Coronavirus and the UK economy

Abstract

First paragraph:The UK economy is facing a precipitous drop in demand. This fall is likely to be short-lived and is specific to a range of customer-facing industries. Social distancing is already having a hugely detrimental effect on transport, tourism, sport and hospitality. What is the appropriate policy response? To avoid serious recession, the government must act to maintain demand. Many businesses will soon run short of cash and be forced to lay off workers. This will cause hardship and lead to further falls in demand. Many of these are viable companies that have been hit by an unprecedented shock. Thus the appropriate action for government is to replace the lost demand by compensating companies hit by the effects of coronavirus. Thus, it would “buy” the empty hotel beds, the empty passenger seats etc. This measure would allow companies to continue paying their employees and meeting their capital costs.