According to the research data analyzed and published by ForexSchoolOnline.com, if the work-from-home trend continues, the UK economy could lose at least £480 billion. The local government has been persuading commuters to return to work in the office.
The UK GDP reports for both the first and second quarters of 2020 paint a grim picture that echoes these sentiments. During the second quarter, the UK recorded a GDP decline of -21.7% and was the second worst performer in Europe. Spain came in first with a drop of -22.1%.
Thirteen countries out of the 22 that were sampled recorded annual GDP contractions exceeding -10%. Only Finland and Lithuania recorded losses below -5%.
The situation was no different in Q1 when the UK economy recorded the joint largest fall since the third quarter of 1979. According to data from the Office of National Statistics (ONS), between January and March, the economy contracted 2.2%. In March alone, GDP fell by 6.9%.
April was the worst month in the entire first half, with ONS figures showing a drop of 20.4%. This went as the largest single-month drop on record. Furthermore, the contraction in that month was three times higher than the decline experienced during the entire 2008/2009 economic downturn.
According to separate data from the ONS, the UK’s current account deficit also widened during the period. The difference between the value of imports and exports, the balance of payments deficit, rose to a value of £21.1 billion, equivalent to 3.8% of the GDP.
44% of UK Workers to Keep Working From Home
Based on the CEBR report, the greatest loss to the economy would result from a permanent shift to remote working, other factors held constant. But it points out that with changes in influential factors, the situation might improve. For instance, with the reopening of schools, the GDP could stand at least £70 billion higher.
Some UK employers are already closing down offices causing businesses to cut thousands of jobs. A case in point is Capita, an outsourcing group that operates the London congestion charge. It is in the process of closing down at least 30% of its 250 offices in Britain.
NatWest Group, which owns the Royal Bank of Scotland, has 49,000 of its 65,000 staff members working remotely until 2021. Fund management firm Schroders and accounting firm PricewaterhouseCoopers are other big names that want the majority of their staff to keep working from home.
On the other hand, sandwich chain Pret a Manger has announced its intention to cut over 2,900 jobs as city centers remain deserted. In keeping with this, the CEBR forecast highlights the fact that the economic activity that socializing and commuting create cannot be replicated when people work from home.
A separate CEBR study reveals that almost 32% of workers, numbering around 10.7 million expect to keep working from home even after the lifting of restrictions. In the capital, London, the survey estimated that 44% of workers expect to work remotely in the long run.
It estimates that by 2021 when the ‘new normal’ is realized, London workers operating from home will increase to 25% from 11.9% in 2019. This would result in a loss of over 300,000 jobs across London.
Global Economy Could Lose up to $21.8T, Students up to $10T
The situation is not any better for the global economy, which according to multiple forecasts will lose trillions as a result of the pandemic. According to the UN Trade Agency, the global economy will slow down to a growth rate of less than 2%. In that case, it would lose at least $1 trillion in 2020. In the same report, the worst case scenario forecast estimates a growth rate of 0.5%, which would lose the global economy $2 trillion in 2020.
However, a more grim report from The Australian National University predicts a loss of up to $21.8 trillion in 2020 alone. This research models six different scenarios relating to the impact of the coronavirus pandemic on the world economy.
Under its best case scenario, the loss is in the environs of $14.7 trillion. Two of its scenarios model the total loss for the period between 2020 and 2025, taking into account possible ripple effects. The worst case scenario estimates a loss of $35.3 trillion over the five-year period.
The World Bank published a report on the potential permanent loss in learning and lost earnings resulting from COVID-19. At the peak of the pandemic in April 2020, the report estimated that at least 1.6 billion students were out of school. In the absence of remedial action when these students return to school, they could lose over $10 trillion in earnings over time.