Right, let’s get this over with. You want a detailed account of the economic fallout from the COVID-19 pandemic in the United Kingdom . Don’t expect me to sugarcoat it; the data speaks for itself, and it’s not a pretty picture.

Economic impact of the COVID-19 pandemic in the United Kingdom

The period from March 2020 to May 2023 marked a particularly turbulent chapter for the United Kingdom’s economy, primarily due to the cascading effects of the COVID-19 pandemic . This unprecedented global health crisis triggered a severe Global recession , with its impact on the UK manifesting as market instability, widespread lockdowns, and a subsequent strain on virtually every sector. The repercussions were far-reaching, contributing to a sharp rise in unemployment , significant stress on supply chains , a noticeable decrease in government income, and the profound collapse of key industries such as tourism and the hospitality industry . Consumer activity, naturally, saw a sharp decline as well.

A map illustrating real GDP growth rates for 2020, as projected by the IMF , would likely show a stark contraction for the UK, reflecting the severity of the economic downturn.

Charity fundraising

The pandemic’s onset revealed a significant vulnerability in the charity sector, with many organizations reporting substantial drops in their income. An estimated funding hole of £4 billion was identified as fundraising events, the lifeblood of many charities, were cancelled en masse. This created a dire situation for countless organizations working to support the most vulnerable.

In response to this crisis, a commendable surge of individual and group fundraising efforts emerged. One notable example was the extraordinary campaign by 99-year-old Tom Moore , who captured the nation’s attention by raising over £28.2 million for NHS charities. This achievement set a new record for a JustGiving campaign, demonstrating the power of public generosity in times of need.

The London Marathon , typically a massive fundraising event, was postponed from its usual April date to October 2020. In 2019 alone, the marathon had facilitated the raising of £66.4 million for charities. To help mitigate the financial impact of the postponement, the Mass Participation Sports Organisers group initiated The 2.6 Challenge , encouraging people to undertake challenges based on the numbers 2 and 6 to raise funds.

On April 18th, a collective of UK artists participated in Together at Home , a series of live musical performances from their own homes, all in aid of the World Health Organization’s COVID-19 Solidarity Response Fund . A curated broadcast of these performances aired on BBC One on April 19th, bringing comfort and raising awareness.

Further consolidating these efforts, Children in Need and Comic Relief joined forces for their first-ever joint initiative, The Big Night In , a televised telethon that aired on April 23rd. This event proved to be remarkably successful, raising £27.4 million in just three hours. The UK government pledged to match the total amount raised, doubling the impact of the public’s contributions.

Northern Ireland’s Chief Charity Commissioner acknowledged the “very altruistic” nature of the public’s support for COVID-19 response causes, citing events like The Big Night In, The 2.6 Challenge, and Captain Tom Moore’s efforts. The Commissioner also used the opportunity to remind the public of the ongoing needs of all charities, encouraging continued support across the sector.

In recognition of the sector’s struggles, the UK government announced a £750 million support package for charities across the nation. A significant portion of this, £370 million, was specifically earmarked for smaller, local charities working with vulnerable individuals. This funding was allocated to the four constituent countries of the UK as follows: £310 million for England, £30 million for Scotland, £20 million for Wales, and £10 million for Northern Ireland.

Even established charitable organizations adapted their strategies. Christian Aid , for instance, announced that its annual fundraising week, scheduled for May 10–16, would proceed but without the traditional door-to-door collection of envelopes. Instead, the focus shifted to encouraging online donations and virtual fundraising events.

Clothing retail

The clothing retail sector was particularly hard-hit. Edinburgh Woollen Mill (EWM), a significant employer with 24,000 staff across its retail group, which included brands such as Harris Tweed, Peacocks, and Jaeger, announced in October 2020 a restructuring plan that included the potential sale of parts of the business. This signaled the widespread difficulties faced by even established retail names. The main article detailing the broader impact on retail is Impact of the COVID-19 pandemic on retail § United Kingdom .

Construction and property

The construction industry, initially deemed essential by the government, faced considerable disruption. Many construction sites continued to operate under new social distancing rules, but confusion over what constituted “essential work” and the contractual obligations imposed by contractors on subcontractors led to a complex and often inconsistently applied set of safety measures. By March 24th, major contractors like Mace had paused work, following government advice. Some sites remained operational despite breaches of social distancing rules, while others were temporarily halted due to such breaches. In Scotland, work on all non-essential construction projects was ordered to cease from April 6th.

Major contractors, including Mace, McAlpine, Laing O’Rourke , Wates , and Morgan Sindall , placed hundreds of their workers on furlough. Office for National Statistics (ONS) data from June 2020 indicated that over 80% of construction businesses had utilized the furlough scheme, with an average of 42% of their employees furloughed. The government’s support for construction workers through wages amounted to approximately £5.4 billion by the end of June 2020, covering wages for around 1.5 million individuals.

The economic strain quickly led to redundancies. Wates Group was among the first to announce significant job cuts, with 300 roles, or about 8% of its workforce, being eliminated. Other firms followed suit, and the Construction Leadership Council warned in June that approximately 10% of the construction workforce could face job losses by September 2020.

A survey by Glenigan, covering projects valued at over £250,000, revealed that by April 17th, work had halted on 2,434 UK sites, representing about £58 billion, or 35%, of the total UK construction value. Glenigan later revised its estimate, stating that 43% of sites had ceased work during the initial six weeks of the crisis, with 3,636 sites closed, including 466 in Scotland. Barbour ABI reported that 4,500 projects, valued at £70.7 billion, had been delayed.

The slowdown in construction activity had a ripple effect on materials suppliers. Kingspan reported a halving of its UK business and a one-third drop in global revenues. Marshalls plc experienced a 27% decrease in sales and considered making up to 400 staff redundant. Furthermore, builders’ merchants reported a 6.7% drop in sales for the first quarter of the year, accompanied by ongoing shortages of building materials.

Early May data painted a grim picture. Builders’ Conference reported a steep decline in construction tender opportunities, falling from an average of 664 projects per month in the year leading up to March 2020 to just 220 in April, with only 217 available through July. The IHS Markit /CIPS UK Construction Total Activity Index recorded the most significant contraction in UK construction output since the survey’s inception in 1997. Contract awards in April 2020 dropped to 115, compared to 180 in April 2019, with the total value plummeting from £2.82 billion to £1.25 billion as clients became hesitant to commit to large contracts. An Irwin Mitchell /Centre for Economics & Business Research report identified construction as one of the three most severely affected economic sectors, losing approximately £300 million per day. The Construction Products Association (CPA) forecast in late May that UK construction output would fall by 25% in 2020, with a subsequent rebound in 2021, though output would still remain 6% lower than in 2019. ONS data confirmed a record 40.2% collapse in construction output in Great Britain during April 2020, and despite a rise in May, output remained nearly 40% below pre-pandemic levels. By August, the CPA revised its forecast, anticipating a 20.6% fall in construction output for 2020, reflecting a quicker-than-expected resumption of site work post-lockdown.

Despite the challenges, some contractors, including Mace and McAlpine , began reopening certain sites in April. While large-scale projects like the £9 billion Battersea Power Station redevelopment, which had employed 4,000 workers before lockdown, remained closed, nearly 70% of sites operated by 36 major contractor members of Build UK were operational by late April, increasing to 86% by May 20th. The trade union Unite advocated for increased site inspections by the Health and Safety Executive to ensure compliance with social distancing measures. Construction workers became eligible for targeted COVID-19 testing on April 28th. On May 10th, Prime Minister Boris Johnson encouraged construction workers in England and Wales to return to sites, though the Scottish Government maintained its directive for non-essential sites to remain closed. ONS data released on May 11th highlighted that male construction workers were among those in lower-skilled jobs most at risk of dying from COVID-19; over 360 construction workers had died between March 9th and May 25th. By May 20th, only 19% of projects in Scotland were operational. First Minister Nicola Sturgeon announced a phased easing of lockdown measures in Scotland on May 21st, permitting site preparations for a gradual return to work from May 28th. In early June, Build UK members reported 97% of sites in England and Wales were operational, while in Scotland, 21% of sites had resumed work.

Even with the return to site operations, productivity reportedly dropped by an estimated 35% due to programme delays, escalating costs, uncertainty regarding labor availability, ongoing social distancing measures, and material supply chain disruptions.

Housebuilding and house sales

Following government guidance, major housebuilders such as Barratt and Taylor Wimpey temporarily suspended operations on March 24th. By April 8th, work had ceased on 80% of UK housebuilding sites. Barratt placed 5,000 of its 6,000 employees on furlough. By April 17th, approximately 44% of private housing schemes and 32% of social housing schemes were suspended. In Scotland and Northern Ireland, where lockdown measures were more stringent, suspension rates were higher at 79% and 78%, respectively. The CPA estimated in May that housebuilding activity had declined by 85% during the lockdown period. Several housebuilders, including Barratt, Taylor Wimpey, Vistry , Persimmon , Redrow , and Bellway , announced plans to implement safe working procedures and reopen sites in late April and early May. Bellway reported in June a significant drop in sales, down by more than two-thirds since the lockdown began, and anticipated that sales activity would remain severely constrained year-on-year until restrictions were further eased. Redrow noted that site closures had led to a one-third reduction in house sales.

An analysis by estate agent Knight Frank in April forecasted a 38% drop in house sales, equating to over half a million transactions, due to the lockdown’s impact. This was projected to reduce government revenues by £4.4 billion in stamp duty and £1.6 billion in VAT. Nationwide reported in early June that house prices had fallen by 1.7% in May compared to the previous month, the largest monthly decrease in 11 years. HMRC data indicated a 53% reduction in residential property transactions in April compared to 2019, with Pantheon Macroeconomics predicting a 5% fall in prices by the end of the third quarter of 2020. Further Nationwide data on July 1st showed another monthly price fall of 1.4%, and the first year-on-year decline (0.1%) in eight years.

Food retail

In early March, reports indicated that British supermarkets and their suppliers had developed contingency plans to manage potential panic buying and ensure adequate food supplies. Supermarkets began experiencing sell-outs of hand sanitiser and anti-bacterial products. Online retailers observed consumers placing unusually large orders, while the managing director of the frozen food chain Iceland reported an increase in sales of “multibuy deals and larger packs.”

In response to the surge in demand and panic buying, some supermarkets implemented purchasing limits on popular items or across their entire product range. Sainsbury’s introduced a dedicated shopping hour for elderly and disabled customers, prioritizing them for online deliveries. Iceland and Morrisons also introduced similar measures. Morrisons, in particular, launched a range of basic food boxes designed to feed two adults for a week. Sainsbury’s further announced on March 21st that healthcare workers would be allocated specific shopping hours on three mornings per week.

Amazon temporarily restricted sellers from sending non-essential products to its warehouses, and Selfridges closed all its physical stores, operating solely online.

Professor Stephen Powis , medical director at NHS England, appealed to consumers on March 21st to shop responsibly, noting that NHS staff were being deprived of essential food supplies due to the actions of some shoppers. Helen Dickinson , head of the British Retail Consortium , reassured the public that sufficient food was available and noted an additional £1 billion had been spent on food in the preceding three weeks. Environment Secretary George Eustice echoed this call for responsible shopping. On the same day, several supermarkets began actively recruiting additional staff to manage the increased demand. The government announced on March 21st that the 5p charge for carrier bags would be waived for online deliveries to expedite service.

By April 5th, Sainsbury’s had removed purchasing limits on most items. On April 8th, Tesco stated that despite expanding its online delivery service, it could not meet the increased demand, necessitating that 85–90% of food purchases would need to be made in-store.

Finance and the economy

The Governor of the Bank of England urged the British government to provide support for businesses affected by the virus and was reportedly collaborating with the Treasury on an economic stimulus package to avert a recession . Companies listed on London’s stock markets experienced significant declines in value, attributed to concerns surrounding the virus. To stimulate economic activity, the Bank of England reduced its bank rate from 0.75% to 0.25%. On March 19th, the interest rate was further lowered to 0.10%, reaching the lowest point in the bank’s 325-year history. On March 28th, Fitch Ratings downgraded the UK’s government debt rating from AA to AA−, citing increased coronavirus-related borrowing, economic contraction, and lingering uncertainty surrounding Brexit . The agency projected the UK’s government deficit for 2020 to reach 9% of gross domestic product (GDP), a substantial increase from the previous year’s 2%. The government also extended its overdraft facility with the Bank of England. In a May 7th forecast, the Bank of England predicted that the UK would enter its worst recession in over 300 years, potentially surpassing the severity of the “Great Frost” of 1709, while also forecasting an economic recovery in 2021.

During the latter half of March, an unprecedented one million British workers applied for the Universal Credit benefit scheme. By April, the number of people claiming unemployment benefits had risen to 2.1 million, an increase of 856,500 claims, according to the Office for National Statistics (ONS). The employment rate for the first quarter of the year fell to 3.9%, a period that included the initial week of lockdown.

Research by the Resolution Foundation , surveying 6,000 workers, indicated that 30% of those in the lowest income bracket had been affected by the pandemic, compared to only 10% in the top fifth of earners. The foundation also found that approximately a quarter of 18 to 24-year-olds surveyed had been furloughed, with an additional 9% losing their jobs entirely. Conversely, 35 to 44-year-olds were least likely to experience furlough or job loss, with only about 15% reporting such outcomes. Earlier research by the Institute for Fiscal Studies had concluded that younger individuals (under 25) and women were disproportionately employed in sectors that were forced to shut down.

In early April, as the second quarter commenced, the Office for Budget Responsibility projected that unemployment could climb to 3.4 million and GDP could contract by 35% during the quarter. By June, this unemployment projection proved accurate, with over 3 million individuals out of work for at least three months, and another 4 million experiencing shorter periods of unemployment. Although GDP contracted by 20% in the second quarter, this still represented the most severe quarterly economic downturn recorded since records began in 1955.

On November 25th, 2020, the Chancellor of the Exchequer presented a Spending Review that revealed the United Kingdom was facing its worst economic slump in 300 years due to the impact of COVID-19. The projected slump for the year was nearing -10%, a decline that could indeed surpass the Great Frost of 1709 . The economic report further indicated that the unemployment rate could reach 7.5% in 2021, with the number of jobless individuals peaking at approximately 2.6 million. GDP was expected to contract by 11.3% in 2020.

Hospitality

On March 16th, Prime Minister Boris Johnson urged the public to avoid social venues such as pubs, clubs, and restaurants. By March 20th, he had requested the closure of these establishments from that evening onwards.

A June 2020 ONS survey revealed that during the first half of May, the accommodation and food services sector had the highest proportion of its workforce furloughed, at a staggering 83%. Some fast-food outlets began reopening their takeaway and drive-through services in late May. Pubs, hotels, and restaurants were permitted to reopen on July 4th, coinciding with the relaxation of social distancing rules.

The tourism sector, across the UK and encompassing both domestic and international visitors, experienced a substantial decline due to travel restrictions and lockdowns. For much of 2020 and into 2021, vacation travel was severely restricted, and entry into the UK was tightly controlled. Business travel, for example, saw a reduction of nearly 90% compared to previous years. This downturn not only impacted revenue but also led to widespread job losses within the industry.

Fast food

Fast food and drink outlets such as Pret a Manger and McDonald’s initially announced that customers would not be permitted to dine in, but takeaway and off-premises consumption would still be allowed. On March 22nd, McDonald’s declared it would close all its UK and Ireland outlets by 7 pm on March 23rd. Nando’s followed suit later that day, announcing the closure of its restaurants. As lockdown measures eased in late May, some chains reopened selected takeaway and drive-through locations. By early July, Pret a Manger had reopened 339 of its 410 shops but announced plans to close 30 outlets and cut at least 1,000 jobs as part of a post-pandemic restructuring effort.

Pubs

Initially, the pub chain J D Wetherspoon remained open, implementing measures to promote social distancing, such as spacing tables further apart and encouraging the use of its mobile app for ordering. However, from March 20th, Wetherspoon pubs closed in compliance with government instructions. On March 25th, off-licences were added to the list of essential businesses permitted to stay open, allowing pubs and brewery taprooms with appropriate licenses to offer takeaway sales and home deliveries.

Hotels

The hotel industry was severely impacted. Keith Barr, chief executive of InterContinental Hotels Group (IHG), warned that the sector faced its “most significant challenge” ever. IHG reported historic lows in occupancy levels during the first quarter, with revenue per available room down 55% in March 2020 compared to the previous year, and an anticipated drop of up to 80% in April. Some hotels were repurposed to accommodate NHS patients, freeing up hospital capacity for COVID-19 cases, to house NHS and other key workers, and to provide shelter for homeless individuals.

Restaurants

On May 18th, Casual Dining Group , the owner of approximately 250 restaurants including Bella Italia , Café Rouge , and Las Iguanas , announced it was preparing to enter administration, potentially jeopardizing 6,000 jobs. By May 22nd, it was estimated that over 30,000 UK pubs and restaurants might permanently close following the lockdown. On June 2nd, The Restaurant Group , which owns chains like Frankie & Benny’s and Garfunkel’s , informed its employees that a “large number” of its outlets would not reopen after lockdown. Up to 120 restaurants, predominantly Frankie & Benny’s, were slated for permanent closure. On June 29th, 2020, Byron Hamburgers announced its intention to place the 51-restaurant chain into administration. SSP Group revealed plans to cut 5,000 UK jobs across its various chains, including Upper Crust and Caffè Ritazza , as part of a restructuring aimed at ensuring the company’s survival. On July 2nd, 2020, CDG confirmed its entry into administration, leading to the closure of 91 outlets and the loss of 1,900 jobs. On July 17th, Azzurri Group, owner of the Zizzi and ASK Italian chains, announced the closure of 75 restaurants, resulting in up to 1,200 job losses. Byron closed 31 of its 51 branches on July 31st, shedding 650 jobs.

Transport

Following the introduction of lockdown restrictions in late March, UK road traffic volumes plummeted to levels not seen since the 1950s, leading to corresponding reductions in air and noise pollution. By May, as road traffic volumes gradually increased but remained around 35% to 45% of usual levels, the AA reported that these volumes were comparable to those experienced in the early 1970s.

In April 2020, petrol prices dropped below £1 per litre at some outlets. Morrison’s supermarket chain became the first national retailer to sell petrol below £1 a litre, marking the first time this had occurred since February 2016.

Aviation

From mid-January, Heathrow Airport implemented enhanced clinical support and tightened surveillance measures for the three weekly direct flights from Wuhan. Each of these flights was met by a Port Health team. Subsequently, airlines including British Airways and Ryanair announced numerous flight cancellations for March.

The regional airline Flybe , already facing financial difficulties, entered administration and ceased operations the following day. British Airways’ parent company, IAG, announced a restructuring and redundancy program on April 28th, potentially resulting in 12,000 job losses at BA, after having already placed approximately 23,000 workers on furlough. EasyJet furloughed 4,000 UK-based cabin crew for two months. On May 5th, Virgin Atlantic announced it would cut 3,000 jobs and withdraw from Gatwick Airport .

London City Airport temporarily closed on March 25th. Heathrow Airport closed one runway from April 6th, while Gatwick Airport closed one terminal and reduced its runway operating hours. Most other UK airports also significantly reduced their operations and put airport expansion plans on hold.

In May, a mandatory 14-day quarantine period for individuals arriving from outside the UK or Ireland was announced, a measure criticized by Airlines UK. This requirement excluded individuals traveling from the Channel Islands , Isle of Man , Ireland, and those in specific occupations. Arrivals without a suitable place to isolate were required to enter government-provided accommodation at their own expense. Each constituent nation of the UK was to determine its own enforcement methods for these new rules.

On July 3rd, the British Government published a comprehensive list of countries from which quarantine would not be required, effective from July 10th. This list included Greece, Spain, France, and Belgium. However, arrivals from countries such as China, the US, Sweden, and Portugal were still subject to the 14-day isolation period. Scotland and Wales had yet to confirm their stances on easing travel restrictions, describing the government’s approach as “shambolic.” Quarantine rules were also to remain in effect in Northern Ireland for visitors arriving from outside the UK and the Republic of Ireland. On October 7th, 2020, the Transport Secretary announced the establishment of a new Global Travel Taskforce aimed at facilitating the safe return of international travel. On November 17th, United Airlines Flight 14 arrived at London Heathrow, marking the first transatlantic flight where all passengers had undergone mandatory negative coronavirus testing prior to departure from Newark Airport , New York.

Public transport

On March 20th, the government implemented emergency measures to protect the nation’s rail network . Season ticket holders were offered refunds if they were working remotely, and rail franchise agreements were nationalized for at least six months to prevent the collapse of train operating companies. From March 30th, the open-access operator Hull Trains suspended all services, with Grand Central following shortly thereafter. Govia Thameslink Railway also suspended its Gatwick Express service, while other operators reduced their timetables.

On March 19th, the Stagecoach Supertram light rail network in Sheffield announced a transition to a modified Sunday service from March 23rd until further notice. Local bus operators First South Yorkshire and Stagecoach Yorkshire , which operate in the same region, also announced reduced timetables from March 23rd. National Express suspended all its long-distance coach services from April 6th.

Transport for London (TfL) services were gradually reduced. All Night Overground and Night Tube services, along with all services on the Waterloo & City line , were suspended from March 20th. Additionally, 40 Tube stations were closed on the same day. The Mayor of London and TfL urged the public to use public transport only if absolutely essential, to ensure capacity for critical workers. In April, TfL directed passengers to board buses via the middle or rear doors and to refrain from “touching in” with their payment cards to reduce risks to drivers, following the deaths of 14 TfL workers, including nine drivers.

Due to a significant decline in fare revenue, TfL requested £2 billion in state aid on May 7th to maintain services until September 2020. On May 12th, TfL documents warned of an expected £4 billion loss due to the pandemic, requiring £3.2 billion to balance a proposed emergency budget for 2021, having already lost 90% of its overall income. Without a government agreement, TfL faced the risk of insolvency. On May 14th, the UK Government approved £1.6 billion in emergency funding for TfL. In April, Govia Thameslink Railway introduced special liveries on three trains to express support for the NHS and the 200,000 essential workers who commute on its network weekly.

On May 8th, Transport Secretary Grant Shapps stated that even with all public transport services running normally, applying the two-meter social distancing rule would limit network capacity to just 10% of normal levels. Shapps also noted an increase in walking and cycling, with cyclist numbers rising by 70% in some areas. The Department for Transport announced plans to improve cycle networks, anticipating that more people would need to walk or cycle to work after lockdown to alleviate congestion. On June 4th, Shapps announced that passengers and staff on public transport in England would be required to wear face coverings from June 15th, with non-compliance potentially leading to refusal of travel or a fine. Research from Transport Focus suggested that passenger compliance would be influenced by staff prompts. While initial implementation was planned through amendments to the National Rail Conditions of Travel and Public Service Vehicles Regulations, the Health Protection (Coronavirus, Wearing of Face Coverings on Public Transport) (England) Regulations 2020 were ultimately enacted by Shapps under emergency powers derived from the Public Health (Control of Disease) Act 1984 .

Betting shops

William Hill , which operates a significant number of physical betting shops, reported an 85% drop in profits during the first half of 2020 compared to the previous year. The company announced plans to permanently close over a hundred of its shops.

See also

• COVID-19 recession
• Economic effects of Brexit