GDP rose by 1.5% in 2019, surpassing the 1.3% recorded in 2018. Though a slight improvement on 2018, with 2019 being the first year of improvement in growth since 2014, it nonetheless continued the trend of subdued growth exhibited since the financial crisis, which has been driven by Brexit uncertainty in recent years.

GDP fell by 20.4% on a quarterly basis in Q2, while the economy was 21.7% smaller than the same period a year earlier. This actually represented better performance than expected by some projections. However, while a recession on this scale was widely anticipated, it should not be underestimated. This is the deepest recession since official records began, driven by a similar drop in household consumption during lockdown.

However, as the economy has started to reopen, the recovery has begun. Monthly GDP grew by 2.4% in May and 8.7% in June. As long as the UK avoids a damaging second wave of COVID-19 infections resulting in another national lockdown, this growth is expected to continue and restrict the recession to the first half of the year.

Lockdown had a significant effect on the number of businesses able to continue trading. Between 23 March and 5 April 2020, 24% of businesses reported temporarily closing or pausing trading to the ONS’ Business Impacts of COVID-19 Survey (BICS). Comparing across industry however, highlights how disparately COVID-19 has impacted business performance.

Company insolvencies in England and Wales declined by 23% between Q1 and Q2 of 2020. The fall in liquidations was partly driven by government support measures, which helped prevent a cascade of bankruptcies arising from cash flow issues.

Ernst & Young reported 165 profit warnings for Q2 2020, compared to 313 in the whole of 2019. This followed a record 301 warnings in Q1 2020, with 70% of these warnings issued by FTSE 350 Travel & Leisure companies. This suggests that while government policies have been effective in preventing business closures and unemployment, many UK businesses will struggle through H2 2020 and into 2021.

Sectors capable of delivering their services digitally were more resilient, able to rely on remote working to continue operating.

However, in most cases, businesses were affected by COVID-19’s indirect impact through its effect on the cash flows of clients and stakeholders in their respective markets. Financial pressure induced by these issues drove businesses to postpone investments, further reducing demand for goods and services beyond.

The pandemic has had diverse impact on different industries. Those hit hardest have been sectors dependent on mass gatherings or customer-facing interactions such as high-street retail, hospitality, leisure services, tourism and transport.

COVID-19’s effect on workspaces has been unprecedented, ushering in a regime of remote and agile working where possible. Although necessary in order to prevent the spread of the virus, the benefits of this shift towards the next normal are not shared by all stakeholders.

This combination of health concerns, budgetary pressures and a slowdown in investment will put downward pressure on office property prices and rents, opening opportunities for re-negotiations over existing tenancies to ensure the long-term health of tenants, landlords, and more broadly the property market by preventing a wave of defaults.

The continued uncertainty over Brexit presents even more challenges to businesses. As the end of the Withdrawal Agreement approaches, a failure to negotiate a trade deal between the UK and EU could add to economic difficulties if a trade agreement is not reached - with a significant impact on services reliant on mutual recognition and which could see the introduction of a number of non-tariff barriers to UK services exports seeking to operate within the Union.