We know the pandemic has affected everyone in different ways. But we can look at the impact of the crisis on the UK economy as a whole.
In March 2020, the UK Government asked millions of people to stay at home to help save lives and protect the NHS. There have been more lock downs since then.
It meant millions of people could not go to work. For a time, only those doing essential work, such as providing food or electricity, could continue.
It also meant people spent less money on non-essential things like buying clothes, eating out and going on holiday.
That hit the economy hard.
But spending by consumers began to rise at the end of 2020. And by summer 2021, it was almost back to where it was before Covid hit.
What impact has Covid had on jobs?
The disruption caused by Covid meant many businesses couldn’t operate in the usual way. Many of their employees couldn’t go to work and customers couldn’t buy their products or services.
Some businesses were able to get a loan to pay for overheads like rent so they could keep afloat. And many could sell things online.
But others had to cut costs by their employees or letting them go. They simply could not carry on running their business without an income.
As a result, many people have lost their job or part of their income.
The businesses among the hardest hit included restaurants, theatres and construction companies.
What was done to help protect peoples’ jobs?
The Government offered employers money to cover part of their wage bill while their staff couldn’t work (this support is known as ‘furlough’).
Between August and November 2020, around nine million people were being paid 80% of their income this way.
Furlough will be phased out by September 2021. We know without this support, more people would have lost their jobs.
One of the things we (the Bank of England) did to help was to offer low-interest loans to large employers in the UK. So they could keep paying their staff and suppliers.
We have also kept interest rates low to support the UK economy. We do this by setting the UK’s main interest rate (called Bank Rate) and through quantitative easing (QE).
This reduces borrowing costs for households and businesses and helps the economy to recover.
There are signs that the economy is recovering. By the summer of 2021, job vacancies were back to where they were before the start of the pandemic.
What is a V shaped recovery?
You may have heard people talk about a V shaped or U shaped recovery.
Those names just refer to the shapes of the lines on charts that show how much the economy is growing.
Some people thought the UK economy would recover quickly in just a few months. On a chart, this would look like the letter V so it’s called a ‘V shaped’ recovery.
Others thought it will take more time, perhaps even years. On a chart, this would look more like the letter U – so it’s known as a ‘U shaped recovery’.
It’s as simple as that.