Dun & Bradstreet – the world’s largest business information company – has published its country insight report into the United Kingdom, which looks at the adverse effects of the coronavirus on the country’s business environment.
Dun & Bradstreet has downgraded the UK’s country risk rating by two quartiles to DB3b (a new all-time low) as the coronavirus pandemic continues to adversely impact opportunities for both traders and investors. Markus Kuger, Chief Economist at commercial data and analytics firm, Dun & Bradstreet, explains how the pandemic has drastically reduced demand in every sector and why the UK is likely to enter into a recession as a result: “Dun & Bradstreet has downgraded its country risk rating for the UK to an all-time low (Rating DB3b) in response to the adverse impact of the coronavirus pandemic on opportunities for both traders and investors. We have also adjusted the UK market environment outlook from ‘Green’ to ‘Amber’ following the lockdown measures implemented by the government, aimed at reducing the spread of the virus.
“While the measures implemented by the Prime Minister on the 23rd March have been introduced to slow the spread and minimise humanitarian damage, the economic impact of the lockdown is set to be significant. The coronavirus outbreak has drastically reduced demand in almost every sector – as well as posing supply chain risks – and threatens to lead to a considerable rise in both business failures and unemployment ﬁgures. Large parts of the economy, including hospitality, leisure, entertainment, retail (except supermarkets) and transport are now closed, while other sectors – such as manufacturing – are impacted by resourcing challenges.
“The measures implemented by the UK government to counterbalance some of the negative effects are unprecedented. But while grants, loans, loan guarantees, salary support and deferred VAT payments are aimed at reducing the economic damage, they will also lead to a signiﬁcant rise in the ﬁscal deﬁcit. We have therefore revised our 2020 deficit forecast to 6.5% of GDP, almost double the initial prediction.
“Considering all factors, we are also lowering our real GDP growth forecast for 2020 from 0.8% to -2.5%. While a recovery in the second half of 2020 and in 2021 seems likely, the rate of recovery will largely depend on the success of the global containment efforts. Either way, we believe the UK will almost certainly enter a technical recession in Q2 2020, and real GDP growth for the year as a whole will be the weakest since the global ﬁnancial crisis when the economy contracted by 4.2% in 2009.”