UK Economic Update - COVID-19

COVID-19
UK Economic Update
For more information on the potential business impact of COVID-19, please visit www.pwc.co.uk/covid19
29 April 2020

PwC
Summary
• Last week’s flash purchasing managers’ index (PMI) data for April suggested the COVID-19 outbreak has had a significant impact on business activity.
For services in particular, the PMIs signalled the fastest decline in business activity in two decades since comparable figures were available. The manufacturing
sector was also hit, but less severely compared to services activity. This is consistent with the final results of the ONS’s business survey conducted between 25
March and 5 April, which shows that around 24% of businesses have either temporarily shut down or paused trading.
• More recent data on retail sales indicates consumer spending is coming under pressure, largely due to non-food retail store closures as a result of social
distancing measures. The value of retail sales fell sharply by 5.9% in March 2020, on a year earlier.
• We have revised our illustrative COVID-19 scenarios for the UK economy to reflect more recent economic data. Both of our scenarios assume a continuation
of the lockdown in the short term, but for varied periods and at varying levels of intensity. Our estimates for GDP growth in 2020 now range from around -5% to
-10%, as compared to -3% to -7% previously. This downward revision reflects more recent data on the significant negative impacts on businesses and the labour
market during the lockdown. We have also revised our expectations for 2020 Q1 based on the weaker-than-expected data for March. We expect the economy to
recover gradually in 2021, although the level of GDP may still be around 1.5% to 4% below pre-crisis trends by the end of next year.
• The deeper economic downturn now expected this year has also led us to revise up our estimates of the budget deficit to around 10% to 15% of GDP in
2020/21. This also reflects new fiscal support measures announced in the last couple of weeks, including extension of the job retention scheme by a further month.
But we still expect the budget deficit to fall relatively rapidly to around 4.5% to 7% of GDP in 2021/22 as the economy recovers and temporary fiscal support
measures are reversed.
• Home-working is possible for over half of workers, but for some, this may come at a cost of lower productivity. The results of our new home-working
survey, conducted between 16-19 April, showed that around 60% of workers (that were still employed at that time) were able to work from home, but for nearly a
third of this group, home-working productivity was lower than at their usual workplace. Our survey also finds higher-income workers are much more likely to
have remained employed since mid-March than lower-income workers.
2
In this week edition, we present our revised economic scenarios and projections for UK economic growth in 2020
and 2021. We also present our revised fiscal scenarios and projections, an update on the latest economic data, as
well as results from a more recent survey we conducted on home-working and the impacts on productivity.
29 April 2020UK Economic Update

PwC
Contents
3
1. This week’s data 4
2. UK GDP scenarios 10
3. UK public finance scenarios 16
4. UK sector impacts 22
5. The workforce 26
Annex – methodological details 33

PwC
10
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Jan-2007
Apr-2007
Jul-2007
Oct-2007
Jan-2008
Apr-2008
Jul-2008
Oct-2008
Jan-2009
Apr-2009
Jul-2009
Oct-2009
Jan-2010
Apr-2010
Jul-2010
Oct-2010
Jan-2011
Apr-2011
Jul-2011
Oct-2011
Jan-2012
Apr-2012
Jul-2012
Oct-2012
Jan-2013
Apr-2013
Jul-2013
Oct-2013
Jan-2014
Apr-2014
Jul-2014
Oct-2014
Jan-2015
Apr-2015
Jul-2015
Oct-2015
Jan-2016
Apr-2016
Jul-2016
Oct-2016
Jan-2017
Apr-2017
Jul-2017
Oct-2017
Jan-2018
Apr-2018
Jul-2018
Oct-2018
Jan-2019
Apr-2019
Jul-2019
Oct-2019
Jan-2020
Apr-2020
Services Manufacturing
UK business activity falls sharply in April, particularly in services
5
Last week’s flash purchasing managers’ index (PMI) data for April suggested the COVID-19 outbreak has had a significant
impact on UK business activity. For services in particular, the PMIs signalled the fastest ever decline in business activity due
to the lockdown. The manufacturing sector was also hit, but less severely compared to services activity (although the
manufacturing output index alone fell by more to only 16.6, with the headline index being distorted by delivery time effects).
Purchasing Managers’ Indices of businessactivity
Source: IHS Markit / CIPS
April 2020
Services: 12.3
Manufacturing: 32.9

PwC
24% of businesses have had to cease or pause trading temporarily
6
UK business responses on % continuing to trade (23 Mar- 5 Apr)
Source: ONS Business Impact of Coronavirus (COVID-19) Survey – final results
An ONS survey of businesses carried out between 23 March and 5 April showed the lockdown has forced almost a quarter of
UK businesses to temporarily close or pause trade. 55% of businesses that continued to operate reported their turnover was
lower than normal, an increase from the previous fortnight’s survey result of 45% (9-22 March). Businesses’ financial
performance is likely to come under further pressure as long as the lockdown continues.
The preliminary results from this survey were previously reported in our 22 April update. These figures have been revised following final data revisions made by the ONS.
Effect on turnover, percentage of responding businesses, UK,
Wave 2 (23 Mar - 5 Apr) vs Wave 1 (9 Mar – 22 Mar)
* Of the businesses that have reported revenue being lower than normal, 38.7% reported their
turnover being substantially lower than normal, with the remaining16.6% reportingturnover
being slightly lower than normal.
41.9%
4.7%
8.8%
44.6%
1.1%
34%
5%
5%
55%
Not sure
Financial perfomance Not affected
Affected Higher than Normal Range
Affected - Within Normal Range
Affected - Lower than Normal Range*
23 Mar - 5 Apr 9 Mar - 22 Mar
0.3%
24.3%
75.4%
0% 20% 40% 60% 80%
Permanently ceased trading
Temporarily Closed or Paused Trading
Continuing to Trade

PwC
Most businessesare generally interested in taking up government schemes on offer
7
Source: ONS - Coronavirus and the social impacts on Great Britain– final results
The latest ONS survey suggests around 94% of responding businesses, including those that have paused trade, indicated
interest in at least one of the government schemes on offer, with the most popular scheme being the Coronavirus Job
Retention Scheme (81%), followed by VAT payment deferrals (68%). Interest in the loan schemes appear to be lower, but this
may be due to most businesses experiencing no change in their ability to access financial resources. However, a small
minority (6%) reported experiencing decreased access to finance.
Interest in COVID-19 initiatives, % of respondingbusinesses, UK
(23 March to 5 April 2020)
Impact on access to financial resources, % of businesses
continuing to trade, UK (23 March to 5 April 2020)
80.7%
68.3%
42.4%
37.4%
21.4%
14.9%
9.7%
6.0%
Coronavirus Job Retention Scheme
Deferring VAT payments
Business rates holiday
The HMRC Time To Pay scheme
Accredited finance agreements
Small business grant or loan schemes
Not sure
None of the above
71.6%
13.2%
9.2%
6.0%
No, access to finance has stayed the same
Not sure
Yes, access to finance has increased
Yes, access to finance has decreased

PwC
UK retail sales fell sharply in March, except food & drink and online
8
UK Retail Sales Index: value of retail sales, seasonally adjusted
(2016 = 100)
Monthly retail sales value in March 2020 fell sharply by 5.9% on a year earlier, following the implementation of social
distancing measures that saw the closure of non-food retail stores. This decline is far bigger than the peak-to-trough decline
observed during the 2008-9 financial crisis, even though it only covers one month. While most non-food retail sales have
been adversely affected, food and drink sales have increased significantly. Online sales have also increased, but not by
nearly enough to offset the decline in physical sales.
Volume of sales per week, % increase on a year earlier
100
105
110
115
120
125
RetailsalesIndex(2016=100)
All retail Food retail
-35%
-27%
-10%
8%
36%
10%
Clothing and footwear
Non-food
Household goods
Non-store retail (incl. online)
Drinks and beverages
Food
Source: ONS

PwC
Consumer sentiment fell sharply in March, but not as much as in 2008
9
Our UK Consumer Sentiment Survey for April showed an improvement since our March survey. The small improvement in
April may have been driven by the announcement of fiscal support measures during this current crisis, which has provided
some measure of certainty to consumers who may have otherwise lost their jobs or incomes. Though overall sentiment in
2020 has been lower than at any point since 2013, it is still less negative than during the global financial crisis (2008-09) and
the subsequent Eurozone crisis (2011-12).
PwC Consumer SentimentIndex
-60
-50
-40
-30
-20
-10
+0
+10
Apr2008
Jun2008
Aug2008
Oct2008
Nov2008
Feb2009
May2009
Oct2009
Jan2010
May2010
Jul2010
Oct2010
Dec2010
Jan2011
May2011
Sep2011
Dec2011
May2012
Sept2012
Jan2013
May2013
Sept2013
Jan2014
Aug2014
Nov2014
Jan2015
Apr2015
Sept2015
Nov2015
Dec2015
Mar2016
Jul2016
Sep2016
Dec2016
Mar2017
Jun2017
Sep2017
Dec2017
Apr2018
Sep2018
Dec2018
Apr2019
Sep2019
Dec2019
Mar2020
Apr2020
Balanceofopinion
Source: PwC Consumer Sentiment Index
A negative reading suggests that, on
balance, households expect their real
disposable incomes to decline over the
next 12 months

PwC
Assumptions:
• Following an initial peak in April 2020, successful implementation of NPIs including testing,
contact tracing, quarantine and physical distancing results in the effective reproduction rate
remaining at or below one, and therefore the number of cases reducing to a lower level.
• NPIs are lifted in a gradual, phased way from mid/late May 2020 onwards.
• Significant testing and contact tracing will be necessary to track and control outbreaks as pre-
symptomatic and mildcases prevent complete containment of the virus until a vaccine
becomes available.
Timeframe:
• Peak: April 2020
• Total duration: 12 to 18 months (until a vaccine is available).
Assumptions:
• Following an initial peak in April 2020, successful implementation of NPIs including testing,
contact tracing, quarantine and physical distancing results in the effective reproduction rate
remaining at or below one, and therefore the number of cases reducing to a lower level.
• NPIs are lifted in a gradual, phased way from mid/late May 2020 onwards. However, this has
the effect of increasing the reproduction number to above one, causing a further peak in cases.
NPIs may be introduced and reversed in a cyclical way to control subsequent outbreaks.
• Significant testing and contact tracing will be necessary to track and control outbreaks as pre-
symptomatic and mildcases prevent complete containment of the virus until a vaccine
becomes available.
Timeframe:
• Peak: April 2020(with second smaller peak later in 2020)
• Total duration: 12 to 18 months (until a vaccine is available).
Potential COVID-19 scenarios to inform crisis planning
11
We revised our illustrative COVID-19 scenarios to reflect a range of likely outcomes on the lifting of lockdown restrictions that
are currently in place. Both of these scenarios assume a continuation of the lockdown in the short term, but for varied periods
and at varying levels of intensity. The subsequent trajectory of the disease is dependent on the success of the implementation
of these NPIs, whether they need to be re-imposed, and the introduction of other NPIs or pharmaceutical interventions at a
later date (i.e. treatment drugs or vaccines).
2
Newcasesperweek
BUMPY EXIT
Lifting of NPIs results in a second peak in cases, requiring NPIs to
be reintroduced to bring cases back to a lower level.
2021 2022
Assume vaccine
available – June
2021
2020
1
Newcasesperweek
SMOOTH EXIT
Gradual lifting of NPIs does not result in a significant second peak
of disease. Cases continue to occur at a lower level.
2021 20222020
Assume vaccine
available – June
2021

PwC
COVID-19 economic impact transmission channels
12
For our alternative scenarios, we modelled five main transmission channels through which COVID-19 could impact the UK
economy (the first four negative, with an offsetting positive effect from monetary and fiscal policy reactions). Other reinforcing
and mitigating impacts are possible, so this is not an exhaustive list.
• Major disruption
reduces demand
throughout the supply
chain, affecting
suppliers. Businesses
scale back production or
adapt supply chains to
alternative sources.
• Significant proportion of
the workforce becomes
unavailable for work and
production facilities can’t
maintain output of basic
materials and unfinished
goods.
• Social distancing
measures see non-
essential workers
working from home for
an extended period, or
workers staying at home
to care for children or
other dependents.
• Focus on maintaining
workforce in essential
roles only.
• Consumers defer major
purchase decisions and
defer discretionary
spend.
• Significantly reduced
levels of business and
consumer confidence
results in a sharp and
sustained downturn in
business investment.
• Investment focuses on
infrastructure and
facilities to counter the
pandemic and
investment in digital
ways of working (or new
delivery models).
• Significant periods of
travel disruption,
closures of most retail
outlets (except grocery
and pharmacy), leisure;
hospitality; sports and
entertainment venues.
• Other non-essential
sectors may see full or
partial lockdowns due to
practical difficulties in
operating with adequate
social distancing.
• Extensive working
capital / cashflow
support to businesses
through tax / payment
holidays, grants and
loan guarantees.
• Fiscal support for
healthcare service.
• Looser monetary policy
stance through interest
rate cuts combined with
additional quantitative
easing (QE) and other
measures to boost
credit flows to business.
1. Supply
chain
disruption
2. Labour
supply
reduction
4. Sector
partial or full
lockdowns
3. Uncertainty
impacts
5. Policy
reactions

PwC
Illustrative scenarios for short-term impact on UK GDP
13
We revised our COVID-19 economic scenarios to reflect a range of likely outcomes on the lifting of lockdown restrictions that
are currently in place and in light of more recent economic data. As a result, our estimates for GDP growth in 2020 now range
from around -5% to -10%, which reflect a downward shift from our earlier scenarios of -3% to -7%. This reflects weaker-than-
expected labour market data, retail sales and business activity data coming out over the past couple of weeks.
Year one impact (%) on UK GDP
relative to baseline without COVID-19
Scenarios
Smooth exit Bumpy exit
1. Supply chain -0.7 -1.2
2. Labour supply -2.1 -2.4
3a. Uncertainty – consumer
expenditure -1.3 -2.6
3b. Uncertainty – business
investment -1.3 -2.3
4. Policy response
Fiscal: 2.1
Monetary: 1.0
Fiscal: 2.1
Monetary: 1.3
5. Sector partial lockdowns -3.6 -6.0
OverallUK economic impact -5.9 -11.1
Government
support schemes
prevent far worse
outcomes
First year UK GDP impact across COVID-19scenarios
Net position after monetary
and fiscal response
Our analysis suggests that UK GDP growth could range between around -5%
and -10% in 2020, given we expected growth of around 1% before COVID-19
and the estimated impacts of the outbreak in the table below, which are from
around -6% to -11% in the first year. Figures below are only illustrative of broad
orders of magnitude and should not be taken as forecasts or predictions. See the
technical annex for more detail on assumptions.
% impact on 2020 GDP relative to
baseline without COVID-19
-16
-14
-12
-10
-8
-6
-4
-2
0
Supply chain
Labour supply
Uncertainty- consumer
expenditure
Uncertainty- investment
Sector lockdowns

PwC
● In the ‘Smooth exit’ and ‘Bumpy exit’
scenarios, GDP could contract between 12%
and 16% quarter-on-quarter in Q2 2020.
● This compares to a contraction of around 2.1%
in Q4 2008 at the height of the global financial
crisis, or a 2.7% quarter-on-quarter decline at
the peak of the 1974 recession.
● We assume output would then recover
relatively quickly at first as lockdowns are
eased, followed by a more gradual pace of
recovery as economic life slowly returns to
normal. The recovery is longer under the
‘Bumpy exit’ scenario due to larger scarring
effects and the temporary re-imposition of
social distancing measures in this case.
● The pace of the recovery remains highly
uncertain, but we assume this involves the
level of GDP returning to only around 1.5% to
4% below pre-crisis trend levels by the end of
2021. But other outcomes are clearly possible
if the crisis lasts for longer.
UK GDP will drop sharply in Q2 2020, but should recover later
14
It is clear the COVID-19 crisis will lead to a sharp fall in GDP in Q2 2020, perhaps by around 12% to 16% - much larger than
any quarter during the 2008-09 financial crisis. This is driven by the unprecedented nature of the lockdown, as well as lower
consumer spending and business investment due to more standard confidence and income effects. There should then be a
recovery as and when the lockdown eases, although the pace of this remains highly uncertain. We estimate in our two
scenarios that output could be back to around 1.5% to 4% below its pre-crisis trend by the end of 2021 (see chart).
UK GDP index (Q4 2019 = 100), quarterly levelsin each scenario Commentary
80
85
90
95
100
105
2019
Q1
2019
Q2
2019
Q3
2019
Q4
2020
Q1
2020
Q2
2020
Q3
2020
Q4
2021
Q1
2021
Q2
2021
Q3
2021
Q4
UKRealGDPIndex(Q42019:100)
Quarter
Smooth exit
Bumpy exit
Baseline
Source: ONS, PwC analysis

PwC
PwC’s economic growth scenarios compared to other analyses
15
Our GDP growth scenarios for 2020 are less negative than the recent illustrative projections by the OBR predicting a 13% fall
in 2020. But the OBR assumes a very sharp 35% drop in Q2 2020, which seems rather an extreme assumption. Both the
latest IMF forecast for the UK and consensus forecasts as surveyed by the Treasury in April are more comparable with our
‘Smooth exit’ scenario, but are more optimistic in comparison to our ‘Bumpy exit’ scenario.
Comparison of 2020 GDP projectionsand scenarios
● The Office for Budget Responsibility (OBR)
published illustrative projections on the impacts
of COVID-19 on UK economic output on 14
April. They estimate that 2020 Q2 GDP could
fall by as much as 35% compared to the
previous quarter and by around 13% in 2020
as a whole despite a strong recovery later in
the year. But their estimate of the effect in Q2
2020 appears extreme compared to both our
own view and other recent forecasts. By
contrast, they appear overly optimistic in
assuming the level of GDP returns to its pre-
crisis trend level by Q1 2021.
● IMF and consensus forecasts project more
moderate falls in GDP in 2020, but also some
longer term scarring effects as we do. But all
such projections are subject to large
uncertainties and can only be illustrative at
present.
Commentary
Source: PwC, OBR, IMF, HMT
*HMT comparison of independent forecasts (April 2020) – average of new forecasts made in last month
-12.8%
-10.0%
-6.5%
-5.8%
-4.8%
OBR (14 Apr)
PwC - 'Bumpy exit' scenario
IMF (14 Apr)
Consensus forecasts* (16 Apr)
PwC - 'Smooth exit' scenario

PwC
Direct cost of fiscal measures to combat COVID-19
17
We have revised our estimates of the impact of fiscal measures on public finances in line with our revised COVID-19 scenarios.
The Treasury, working closely with the Bank of England, has responded to the COVID-19 crisis with direct fiscal support
measures totalling around £75bn to £110bn in 2020/21 in our two scenarios. But many measures are temporary so costs should
be much lower at only around £20bn to £30bn in 2021/22, assuming the crisis ends next year as assumed in both scenarios. The
assumptions behind this and other fiscal analyses in this section are described further in the annex at the end of this report.
Estimatedcost of direct fiscal support measures in alternativescenarios (£bn)
0
20
40
60
80
100
120
2020/21 2021/22 2020/21 2021/22
Estimatedcost(£bn)
Source: PwC estimates based on datafromOBR, Treasury and IFS
Other measures
Job retention and self-employment
support
Benefit increases
Other Budget 2020 Covid-19 measures
NHS emergency fund
● Our previous fiscal analysis (first published on
15 April based on modelling the previous
week) assumed a direct fiscal support of
around £60bn to £80bn in our two scenarios.
● We have revised the estimated cost of the
fiscal stimulus package upwards to account for
the higher cost likely to be associated with the
Coronavirus Job Retention Scheme in light of
more recent data on business take-up, as well
as estimated cost of newly announced policies
over the past two weeks.
Commentary

PwC
International comparison of fiscal support programmes
18
The estimated amount of direct fiscal stimulus in the UK in response to COVID-19 is around 3.5% to 5% of GDP, which is
within the estimated range seen in other G7 economies (as a % of GDP in 2020/21). These fiscal policy packages are
continually evolving, so these estimates can only be approximate snapshots at a certain point of time.
Estimateddirect fiscal stimulus in G7 (% of GDP, FY 2020/21)
7.4%
5.2%
4.4%
4.0%
3.5%
2.5%
1.9%
1.4%
US
UK (Bumpy exit)
Canada
France
UK (Smooth exit)
Japan
Germany
Italy
Source: PwC scenarios for the UK, PwC estimates fromvarious national sources for other countries

PwC
Annual budget deficit (£bn) Annual budget deficit (as % of GDP)
The budget deficit will rise sharply in 2020/21, but should then fall back
19
Our revisions to the cost of the fiscal support package as well as our new lower economic growth scenarios imply a sharp rise
in the budget deficit in 2020/21 to around £210-315bn, or around 10% to 15% of GDP, as compared to 10% in 2009/10 after
the financial crisis. But we expect much of this rise will reverse in 2021/22, with the deficit coming down to around 4.5% to 7%
of GDP. This would still be above the 3% of GDP ceiling implied by current fiscal rules, so some longer term fiscal tightening
may be needed after full recovery has been achieved. But that is a matter to decide after the crisis.
49
315
163
212
112
55
67
0
50
100
150
200
250
300
350
2019/20 2020/21 2021/22
Source: OBR for pre-crisis baseline, PwC for alternative scenarios
'Bumpy exit' scenario
'Smooth exit' scenario
Pre-crisis baseline (OBR
forecast)
15.4%
7.1%
9.8%
4.7%
2.2% 2.4%
2.8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2019/20 2020/21 2021/22
Source: OBR for pre-crisis baseline, PwC alternativescenarios
Fiscal rule ceiling = 3%
GDP
Pre-crisis baseline
(OBR forecast)

PwC
Impact on public debt to GDP ratios in alternative scenarios
20
In our ‘Smooth exit’ scenario, public debt might stabilise at around 80% of GDP in 2021/22, so in this case there should be no
major threat to longer term fiscal sustainability. But the debt profile looks less sustainable in a ‘Bumpy exit’ scenario as that
may be associated with a larger permanent loss of GDP and, hence, of tax revenues. In that less favourable case, there may
be a need for future tax rises or renewed spending restraint in the longer term, but only once we are well passed the end of
the current crisis. Bank of England action means there is no problem with the government borrowing more for now.
Public sector net debt, excluding contributionfrom Bank of England schemes (% GDP)
● Our estimates of the debt-to-GDP ratio have
been revised from our previous 15 April update
to match our new budget deficit and GDP
scenarios. We also exclude the impact on debt
of the Bank of England’s schemes (such as the
Term Funding Scheme), which provides a
better indication of underlying trends in the
debt to GDP ratio.
● The government clearly needs to borrow much
more in the short term to help soften the
economic blow from the crisis. So the debt-to-
GDP ratios will rise, particularly in a ‘Bumpy
exit’ scenario. Recent successful gilt auctions
show the markets are happy to buy significant
additional amounts of UK government debt at
current record low yields.
● This reflects the fact the Bank of England has
pledged to buy at least an extra £190bn (c.8%
GDP) of gilts, and more if needed, which offers
considerable support to the market. In the
short term, the government can also call on
temporary cash flow financing through
expanding its ‘overdraft’ at the Bank of
England.
Commentary
72%
85%
89%
72%
79%
81%
72% 72% 72%
60%
65%
70%
75%
80%
85%
90%
95%
2019/20 2020/21 2021/22
Source: OBR for pre-crisis baseline, PwC for alternative scenarios
Pre-crisis baseline (OBR forecast)

PwC
The OBR anticipates a larger budget deficit than during the financial crisis
21
According to an illustrative reference scenario published by the OBR on 14 April, COVID-19 could cause the largest single-
year deficit in public sector net borrowing since the Second World War, rising to nearly 14% of GDP in 2020-21. Our revised
estimates of the budget deficit in alternative scenarios (10-15% of GDP) are now broadly in line with the OBR’s analysis, but
we do not expect as sharp a fall in the deficit in 2021/22 as we assume some longer term scarring effects on the economy.
OBR public sector net borrowing: reference scenario versus Budget forecast (% GDP)
● The OBR’s illustrative scenario suggests that
compared to their 2020 Budget forecast of
£55bn, there could be a £218bn increase in net
borrowing, bringing the total to £273bn in
2020-21. This reflects the cost of various
schemes which the government have
introduced as well as the impact of the
lockdown on the economy and so on tax
revenues and benefit spending.
● This means that COVID-19 could have the
largest impact on public borrowing since the
Second World War: the OBR estimates that
the deficit could reach 14% of GDP in 2020-21.
● The budget deficit is projected to fall quickly in
2021-22 as lockdown measures are lifted and
the economy recovers. But the OBR
assumptions, while very negative for Q2 2020,
appear rather optimistic in the medium term.
● The OBR also estimates that every additional
month spent in lockdown could add add £35bn
to £45bn to the deficit (which is similar to our
own estimates).
Commentary
20
0
10
5
-5
15
25
30
PercentofGDP
1908
-09
2019
-20
2024
-25
Outturn Budget 2020 forecast Reference scenario
Financial crisis
WWII
WWI / Spanish
flu
Source: ONS, Nomis: DWP; Stat Xplore; Work and Pensions Select Committee hearing, Resolution Foundation

PwC
We use an input-output approach to assess sector impacts
23
We use UK input-output (I-O) tables to model the sectoral economic impact of COVID-19 through three main channels: the
direct impact on gross value added (GVA)* due to sector lockdowns and labour supply disruption; the supply chain spend
impact (indirect impacts through the supply chain); and the employee spend impact (induced impacts as a result of lower
household incomes and so lower consumer spending).
The relationship between the three levels of economic
contribution
1
Indirect
Supply chain spend
2
Direct
Employment
Gross Value added
Wages Profit
Employment
Gross Value added
Wages Profit
Induced
Employee spend
3
Employment
Gross Value added
Wages Profit
Supplier
expenditure
Employee
spending of
w ages
A simplified representation of the relation between Covid19’s
direct impact and its impacts through the supply chain
A simplified representation of the relation betweenCOVID-19’s
direct impact and its impacts through the supply chain
£xm
(construction
contractor)
£xm
(financial
services provider)
£xm
(distribution
netw orkprovider)
£xm
Suppliers to the financial
services provider
£xm
Suppliers to the distribution
netw orkprovider
£xm
Suppliers to
construction contractor
£xm
Initial demand shock
Extended supply chain
*Note: GVA is broadly the sectoral version of GDP

PwC
Our estimates show biggest impacts for food service, hotels and transport
24
Our sectoral analysis shows that the industries likely to experience the greatest short term economic impact are food service
(e.g. restaurants, cafes and pubs), hotels and transport. In our ‘Smooth exit’ scenario, we estimate reductions of around 14%
to 20% in annual 2020 GVA in these sectors relative to a baseline without COVID-19. In our ‘Bumpy exit’ scenario, these
sectors could suffer a negative impact on GVA of around 26% to 37% in 2020. There would be some offsetting gain in
healthcare and other public sector activity levels, but not enough to prevent a significant negative impact on total UK GDP.
Source: PwC Economics analysis,ONS
% impact on 2020
GVA relative to
baseline without
COVID-19
● Our sector scenario impacts have been
revised in line with our changes to our GDP
scenarios as described in Section 2 above.
● The I-0 approach helps identify points of most
negative impact, including supply chain effects.
● These impacts stem largely from demand-side
effects, and we assume that the economy re-
allocates labour to where it is needed (e.g.to
food retail away from non-food retail).
● Our analysis also implicitly assumes that policy
action is sufficient to prevent a very large wave
of corporate insolvencies (though there are
bound to be some in practice).
Commentary
-20% to -37%
-18% to -34%
-15% to -28%
-14% to -26%
-12% to -22%
-10% to -18%
-9% to -17%
-9% to -16%
-6% to -11%
-6% to -11%
-5% to -9%
-4% to -7%
-4% to -7%
-3% to -5%
-2% to -3%
2% to 3%
3% to 6%
Food service
Hotels
Leisure and arts
Transport
Construction
Real estate
Retail and wholesale
Manufacturing
Logistics
UK average
Professional and technical services
Finance and insurance
Information and Telecoms
Utilities
Education
Public Admin, Defence
Health and social care
Bumpy exit Smooth exit
Range of estimated GVA impact by sector– ‘Smooth exit’ vs ‘Bumpy exit’, % impact on
2020 GVA relativeto baseline without COVID-19

PwC
COVID-19 sector impacts vs 2009 financial crisis
25
The potential scale of the annual GDP impact under even our ‘Smooth exit’ scenario could be larger than the experience of
2009 due to the global financial crisis, with the impact of COVID-19 being significantly larger for locked-down sectors. During
the financial crisis, by contrast, businesses were still able to maintain some cash flow to support operations. However, the
scale of government support has also been much greater this time around, which mitigates some of the difference. In our
Bumpy exit scenario, the larger impacts in 2020 vs 2009 would be further increased.
Sectoral GDP impactsin the smooth exitscenario in 2020 vs actual 2009 annual impacts
-25% -20% -15% -10% -5% 0% 5%
Food service
Hotels
Leisure and arts
Transport
Construction
Real estate
Retail and wholesale
Manufacturing
Logistics
UK average
Professional and technical services
Finance and insurance
Information and Telecoms
Utilities
Education
Public Admin, Defence
Health and social care
COVID-19 Smooth exit 2009 GFC
Source: PwC Economics analysis,ONS

PwC
Ability to work from home and impact on productivity by sector
27
Ability and impact of working from home, % of respondents, 16 April to 19 April 2020
Our latest PwC Research survey (16-19 April) asked a representative sample of around 600 currently employed UK workers
whether the nature of their work allowed them to work from home. The results show that around 60% of workers were able to
work from home, but for some, this comes at a cost of lower productivity, for example in financial and business services.
However, the majority of workers in the transport and logistics (76%), hospitality and leisure (57%) and consumer and retail
sectors (56%) were unable to work from home. Lower income workers were significantly less able to work from home than
higher paid workers, as in our previous survey.
Source: PwC Research survey of 600 workers still employed on 16-19 April 2020 (see appendix for details of survey methodology)
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Primary
Business services
Financial services
Industrials
Total
Govt & healthcare
Consumer & retail
Hospitality & Leisure
Transportation & Logistics
Yes - with a significant increase in productivity Yes - with no significant change in productivity
Yes - but with a significant decrease in productivity No

PwC
Higher-income groups more likely to have remained employed
28
Impact of COVID-19 on employment status, % of respondents by annual income group,
16 April to 19 April 2020 Commentary
Source: PwC Research survey of 650 workers, 16-19 April 2020(see appendix for details of survey methodology)
Our new PwC Research survey (16-19 April) asked whether there had been a change in employment status since the
imposition of social distancing measures in March. The results show higher-income groups are far more likely to have
remained in employment compared to lower-income groups. For example, over half of those earning more than £50,000 a
year have been able to keep working their usual hours, whereas only around 30% of those earning less than £20,000 a year
could do so (though a significant proportion of lower earners have been furloughed on at least 80% of normal pay).
● Our latest PwC Research survey conducted
during 16-19 April 2020 for a representative
sample of around 650 UK workers shows
higher-income earners are most likely to have
remained in employment, even if their hours
have been reduced, compared to lower-income
earners.
● The share of people who remain, or have
become, employed is around 76% for the
highest income earners (£50K+), significantly
higher than 49% for lower income earners
(<£20K).
● This suggests the negative economic impact of
COVID-19 may be greater for lower socio-
economic groups, particularly those exposed
to harder hit sectors like leisure and hospitality,
and non-food retail who have subsequently
been made redundant or furloughed.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
<£20k £20k-£50k >£50k
I have become employed
I am still working my usual hours
I am still employed, but on reduced hours
I have been furloughed (but remain
employed)
I have become unemployed

PwC
Universal credit claims continue to rise, albeit at a slower rate
29
Weekly new claims to Jobseeker’s Allowance and Universal Credit: GB
Source: ONS, Nomis: DWP; Stat Xplore; Work and Pensions Select Committee hearing, Resolution Foundation
So far, over 1.6 million people have made new Universal Credit claims between w/c 16 March and w/c 13 April. This peaked
towards the end of March as a result of the sudden announcement of lockdown measures. The weekly number of new claims
appears to be on the decline, possibly due to the support measures announced by the government (notably the Job Retention
Scheme that should see furloughed workers continuing to receive some income). However, there is still likely to be a large
rise in unemployment over the next few months, as reflected in recent projections by the OBR and other forecasters. Official
ONS data showed employment remaining strong until February, but with some signs of softening in March.
600k
0k
100k
200k
500k
300k
400k
February 2008 February 2009 March 2019 23 March 2020 30 March 2020 13 April 20206 April 2020
380k
475k
82k
220k
60k
540k
46k
+533%
+267%
+800%
+78%
+692%
Jobseeker’s Allowance Universal Credit
Note: JSA figures have been adjustedto weekly. JSA and UC figures are not directly comparable.

PwC
Around a fifth of businesses have furloughed workers according to ONS
30
The latest ONS survey suggests around 22% of businesses still operating have furloughed employees through the
government’s Job Retention Scheme, while only 0.3% have laid off workers. This suggests the furlough scheme is working to
encourage businesses to keep staff employed. Nearly half of operating businesses have also made arrangements for their
employees to work remotely.
The preliminary results from this survey were previously reported in our 22 April update. These figures have been revised following final data revisions made by the ONS.
Measurestaken to manage workforce as a result of the
coronavirus, % of businesses, UK (23 March to 5 April 2020)
What arrangements were in place in terms of staff working patterns
in the period % of businesses, UK (23 March to 5 April 2020)
0.3%
4.0%
4.5%
21.6%
69.6%
Made redundant
Other
Off sick or in self-isolation due to COVID-19
On furlough leave
Working as normal
15.9%
36.6%
47.5%
Other arrangements in place
Still working at their normal place of work
Working remotely

PwC
Take-up of the Job Retention Scheme appears highest for hotels and restaurants
31
Proportion of workforce furloughed,% of businesses continuing to trade by industry, 23 March to 5 April 2020
Among businesses still operating, the hotels and restaurants, construction, and arts and entertainment sectors appear to
have furloughed the highest proportion of their workforce. The share of workers that have been made redundant is small
among businesses still trading (0.3%), but is slightly higher among businesses that have had to pause or cease trading
(0.8%). The furlough scheme also appears to have reduced the risk of unemployment despite the significant reduction in
business activity – around 82% of the workforce of businesses that have had to pause or cease trading has been furloughed,
with less than 1% made redundant.
47%
36%
34%
30%
29%
25%
22%
21%
17%
15%
11%
10%
9%
0.6%
0.3%
0.0%
0.6%
0.2%
0.4%
0.3%
0.6%
0.1%
0.3%
0.2%
0.1%
0.6%
Accommodation And Food Service Activities
Construction
Arts, Entertainment And Recreation
Administrative And Support Service Activities
Wholesale And Retail Trade; Repair Of Motor Vehicles And…
Transportation And Storage
All Industries
Water Supply, Sewerage, Waste Management And…
Manufacturing
Professional, Scientific And Technical Activities
Education
Human Health And Social Work Activities
Information And Communication
Furloughed
Made redundant

PwC
Take-up of the Job Retention Scheme already high and increasing
32
After the Job Retention Scheme was opened on 20 April, applications relating to around 4 million workers were made during
the first four days of operation. This is so far lower than the number of workers estimated to have been furloughed based on
the ONS’s business survey (6m) and estimated by the OBR (8.3m). But some businesses may have waited out the initial rush
of applications before submitting claims and there could be another spike ahead of pay day at the end of April. This suggests
take-up of the scheme is likely to increase over the coming weeks. Our fiscal estimates assume around 7m workers are
furloughed under the scheme on average over its duration, but the final total remains highly uncertain at present.
Job Retention Scheme applications– actual in first 4 days vs estimates of potentialtotal
Source: Resolution Foundation, HMRC, ONS, OBR
0.8m
6.0m
8.3m
1.3m
0.9m
1.0m
0
1
2
4
3
7
8
6
5
9
Millions of people
Number of employees on
the Job Retention scheme
Number of employees
furloughed by 5 April 2020
Estimated number of furloughed
employees (in OBR scenario)
Total = c.4m
4.3m
2.0m
23 April
22 April
21 April
20 April

Annex – methodological
details

PwC
• Annual vs quarterly: this reportfocuses on estimated impacts on annual
GDP/GVA in 2020, but these are based on a quarterly model where output falls
sharply in Q2 2020 and then recovers at varying ratesin different scenarios later
in the year and in 2021 (see charton p.14).
• Supply chain assumptions are taken from an academic paper by Luo and Tsang
(2020) who estimate the indirect economic impact to the: a) domestic and b)
global economy due to the Chinese supply chain disruption as a reference point.
We adjust this to reflect the different composition of the UK economy (either due to
the manufacturing/services mixor openness to trade compared to the global
average). Finally,we also incorporate any potential adaptation effects for longer
lasting scenarios from businesses which switch to alternative suppliers,
dampening this effect.
• Labour supply impacts are assessed in five categories covering workersthat
are: a) self isolating; b) infected and not ill; c) infected and ill; d) caring for
dependants; e) not affected by the disease. We assume the first four segmentsof
the workforce lose between 75-100% of their working hours during absence and
calculate the total number of hoursworked lost. We combine this analysis with our
calculation of the additional GDP produced per hour of work estimated by UK
GDP and the average number of hoursworked by an employee in the UK in a
week. In this analysis, we don't take into account the productivity improvements
that could potentially result from adjusting to lower staff levels, or the potential for
continued home working by those with only mild symptoms.
• Uncertainty - consumer expenditure: We benchmark the shockto household
expenditure with reference to historical crises and period of economic stress. To
derive the economic impact we adjust the expenditure shock based on its duration
and the relative importance of household expenditure to total GDP.
• Uncertainty - business investment: We use our previous modelling work to
determine the relationship between UK GDP and business investment. The
modelling quantified the economic impact of a risk premium shock to total
investment and UK GDP using a Computable General Equilibrium modelling
approach. We apply this relationship to a drop in the business investment portion
of total investment to estimate the impact on GDP. The shock to business
investment was informed by benchmarking to other periods of historic stress and
adjusted for its duration.
• Policy response - fiscal: We divide the additional amount the UK government
plans to spend to combat COVID-19 into: a) day-to-day spending; b) additional
spending brought forward; and c) negative taxreceipts (i.e. cut in taxes). Each of
these spending categoriesis associated with a fiscal multiplier between 0.6 and 1
which we obtain from the Office for Budget Responsibility (OBR). We do not
explicitly model the impact of government loan guarantees, though these will help
to limit downside risks to the economy relative to our two scenarios.
• Policy response - monetary: We estimate the sensitivity of UK real GDP growth
to changes in monetary policy using Andy Haldane's speech on the impact of
monetary policy during the global financial crisis. We assume the monetary policy
space available to the Bank of England is consistent with the Governor's
statement that "We have effectively 200 to 250 basis points of space".
• Sector lockdown: We use ONS data for the UK's sector and sub-sector outputs.
We assume that output in certain “locked-down” sectors will be depressed for
varying periods of time in the two scenarios. This may include periods of partial
lockdown. We do not attempt to model any possible regional or demographic
variations in lockdowns.
34
UK GDP/GVA scenarios – technical notes and key assumptions

PwC
• Our baseline was the Budget 2020 forecast by the OBR, which was
completed in mid-to-late February 2020 and so included little impact
from COVID-19 in the UK, both for the economy and the public finances.
The later OBR forecast on 14 April was included as a comparator in
some slides.
• We first estimated the direct cost of the various fiscal stimulus measures
announced by the government in the Budget on 10 March and
subsequently up to 23 April 2020. This totalled around £75bn to £110bn
in 2020/21, including:
− Additional emergency NHS funding in the Budget and later
− Other Budget 2020 measures, which we costed using OBR
estimates
− Increases in Universal Credit and other benefit, estimated to cost
£7bn in 2020/21 by Treasury
− The job retention scheme for employees is hard to cost with any
certainty, but we estimate its cost at around £18-30bn based on a
take-up of around seven million and an average pay-out of around
£1,200 per month, for varying periods in different scenarios (and
allowing for offsets from higher income tax and NIC payments).
− The self-employment support scheme, where we use an IFS cost
estimate of around £9bn, or £15bn in our bumpy exit scenario.
− Other measures including business rates holiday for some sectors
and potential realised government losses on loan guarantees – the
latter are hard to quantify but we assume a low loss rate in 2020/21
that builds up over time.
− Due to lack of data we do not include the potential impact of tax
deferrals or any offset from possible government spending savings.
• We then considered which of these costs might persist in 2021/22 – in
general, most are temporary measures but some may continue so we
estimated the second year cost at around £20bn to £30bn in our two
scenarios.
• We then added in an estimate of how far the budget deficit might rise in
our alternative economic scenarios, based on a standard Treasury rule
of thumb on the relationship between GDP growth and the deficit. This
gave an indirect cost estimate of around £80bn to £150bn in 2020/21 in
our two scenarios, falling to around £22bn to £66bn in 2021/22 as the
economy recovered at different speeds in the two scenarios in 2021.
• We then combined these direct and indirect cost estimates with the OBR
baseline forecasts to get estimates of the potential budget deficits in
2020/21 and 2021/22 in our two scenarios, which in turn provided the
basis for estimates of how the public debt stock would evolve. We
excluded Bank of England schemes from public debt estimates since
these tend to distort underlying trends in the debt/GDP ratio.
35
Public finances scenarios – our approach and key assumptions
Below we set out further details of the methodology used to develop the public finance scenarios in the report:

PwC
• An online survey of 1,000 individuals (representative of the UK population
aged 18 and over) was conducted by the PwC Research team from 16-19
April 2020 to understand some of the impacts of COVID-19.
• One of the questions on the survey was about how the employment status of
workers had changed since the lockdown began in late March. The results for
this question were only analysed for around 650 of the total sample who were
in employment now or at some point in the last 12 months (i.e. excluding
retired people, full-time students not working, the long-term sick and disabled,
those caring full-time for family members and the long-term unemployed).
• A second question on how many of those still working could work from home,
and if so what was the impact on their productivity, was only reported for
around 600 people who remained employed at the time of the survey (i.e,
excluding those becoming unemployed or inactive since the lockdown began).
• Respondents were asked to fill in basic demographic information, what sectors
they worked in and their income levels. The sample was selected to include
individuals from across the UK on a statistically representative basis.
Participants were taken from a panel that PwC Research uses for regular
weekly omnibus surveys on a wide range of topics as an input to market
research projects.
• In an earlier UK Economic Update, we published results of a survey in late
March on the proportion of UK workers who felt they could work from home.
Overall, this was true for around half of workers, but this was just 32% for
those earnings less than £20,000 per year and around 70% for those earning
over £50,000 per year. This reflected both the nature of these jobs and the fact
that lower paid workers were more prevalent in lockdown sectors such as non-
essential retail, hospitality and leisure.
36
PwC Research survey of employment and home working, April 2020
Below we set out further details of the methodology for our home-working survey, issued as part of our weekly Quantibus
survey.

This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors
© 2020 PricewaterhouseCoopers LLP. All rights reserved. PwC refers to the UK member firm, and may sometimes refer to the PwC network. Each member firm is a
separate legal entity. Please see www.pwc.com/structure for further details.
Nick Forrest
Economics leader
T: +44 (0) 7803 617744
E: nick.forrest@pwc.com
Barret Kupelian
Senior economist
T: +44 (0) 771 156 2331
E: barret.g.kupelian@pwc.com
Edmond Lee
Senior economist
T: +44 (0) 7802 660 423
E: edmond.sp.lee@pwc.com
Alex Tuckett
Senior economist
T: +44 (0) 7483 373 911
E: alexander.tuckett@pwc.com
For more information on our Economics services and reports, please contact one of our team above or visit our website at:
pwc.co.uk/economics
For more information on the wider business impact of COVID-19, please see our website at:
pwc.co.uk/covid19
John Hawksworth
Chief economist
T: +44 (0) 7841 803 665
E: john.c.hawksworth@pwc.com
Jing Teow
Senior economist
T: +44 (0) 7525 281 974
E: yong.jing.teow@pwc.com

UK Economic Update - COVID-19

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