Discover how the novel coronavirus is impacting the global economy.
Since originating in November 2019 in Wuhan, China, the novel coronavirus COVID-19 has so far infected over 100,000 persons in over 100 countries. Currently, the death toll stands at more than 4,000 – the large majority of these from China.
As the world struggles to contain the spread and precautionary measures are implemented to protect the public, it’s not just our health that could suffer. The economic impact of the coronavirus is shaping up to be significant; and with fears of a global recession looming, the virus could have serious long-term implications for business.
We’ve taken a look at what is and could be happening.
Which industries will suffer the biggest losses? And are there any that could benefit?
What do we know so far about the economic effects of COVID-19?
Currently, the WHO threat level stands at ‘very high’. The UK’s plan of action is moving into its secondary ‘delay’ phase, with the NHS preparing for an epidemic. Events are being cancelled or postponed as the virus continues to spread.
Immediate effects to business have seen Flybe plunge into administration and the likes of DeLoitte and HSBC closing their London offices following an employee testing positive for coronavirus. Other offices up and down the country are being held on standby pending further advice from the government to work remotely.
Fear of the unknown has caused a panic-induced stockpiling – with major retailers confirming a notable increase in sales of items such as hand sanitiser and toilet roll, despite government advice that hoarding household items is unnecessary.
Additionally, supermarket food delivery services have experienced a surge in demand, as people stay at home – customers have been placing ‘unusually large orders’, according to Ocado UK.
In the short term, this looks good for supermarkets and delivery services, providing they have the capacity and the staff to satisfy the increase in demand. However, as the virus continues to spread, it’s likely that one in five workers will have to take some time off work during ‘peak’ coronavirus season, which will cause issues throughout the supply chain.
The worst economic impact of the coronavirus
The travel industry has taken the biggest hit so far as flights are cancelled and increasing amounts of people are put off travelling due to containment concerns and government restrictions.
In a worst-case scenario this could result in workers losing jobs or seeing their hours cut. The knock-on effect of this would leave areas that rely on tourism struggling in the coming months and even years to come.
Additionally, disruption of global supply chains will hold up business, which, combined with travel restrictions, could spell global recession.
What does this mean for workers?
The government’s four-stage plan consists of: containing the virus, delaying its spread, researching its origins, and mitigating its impact.
The delay phase could see the UK closing schools, banning mass gatherings and advising offices to work from home.
However, retail, hospitality and other customer-facing industries could suffer from a severe loss in earnings. With COVID-19’s classification upgraded to ‘notifiable disease’, this means insurance claims should be easier to make. Whether this will happen or not is still unclear.
Those forced to take time off work might not be subject to Statutory Sick Pay if leave is extended, leaving many out of pocket.
Can insurance companies pay out?
At the moment, it would seem all eyes are on the insurers. How far will loses be covered, if at all? It’s been reported that despite the reclassification of the disease, thousands of businesses may not be able to claim.
The Association of British Insurers have reportedly announced that all losses are ‘unlikely’ to be covered. For example, the events industry may feel the sting as people cancel and postpone gatherings as a precaution. Insurers may only cover losses if the virus is found on-site.
What does the future look like for economies affected by COVID-19?
Those countries worst hit by coronavirus will undoubtedly be those unable to implement tough travel and quarantine restrictions. Poorer countries will see a decline in tourism, whilst richer countries will implement emergency pandemic protocols to cope with the increased demand on the health service and minimise economic losses.
By the time you’ve read this blog, the situation undoubtedly will have changed. With a vaccine still in development, cases will multiply and businesses will grapple with the situation as it unfolds.
What remains paramount is the spread of information – in itself a huge problem in poorer countries with limited digital infrastructure. Best practices to avoid contracting the virus and to treat it effectively must be communicated globally and efficiently.
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