The lockdown that has been put in place to hold back the coronavirus until a medical means of stopping it can be found constitutes a major economic shock, according to the Centre for Economic and Business Research (Cebr). Deliberately shutting down much of the economy has caused a huge reduction in the demand for goods and services as households isolate themselves at home and only consume essentials or anything that can be delivered to their door.
Cebr recently published analysis showing that UK economic activity under lockdown is down by 31%. Although the government has offered up a vast package of support, this lack of demand will mean some businesses fold, many workers will lose their jobs and a lot more will face a cut in incomes. Research from the Cambridge-INET institute has identified that on average UK workers can expect to face a 35% loss of income over the next four months. Once households will burn through their emergency savings, they will have to make tough choices on where to cut down expenditure, according to Cebr.
The report stated: “Housing is the single biggest expenditure item faced by most households, which means that the shortfall in incomes has a tremendous potential to disrupt the UK’s housing markets. We forecast that UK-wide house prices will fall by 13% by the end of 2020 as a lack of transactions, high uncertainty and falling incomes take their toll.”
Some housing markets will be hit harder than others
Although the scale of the crisis means it will affect us all, the impending loss of jobs and incomes won’t be evenly spread across the country. The consequence of this uneven distribution will be to hit some housing markets harder than others.
Cebr reported: “Close to half of UK employment is spread across the manufacturing, construction, retail, accommodation & food services and other services sectors. Jobs in these industries are often characterised by high-contact intensity as workers are in close proximity to customers or their co-workers (think hairdressers or flight attendants). As a result, large parts of the customer service economy including pubs, restaurant, gyms, cinemas and other leisure facilities have been forced to close to limit the spread of infection.