Category: Business News

The scale of the UK’s economic troubles have been laid bare by the latest GDP figures.

Will the recovery be V-shaped, L-shaped, U-shaped, or is it far too early to tell?

Despite the uncertainties, however, some British companies are nothing if not positive.

Here, the owners of three firms that went into lockdown in March tell the BBC why they can see light at the end of the tunnel.

Vivien Wong, co-founder, Little Moons

The lockdown hit just as Little Moons was enjoying its best month of trading.

The business, which makes the Japanese ice cream confection mochi for restaurants and supermarkets, shut down overnight.

Co-founder Vivien Wong said lockdown didn’t come as a great surprise. “We’d followed what was happening in China and Hong Kong,” she said.

More than 50% of revenues came from restaurants, money that dried up immediately. “We were weren’t sure what was going to happen with supermarkets, but we knew immediately we had to go into cash preservation mode.”

Luckily, Little Moons struck a deal with its landlord, which eased cash flow. “We cancelled marketing and all unnecessary spending. Basically, we just hunkered down,” Ms Wong said.

The London-based company trades throughout Europe, which has helped Little Moons to get back to business.

Ms Wong said: “Europe opened up a little earlier, so from about mid-May we started getting orders from supermarkets.

“We started un-furloughing a few members of our team, and have just started cranking up production again.”

But a return to the record trading Little Moons saw in March could be a long way off. Ms Wong said: “We have halved the number of people on the production floor and changed shift patterns.

“It means we are not as efficient as before. That’s really affected us financially.” Little Moons is employing more cleaners, and the cost of face masks and other food hygiene equipment has soared.

The firm’s future is tied up with the restaurant sector, which she worries may never fully recover. That said, supermarket orders are rising, which Ms Wong puts down to people wanting comfort food.

Adam Redhouse, director, Squires Estates

“It was pretty catastrophic” is how Adam Redhouse describes the first few days of lockdown. Sales and lettings at his London estate agents firm disappeared virtually overnight.

“We furloughed sales staff immediately, and closed all the offices,” he said. “We lost over 50% of the sales pipeline over the first few days as people cancelled.”

And yet, over the following weeks the business continued to get what Mr Redhouse said were “a fair few inquiries. That was a massive surprise. But if you can’t do viewings, you can’t sell properties.”

Still, even though Squire Estates did very few transactions, the continuing customer interest at least gave him hope that business would pick up once the lockdown eased.

It was only in mid-May that estate agents began re-opening for business, but Mr Redhouse has been amazed at the pace of recovery. “It sounds crazy, given how much business we lost,” he said.

“It was on a Tuesday night that the government said we could re-open, and on the Wednesday morning we un-furloughed all the sales staff. There was a lot of pent up demand for transactions and viewings,” he said.

It helped, Mr Redhouse believes, that he and his partner made a special effort to keep in touch with clients and potential clients during the lockdown.

Business continues to pick up, but will it get back to normal? “I like to think so. The amount of demand that we are seeing shows that people want to move. I feel positive,” he said.

Sophie Lawler, chief executive, Total Fitness

Sophie Lawler’s 17 health clubs remain closed to their 100,000 members in the north of England and Wales. And like the rest of the fitness sector, she has no idea when she might get the green light to re-open.

“The whole sector has struggled financially, and may do so for years to come,” she said. “The industry is shouldering quite some rental burden, costs we still incur even while we’re closed.”

Furloughing has been vital. “It’s given us a great deal of oxygen to keep the business going,” she said.

Staff wages are the biggest fixed costs after property rents and rates.

As soon as Total Fitness is given the go-ahead to re-open Ms Lawler plans to bring all the staff back from furlough. “We will need all our people, maybe even more.”

She’d like to see the government do more to help, perhaps with some VAT exemptions and support for landlords to let them ease the burden on leaseholders.

Despite the uncertainties, however, she says the fitness industry “has an exceptionally bright future if we can weather this storm”.

Ms Lawler said the sector has proved particularly resilient to recessions in the past, and will do so again. She expects to see a uptick in customers who recognise the importance of fitness and exercise in the fight to stay healthy against viruses.

“It terms of demand, we will do pretty well when we get through to the other side of this,” she said.

The trouble is, she has no idea when that might be. “Our single biggest challenge is that there is just no guidance on re-opening.”

People should feel confident that it is safe to go shopping when non-essential shops reopen in England on Monday, Chancellor Rishi Sunak has said.

Retailers have taken “extraordinary steps” to make sure environments are safe during the coronavirus pandemic, he told the Andrew Marr Show.

Perspex screens, social distancing and customer limits will all help create a protected environment, he said.

“All of that will mean people can feel safe,” he said.

While food shops and pharmacies, as well as other essential retailers including banks and petrol stations, have been open throughout the lockdown, non-essential stores, such as book shops and fashion outlets, have been shuttered since 23 March.

From Monday, most retailers can open as long as they follow safety guidelines. Those who fail to ensure their premises are Covid-secure could face enforcement notices.

Perspex screens at the tills and floor markings to keep shoppers 2m (6ft 5ins) apart – already a regular fixture in supermarkets – will be a key feature.

Other measures will include pleas not to touch items unless customers intend to purchase them and decontaminating shopping baskets after each use.

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It comes as Prime Minister Boris Johnson faces increased pressure to ease the 2m social distancing rule, which many ministers see as crucial to the further reopening of the economy.

Mr Sunak told the BBC the government would “actively” look again at the measure, given its “enormous impact” on the profitability of businesses.

“You are right to highlight the impact it has on business – it is the difference between maybe three-quarters and a third of pubs opening, for example, so it is important we look at it.”

It is understood the review will aim to report back by 4 July – currently the earliest mooted date for the reopening of pubs, bars, restaurants and hairdressers in England.

While other countries have enforced a lesser distance of 1m (just over 3ft), in keeping with the World Health Organization’s recommendation, the UK government’s scientific advisers have so far maintained that being 1m apart carries up to 10 times the risk of being 2m apart.

“Ultimately it is for ministers [to decide],” said Mr Sunak.

“We are the people who are elected to make decisions in this country. People should hold us responsible and accountable for making those decisions.”

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The Chancellor acknowledged many people would be “anxious” at the prospect of going out shopping again after almost three months in lockdown.

But he stressed “it is a safe environment and we should all be able to go out knowing that we should be able to shop in confidence”.

“Shops up and down the country are desperate to welcome us all back and I think we all want to see our high streets spring back to life again,” he said.

Nonetheless, more than half of UK customers expect they will now go shopping less , according to a survey of more than 1,000 people by accountancy giant EY.

The British Retail Consortium (BRC), the trade body for retailers, is urging the public to “play their part” in making shopping safer. Along with 25 other retailers, it says customers should follow five steps:

• Queue considerately
• Maintain social distancing
• Follow instructions inside and outside shops
• Follow all necessary hygiene measures
• Be respectful to shop staff

“It’s very exciting, we can’t wait to have our customers back,” says Annie Martin, who manages the Waterstones Piccadilly bookshop, in London.

Non-essential retailers, such as fashion, toy and book shops, will be allowed to reopen in England on 15 June – as long as they have coronavirus-related safety measures in place.

Waterstones, for example, is introducing Perspex “sneeze screens” and a quarantine trolley where books that have been browsed will be held for “a couple of days”.

“We want to keep bookshop experience exactly as it normally would be,” says Annie. “We’re still encouraging people to browse, we’re just looking after those books once you’ve browsed them.”

Annie has been working on implementing those changes behind-the-scenes, but is also looking forward to seeing her colleagues back in-store.

“Bookshops are quite close teams… We’ve been messaging, but it’s not quite the same as seeing colleagues in person for a chat, particularly about the books you’ve been reading on furlough.”

Suki, who works at a Boots beauty hall in London, also says that it’s “refreshing to come back to work, which is like my second home”.

Most Boots stores have remained open during lockdown. That means that staff on the beauty counter have had the chance to trial different ways of working about a week before shoppers return to the High Street.

Boots is removing all make-up testers, and assistants will wear plastic visors in its beauty halls, to try to keep both customers and staff safe.

Suki acknowledges that some changes could make shopping more difficult. That there won’t be testers is “going to be a shock for a lot of us, because with beauty you often need to try things on,” she said.

“The visor isn’t the most glamorous thing in the world, but it does mean that I’m not touching my face and my make-up can stay on longer. And, safety isn’t supposed to be glamorous,” she adds.

Overall, Suki feels as though she’s in a safe pair of hands: “We’re all as nervous as each other, so I think as long as we all take the necessary steps, we’ll be fine.”

Nervous shoppers

Shoppers, though, might be feeling more anxious about their return to the High Street.

More than half of UK customers expect they will now go shopping less often over the next one or two years, according to a survey of more than 1,000 people by accountancy giant EY.

One trade body, the British Retail Consortium (BRC), is urging the public to “play their part” in making shopping safer. Along with 25 other retailers, it says customers should follow five steps:

• Queue considerately
• Maintain social distancing
• Follow instructions inside and outside shops
• Follow all necessary hygiene measures
• Be respectful to shop staff

Helen Dickinson, the BRC’s chief executive, said: “Every visit we make helps support jobs in retail, as well as throughout the supply chain. Retailers have been working around the clock to create a safe shopping environment”.

“Our shopping experience may be changing, but if we all follow the necessary social distancing measures and show a little consideration to those around us, then everyone will be better off.”

How might shopping change post-lockdown?

For any customers who don’t want to go into a store, HMV will offer to do their shopping for them. From Monday, people can drop in a shopping list, a team member will collect it, package it up and have it waiting for the customer to pick up later. Alternatively, customers can ring their local HMV to have a product put aside for them to collect later on.

The idea came from the chain’s Canadian customers who have been a little bit more cautious about returning to stores as opposed to its US shoppers, says its owner Doug Putman.

So what does he expect from customers in England when HMV opens 93 shops on Monday? Read more here.

Many retailers in England will soon open their doors for the first time since lockdown measures were introduced in March.

No dates have been set for the reopening of non-essential shops in Scotland and Wales, although each country has set out its planned stages for lifting lockdown. Those in Northern Ireland have been open since Friday.

John Lewis stores in Poole and Kingston will be the first to reopen on 15 June, followed by another 11 shops later that week. Marks & Spencer will also reopen the majority of its clothing stores.

Primark has also announced that it will reopen all 153 of its stores in England on Monday.

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Meanwhile, Debenhams will open 50 shops in England. The firm collapsed for the second time in a year in April after coronavirus ramped up the pressures facing the business. It has struck deals with landlords to keep 120 stores open.

However, 17 of its stores will remain closed for good when coronavirus lockdown restrictions are lifted. It is still in discussions over a “handful” of others.

Richard Lim, chief executive of Retail Economics, said: “The survival of so many retailers will hinge on the success of reopening stores over the coming weeks and the pace at which consumers return.”

Mr Lim also pointed out that the “significant shift” towards online seen during lockdown may change shopping habits for good.

“Many of these consumers are shopping for goods online for the first time, overcoming the barriers of setting up online accounts, entering payment details and gaining trust. It is inevitable that some of these behaviours will become sticky,” he said.

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After three months of hibernation, non-essential shops in England will finally be able to re-open on Monday. But it is clear Covid-19 will have a lasting impact on retail well beyond the end of lockdown.

There’s socially distanced shopping, for starters. The new retail rules during this pandemic may take a bit of getting used to. It’s one thing queueing for groceries, but we’re going to have to be prepared to queue to get into all the other shops, too.

We’re being encouraged to shop alone and to avoid touching things, where possible. You may have to forget trying clothes on as the guidance says fitting rooms should be closed wherever possible.

Coronavirus is going to suck some of the fun out of one of our most popular social activities and not all of us will fancy waiting in line when we can buy what we want online.

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Duncan Brewer, head of the UK retail and consumer team at consultants Oliver Wyman, says people may also be more careful with their money. “Consumers have changed their spending habits, and will be increasingly used to going without much of their discretionary shopping.

“With the inevitable recession coming, it’s likely that many will continue to be careful with spending, even if they are comfortable shopping in the first place.”

There’s clearly a bit of pent-up demand, given the spectacular queues outside Ikea stores when they recently re-opened. But even if queueing becomes part of everyday life for now, it doesn’t mean bumper profits for retailers. Social distancing makes it hard for many firms to trade profitably.

Fewer shoppers means fewer transactions which may not cover all the costs of running stores, especially when government support measures start to ebb away.

“When we do start opening up, it certainly won’t be profitable, but we’ve got to start somewhere,” the retail entrepreneur and businessmen Theo Paphitis told me recently as he prepared to reopen his Robert Dyas, Boux Lingerie and Ryman stores.

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He believes coronavirus has speeded up our changing shopping habits. Online sales have been rising steadily over the last decade but they’ve rocketed during the pandemic.

According to a survey by Visa, a third of Britons bought items online for the first time during lockdown. And that is likely to be a permanent shift – just look at food shopping. According to the most recent monthly figures from Kantar, nearly one in five households ordered groceries online – 1.6 million more than this time last year.

Non-food retailers have also seen a huge spike in online sales. KPMG estimates online retailing could reach 50% of the total goods we buy by 2025, five years earlier than previously anticipated.

“The necessity for many retailers to change business models, review their cost base including the amount of physical space they require, has been turbo-charged,” says Paul Martin, head of retail at KPMG.

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With more done online, retailers need fewer shops. This was so long before coronavirus came along, yet the economics of store-based retailing look even more tricky now.

Not all shops will open immediately. It will be a gradual re-opening for some big chains. And some shops will never re-open, although as yet it’s difficult to say how many. Debenhams – in administration for the second time – has already said 17 of its stores will remain permanently closed.

Others have already failed to make it through lockdown – Cath Kidston, Oasis and Warehouse – and there will be more to come.

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“There will continue to be business failures – but there is also opportunity for the better capitalised and more agile retailers,” says Lisa Hooker, PWC’s head of retail and consumer markets.

Retailers have been able to furlough workers and save huge sums with a year-long business rates holiday, but many costs have continued leaving them with an almighty cash squeeze. Some won’t be able to pay their rent for months to come.

Also, given the problems and debt burdens that many big businesses have, access to the government’s bailout loan schemes is proving challenging given the strict credit worthiness tests from lenders. More debt is the last thing some retailers need as any loans will later have to be paid off alongside deferred costs such as VAT.

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For weaker businesses, coronavirus has brought all their problems to a head.

Watch out for Darwinism in retail over the next 18 months, says Paul Martin. “Those with an appealing customer proposition and valid business models, that are really fit for purpose with strong balance sheets will survive. Those that have neither will fall by the wayside”

If more shops shut, who and what will fill the gaps?

“There are so many implications for town centres,” says Ojay McDonald, CEO of the Association of Town and Centre Management.

“Many businesses in some city locations may be unviable as organisations who use large office spaces may be more supportive of home working, which will mean a big decrease in footfall and spend in these areas.”

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But equally, there could be a boost to towns and villages, if more people are working from home.

“Covid-19 has shone a light on the need for many big chains to accelerate store closures but the lockdown has also led us to want to shop locally – so some High Streets will flourish,” believes Lisa Hooker.

Duncan Brewer also thinks there will be opportunities for new businesses: “Up to 25% of retail sites could be vacant. This large amount of retail space available will allow new entrants to launch new businesses without all the historic barriers to entry,”

Coronavirus could help reinvent our High Streets and town centres. But over the next 12-18 months there will plenty of turmoil, too.

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Laura Tarver

My Money is a series looking at how people spend their money – and the sometimes tough decisions they have to make. Here Laura Tarver from Oxford takes us through a week in her life during the coronavirus pandemic.

Laura is 35 and lives in Abingdon, just outside Oxford with her husband, two-year-old daughter and cat. She works part-time as a speech and language therapist both for the NHS and privately. Her husband Tim is a doctor. In her spare, toddler-free time, Laura enjoys running, and during lockdown has taken up learning the ukulele online.

Over to Laura….

I am woken at six by my little girl Izzy shouting from next door. Today I am working from home, while she goes to the childminder.

Our time during lockdown has been quite varied. At the start, I tried to juggle my two-and-a-half days of work around childcare, being very thankful that I didn’t work full-time. I then had a very brief stint being redeployed as a home carer within the NHS, and now that things are starting to get back to normal, I am starting to work as a speech and language therapist again, thankfully while Izzy continues to go to the childminder.

Today, the childminder fees for June come out – £563 for the month (although the government pays 20% of this as part of the tax-free childcare scheme). As all of my work is usually schools based, it is not known yet how long we will have to work from home for – we are starting to try to carry out more therapy online, but this is tricky with many of the children I work with.

As a very small plus side, working from home is saving me money and time on commuting, which is often an hour each way in Oxford traffic. I spend £33 on filling up the car today, which I have to do significantly less often than pre-lockdown.

Total spend: £596

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Laura Tarver

Today, during my lunch break, I pop out to pick up some clothes and a toy trolley for Izzy, which I found advertised on a Hand me on Baby and Toddler site I follow on Facebook. These sites have saved me a fortune over the last few years, as well as avoiding buying new when not needed. Generally, I like to get as much as possible from places such as this, charity shops or second-hand sales, although with those not being available over the past couple of months, I have had to get a few bits like toddler sandals and shorts during my weekly shop.

Our fortnightly cleaner also starts back today, hurrah! Although a bit of a luxury, I feel that this £20 a fortnight is more than justified by the number of arguments it saves in our marriage!

In the evening I take part in an online ukulele course, shown on Facebook. In non-Covid times, these take place in a pub in Oxford. Although lockdown has obviously limited our opportunities to go out, I was never able to make this class in person due to Izzy’s bedtime, so having the chance to do it online now is a plus! The class organiser has kindly made the class fee voluntary (£6) for those who are on limited finances at this time.

Total spend: £26

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Laura Tarver

Lots of bills go out today, making me feel considerably poorer! Our mortgage is £1,000 a month, while a combination of various insurances (cars, house, pet), mobile phone, council tax and a couple of charity and professional subscriptions comes to £314. We try to review these fairly regularly, to check that other subscriptions haven’t sneaked in that we are no longer using, but they do seem hard to pare down.

I pop to the supermarket to get a few bits we are missing, and somehow end up spending £18. This includes a big bag of compost – like half the country, I’ve got into gardening during lockdown. Because I don’t have a clue what I’m doing, anything that doesn’t die feels like a bonus – and I can’t wait to see if we get anything edible out of it in a couple of months time.

I also treat myself to a takeaway chocolate milkshake from a local cafe (£3). This is the first time I’ve had the chance to do something like this in weeks, and feels like heaven!

Later on, I buy an e-book for a bargain £2. I usually tend to try to get books out from the library, or from the charity shop, but again with those options out of action at the moment, I have been getting a few online.

Total spend: £1,337

Today me and Izzy head to the supermarket for our main food shop of the week. This comes to £63, which is a bit less than usual. Although most of our spending has gone down during lockdown, our supermarket spends have definitely gone up – probably due to less eating out, and feeling like we deserve some “treats” at home!

In the afternoon, I take Izzy for a bike ride near our house, on her balance bike. Lockdown has meant I’ve got much better at finding these close by, free activities, whereas before it was always easiest to sign up to classes like music or gym classes for easy entertainment. It’s nice to have time to play at home a bit more and not be so tied into a schedule, as well as saving some cash!

In the evening I carry out some private speech therapy online. Pre-lockdown, I saw four or five children privately every week. This has now decreased to only two, who I see online. I haven’t yet got my head around how to provide therapy online effectively for everyone I see, but need to start thinking about that if the situation is unlikely to change for a while. For the moment though, this does mean we are around £200-£300 a month worse off.

Total spend: £63

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Laura Tarver

Today we have a lovely walk with a friend, her toddler and two-month-old – the first time I’ve met the little one! While it’s great to be allowed to meet up again, I am missing our usual options of a cup of tea in someone’s house or a cafe, especially given the looming rainclouds. Still, it’s another free outing.

We also treat ourselves to our weekly lockdown takeaway, this week Lebanese. This has been a little treat to ourselves since the option was taken away of going out for dinner, to pubs, cafes etc, although ironically we used to manage this much less than once a week.

It’s also the time in the week that me and Tim make to sit down and have a proper conversation, which can often get missed with work and toddler bedtimes. We are making our way through all the local places still offering takeaway food in our town – all to support the local economy of course! Today’s was £40, quite steep, but gives us enough food for tomorrow lunchtime too.

Total spend: £40

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Laura Tarver

My Money

More blogs from the BBC’s My Money Series:

Today me, Tim and Izzy meet up with some different friends to help them walk their dog. Our child entertainment options have changed a lot since lockdown. Previously we would have relied a lot more on paid activities, such as soft play, farm parks and cafes. Now, we tend to have a walk or a cycle ride, with a packed snack for Izzy.

It’s enlightening to see that she gets just as excited by these smaller, cheaper trips as the previous bigger ones, although she does keep asking for different activities she is going to do “when virus gone”. Although we have definitely saved money on our weekend trips out, we did compensate for being at home so much with a 10ft trampoline!

Unfortunately the good weather has turned, so we hide out at home in the afternoon with a film. We also have to jumpstart the car. (Note, don’t let your toddler play at “driving” without checking the lights are switched off at the end!) I clearly don’t learn from my mistakes as the same thing happened a few weeks ago with the other car! Luckily this time we don’t have to end up shelling out for a whole new battery…

Total spend: £0

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Laura Tarver

Another day, another walk with friends. This time we go to a local farm park, which has opened up a few walks past the animals, and (woop woop) the cafe! So we spend £2 on parking and £5.50 on ice creams for us all. It’s been lovely this week catching up with friends we haven’t seen for so long.

This afternoon, despite having time to cook, we were all feeling super lazy, so we got Domino’s Pizza (£20), which made me feel a bit guilty from both a health and money perspective, but as always we promised ourselves that next week would be better…

Total spend: £27.50

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Laura Tarver

Total spent this week: £2,089.50

How does Laura feel about her week?

As it was “bill week”, this obviously made it much steeper than other weeks in the month. Taking out the bills and childcare costs, we spent £209 on other things, which is more than I was expecting before adding it all up. It was a slightly decadent week, with two takeaways, but apart from that I don’t think there were any other big luxuries. Although the amount we spend on food has gone up since lockdown, I think spending has gone down on other things such as trips out and shopping for non-essentials, so I don’t think we are doing too badly.

We’re looking for more people to share what they spend their money on. If you’re interested, please email or get in touch via our My Money (World) Facebook group, or if you live in the UK, please join our My Money (UK) Facebook group and we’ll aim to contact you.

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The UK, along with much of the rest of the world, is thought to be heading into the worst recession for decades.

So what exactly does that mean?

What is a recession?

In normal times, a country’s economy grows.

Its citizens, on average, get slightly richer as the value of the goods and services it produces – its Gross Domestic Product (GDP) – increases.

But sometimes the value of goods and services produced falls.

A recession is usually defined as when this happens for two three-month periods – or quarters – in a row.

If a recession carries on for a long time, or is particularly bad, it is known as a depression.

Why does it matter if there is a recession?

For most people, economic growth is a good thing.

It usually means there are more jobs to go round. Companies are generally more profitable and can afford to pay employees and shareholders more.

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A growing economy also means the government gets more money in taxes. So it has room to cut taxes, or spend more on benefits, public services and the wages of government workers.

When the economy shrinks, all these things go into reverse.

Are we in recession yet?

Most of the developed world saw negative growth – or falling GDP – for January to March 2020, as the economic impact of coronavirus began to hit.

The official figures for April to June haven’t been published yet, but they are likely to show even bigger falls. This would mean a second quarter of negative growth, confirming that much of the world is in recession.

In the UK, the economy shrank by 2% from January to March, according to the Office for National Statistics. It then shrank by 20.4% in April – the largest monthly contraction on record – in its first full month in lockdown.

The International Monetary Fund (IMF) predicts huge falls in GDP for 2020 as a whole – an extraordinary fall of 5.9% for the US and 6.5% for the UK.

In fact the IMF estimates the entire world economy will shrink by 3% this year, making it the worst recession since the Great Depression of the 1930s.

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How could a recession affect me?

Some people may lose their jobs, or find it harder to secure new opportunities and promotions.

Graduates and school leavers looking for their first job could find fewer openings available.

Those staying in work may miss out on pay rises – or have to work longer hours or accept pay cuts.

The UK government’s spending watchdog, the Office for Budget Responsibility (OBR), suggested the unemployment rate could more than double, to 10% this summer.

It also estimates that the government might have to borrow more than £300bn to cover the cost of the crisis.

However, the pain of a recession is typically not felt equally across society, and inequality can increase.

For instance, many people in the UK who owned houses with mortgages and kept their jobs during the last recession did OK. The Bank of England cut interest rates to support the economy, which reduced mortgage interest payments for many considerably, leaving them with more money to spend.

Others, such as benefit recipients or public sector workers, did less well.

How long was the last recession?

In the UK the last recession, caused by the global financial crisis, lasted five quarters – from the second quarter of 2008 onwards.

GDP fell by an estimated 7.2% over the whole period.

Unemployment rose sharply, but it began to fall back again two years later.

And there was a massive deficit – the gap between what the government raises in taxes and what it spends on public services.

This resulted in a near-doubling of the national debt, and a decade-long programme of austerity.

There were steep cuts in many areas of government spending, except health, education and international aid.

When will the recession end?

The IMF predicts the recession will be over next year and the world economy will start bouncing back.

But we are in uncharted territory, and no-one knows how strong that recovery will be.

If all the businesses which shut during the pandemic and lockdown could open quickly, the consequences of the recession would be less severe.

However, there are fears over whether the virus will start spreading again, and people may be wary of travelling or going out even if they’re told it’s safe.

Cruises, air travel and business conferences in particular could take years to bounce back.

So the consequences of this recession will be felt for years to come.

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What can be done?

A reliable way of controlling Covid-19, such as a vaccine, would help create a strong recovery.

But until that is found, there are a few remedies available.

In the last recession, central banks cut interest rates to support the economy. That meant people and businesses could borrow more easily, and had more to spend.

But interest rates are already close to zero in many places, and it may not be possible to cut them much further.

Governments around the world are already borrowing huge sums to support their economies through tax cuts and higher public spending – such as furlough schemes, support for businesses, and even direct cash payments to citizens.

But that borrowing comes at a cost, which will be felt for decades to come.

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British Airways, Ryanair and EasyJet have filed a formal legal challenge to the government’s quarantine policy.

The airlines say the policy will have “a devastating effect on British tourism and the wider economy” and destroy thousands of jobs.

They have applied for a judicial review at the High Court.

The challenge claims that the quarantine rules for travellers are more stringent than those applied to people who actually have Covid-19.

• Coronavirus: What are the UK travel quarantine rules?

The new rules came into force this week. They require most inbound travellers to self isolate for 14 days, although there are more than 40 categories of incomers, largely pertaining to certain workers, who are exempt. Rules for those actually infected with the virus require self isolation for seven days.

The airlines state that there was no consultation and no scientific evidence provided to support the policy; that weekly commuters from France or Germany can be exempted; and that the government is preventing people from travelling to and from countries with lower infection rates than the UK.

However, the government has said the quarantine period is a “proportionate and time-limited approach” to protect public health.

Job losses

In a statement, the three airlines said they had not seen any evidence on how and when so-called “air bridges”, allowing quarantine-free travel between the UK and other countries with low infection rates, could be implemented.

They have called on the government instead to re-adopt a previous policy, where quarantine was limited to travellers from high risk countries.

The air industry has been hit particularly hard by the coronavirus outbreak, which has all but stopped their activities. Mass job cuts are under way:

• British Airways is proposing to make 12,000 of its 45,000 staff redundant, with more than 1,000 pilot roles at risk
• Ryanair is set to shed 3,000 jobs – 15% of its workforce – with boss Michael O’Leary saying the planned cuts are “the minimum that we need just to survive the next 12 months”
• EasyJet has said it will cut up to 30% of its workforce – about 4,500 jobs
• Virgin Atlantic, which employs 10,000 people, has said it will cut 3,000 jobs
• Other European airlines cutting back include Germany’s Lufthansa, which on Thursday said it would cut 22,000 jobs.

Friday’s legal move marks another sign of a breakdown in relations between airlines and the UK government.

Willie Walsh, the boss of IAG, which owns BA, Iberia and Aer Lingus, has called the quarantine policy “irrational”, while Ryanair boss Michael O’Leary said the policy was a “stunt” and would not be enforceable.

Industry body Airlines UK has said quarantine “would effectively kill off air travel”.

The BBC has approached the Home Office for a comment.

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ORLANDO BARRIA/EPA

Ride-sharing giant Uber is to make it mandatory for passengers and drivers to wear face coverings from Monday in the UK.

The minicab app firm said it was taking measures “to help everyone stay safe” and had introduced measures to give drivers access to protective equipment.

Face coverings will become compulsory on public transport and in hospitals in England from Monday.

It comes after a study suggested masks could cut Covid-19 spread by up to 40%.

Uber drivers in London will have to submit a picture of themselves to verify they are following the new rules before they can begin working.

Other measures include trialling in-car partitions in Newcastle, Tyne and Wear, distributing more than two million masks to drivers and sending out 54,000 units of cleaning spray and hand sanitiser.

Uber’s regional general manager for northern and eastern Europe, Jamie Heywood, said: “For months we’ve been urging people to stay home, for their safety and the safety of drivers who make essential trips.

“Now, as cities begin to reopen and people start moving again, we’re taking measures to help everyone stay safe and healthy every time they use Uber.”

‘Potentially useful tool’

Research on face coverings has been described as “slim” by many authorities, and for health professionals there’s always been the fear of a rush to snap up medical-grade masks.

But studies in laboratories have shown not only how far droplets can be spread by coughs but also how various kinds of materials can dramatically reduce how many of those droplets do get through.

A homemade mask will not do a great job of protecting you but may reduce the chances of you infecting others.

And if enough people follow that advice, the risks of the infection spreading are brought down.

There have been passionate disagreements over this within the world of science.

And even advocates would agree that the public wearing masks will not defeat the virus on its own; but it’s a potentially useful extra tool as we come out of lockdown.

From Monday, face coverings will be compulsory on public transport in England.

Scotland already recommends wearing coverings in shops and on public transport.

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People in Wales are asked to wear three-layer face coverings on public transport and other situations where social distancing is not possible.

Face coverings on public transport are also recommended in Northern Ireland.

According to government figures, the average person in England made 10 taxi or private hire vehicle trips last year with an average duration of 20 minutes per trip.

More than a third of all licensed vehicles in England are registered in London. Uber said its platform was used to complete 10 billion trips worldwide in 2018.

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Reuters

British Airways was once seen as a national champion, a potent symbol of the country’s commercial prowess and – as the airline itself puts it – of “timeless British values and modern Britain’s strengths”.

Now, however, it is a company in crisis – struggling to cope with the huge financial impact of the coronavirus pandemic, its relationship with the government apparently fractured, and in conflict with its own employees.

There’s no question that BA, like other airlines, has been dramatically affected by the lockdowns and closure of borders associated with the pandemic. For weeks, it has been operating just a handful of flights a day, while the bulk of its fleet has been parked up.

But it is BA’s response to the crisis which has created an atmosphere within the company that staff have described as toxic, and prompted a political backlash.

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PA Media

In late April, its parent company International Airlines Group announced plans to implement a major restructuring programme at BA, which could lead to up to 12,000 redundancies. It said it would begin formal consultations with its unions, Unite, GMB and Balpa.

Launching that process, BA said it wanted to reach agreement over the proposals – which would also include significant changes to the terms and conditions of remaining staff. But it warned that if an agreement could not be reached, it would force the issue – by giving them notice, and offering them new contracts.

In a letter to the prime minister on 27 May, the chief executive of parent company IAG, Willie Walsh, wrote: “We are open to any ideas on how to limit and mitigate the impact of Covid-19 on our business and our employees.

“Regrettably, Unite and GMB have decided not to represent their members, preferring to engage in what Unite calls ‘crisis leverage’ in an effort to intimidate BA and delay any consultation taking place at this critical time. This has not and most definitely, will not work. Time is not on our side so we will not pause or defer our consultations.”

But the apparent ultimatum from BA has triggered a deep rift with the unions. Unite and GMB are currently refusing to take part in formal consultations. Balpa has been engaging with the company, but now says the negotiations are “hanging by a thread”.

For cabin crew, there is not only the threat of redundancy, but also the possibility of big pay cuts for long-serving staff – in some cases of more than 50%. Many of those affected believe the company is using the current crisis to force through changes it has wanted to make for years.

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AFP

Longer-serving crew at BA have contracts which are, by modern standards, relatively generous. They date back to an era when the airline industry was less ferociously competitive, before the emergence of budget carriers such as Ryanair and Easyjet forced older airlines to cut costs and change their business models.

In 2010, BA engaged in a bitter dispute with Unite over plans to overhaul cabin crew contracts. The row lasted two years and involved 22 days of strikes. Ultimately a settlement was reached, under which existing staff retained most of their privileges – but new joiners were put on inferior contracts, with lower pay.

Now, Unite says BA is using the Covid-19 crisis as cover to make “permanent, drastic cuts to jobs, wages and conditions”, at a time when industrial action is not an option. The union is waging a high-profile campaign against what it calls the company’s “betrayal” of its staff.

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PA Media

The campaign has garnered some high-profile political support. One of BA’s fiercest critics is the Conservative MP and chair of the transport select committee, Huw Merriman.

He says the way in which staff at the company have been treated is “appalling”. “It’s the equivalent of holding a gun to someone’s head,” he says. “It’s really sad to see an iconic brand being dragged into the gutter by its management”.

When the redundancy plans were first announced, Balpa came to the negotiating table. Initially, the company did not threaten to “fire and rehire” pilots if they failed to accept new terms. But at the end of last week, that changed – and pilots were given the same ultimatum other employees were already facing.

According to Brian Strutton, general secretary of Balpa, that move “felt like a kick in the teeth to those people who had been carrying out negotiations in good faith”. The union is still talking to BA – but he says the negotiations are “hanging by a thread” and could break down at any time.

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Reuters

Meanwhile many pilots have responded furiously. One BA captain told the BBC, “I wouldn’t say there was a lot of trust beforehand. There’s even less now”. Another described the mood within the company as “terrible”.

“I’m absolutely amazed at the huge outpouring of anger among our members”, says Mr Strutton. “There’s outrage and despair at the way management are running the company they once loved working for”.

A number of pilots have also voiced concerns that the row could have an impact on safety – with worries about their jobs and mortgages providing an unwelcome distraction for pilots on the flight deck, and potentially affecting their mental health.

All of this has left BA looking like a company under siege. A great deal of anger also seems to be aimed at Willie Walsh, widely seen as the architect of the planned cuts.

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EPA

The airline itself insists that the industry is “facing the deepest structural change in its history”. It says it is acting now to protect as many jobs as possible – and that it wants to work with the trade unions to mitigate the impact of any changes. Although BA does have substantial cash reserves, it is currently burning through £20m every day – and with the majority of its fleet grounded, there is very little money coming in.

It is also feuding with the government over the introduction of a 14-day quarantine period for travellers coming into the UK – which Mr Walsh says has “torpedoed” the possibility of resuming flights in July.

Few within the industry expect a quick recovery. According to the International Air Transport Association, air traffic is unlikely to return to the levels seen last year until 2023. Around the world, carriers are cutting back – and BA’s direct rivals such as Easyjet, Ryanair and Virgin Atlantic are all planning thousands of redundancies.

But what marks BA out is the response to its actions – and the palpable resentment now directed at a brand that once invoked national pride.