Consulting firm KPMG said an analysis of the likely impact this year on UK regions has shown that shutting down auto plants and putting hundreds of auto-related factories on hold means that the region’s economy is forecast to decline 10.1%.
In a report that matched economic forecasts for each region with the mix of local industries and how they will behave in the pandemic, KPMG said London was better placed than other regions to maintain economic activity, despite the highest number of cases and deaths recorded in the pandemic.
London will contract 7.3% this year, the report said.
The report said that London’s service sector, from marketing and advertising to architecture and financial services, could continue remotely during the foreclosure and recover lost ground in the months following the release of the foreclosure.
Meanwhile, the double whack to the auto sector – which accounts for 6% of the local economy – of plant closings and slump in demand for new cars has meant that a major sector of the West Midlands would be dormant for lockout and would take time to recover for the rest of the year.
KPMG chief economist Yael Selfin said damage to UK regions outside London and the south-east would be a setback for the government’s plans to ‘level’ the north and the west of the country with the east and the south.
“Our analysis shows how the government’s ambition to” level the playing field “in the UK will face a setback in the wake of the pandemic. We expect the gap between performance in London and the rest of the UK to widen this year, “she said.
The North West and East Midlands, which also depend on manufacturing industries and lack many of the most resilient service industries, will also suffer more than most regions as well as the East of England region, which, according to KPMG, relies disproportionately on residential and commercial buildings, which stopped during the foreclosure.
The gross domestic product (GDP) of the North West and East Midlands will contract by 9.5% and 9.7% respectively while the GDP of the East of England region will decrease by 10% , predicts KPMG.
“On the other hand, we think London will be the least affected region,” said Selfin. “We expect the economy to contract by just over 7% in 2020. A relatively higher share of services less affected by Covid-19, such as financial and professional services, means that the capital’s economy is more resistant to restrictions imposed by locking. .
“An ONS survey conducted last year found that more than 34% of London workers had worked at home at least once, compared to 27% for the UK as a whole,” she added. .
Northern Ireland and the North East, which will contract by 8% and 8.4% respectively, perform relatively well as they have large food manufacturing companies, which have maintained or increased production, and a higher proportion of public sector employers.
Northern Ireland also has a group of life science companies that have benefited from the emphasis on health and pharmaceutical spending by government and the private sector.
Earlier this month, the Treasury’s economic forecaster, the Office for Budget Responsibility, said the UK economy could shrink 35% this spring and unemployment will rise by more than 2 million due to the coronavirus crisis. .
He said the Covid-19 foreclosure measures would reduce GDP by more than a third in the second quarter of the year and by 13% for 2020 as a whole.