introduce emergency assistance. Industry leaders say there’s risk of severe losses, potentially bankruptcy, if the number of bookings continue to fall.
  • Logistics: Some shipping and sea-lane routes are being closed, with some countries starting to close off ports. 80% of global goods are transported via ships, with China home to some of the busiest shipping container ports in the world.
  • Travel and Tourism: British Airways, for example, slashed around 400 flights over the second-half of March. The prospect of further closures remains.
  • Food-and-drink: Many businesses also export to China, with luxury goods such as whisky and Scottish salmon (comprising 8% of food and drink exports to China) likely to experience a decline in demand.
  • Sports: Potential for sports fixtures to be cancelled or postponed.
  • Higher education: Lower enrolments of international students (10% fall in East Asian students could cost HE £200m in lost tuition fees).
  • Food-delivery sector: Online delivery companies such as Deliveroo and Uber Eats hire a disproportionately large number of EU workers. Case workers that are returning from mainland Europe may pose a higher risk in being potential carriers of the virus.
  • Automotive sector: Jaguar Land Rover and Aston Martin import many of the parts used for their vehicles from China, whilst simultaneously also exporting their cars to the world’s biggest market.

While this should hopefully be a temporary shock, it has the potential to have a severe and broad impact on the UK economy. Much, of course, will depend on the progress of the virus, and what measures are put in place by the government to contain the spread and mitigate the damage. The potential shocks to the economy include lower consumer spending, investment and trade (supply chain disruptions). Higher government spending and investment will only be able to partially offset this. The reaction from financial markets will add to stress – as falling equity prices undermine consumer confidence and induce negative wealth effects. The shock will also hurt business confidence, as well as their willingness and ability to borrow.

Against this backdrop, the emergence of a recession this year cannot be ruled out and we will be continually monitoring the latest data and updating our forecasts as required.

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