Debt and deficit: UK coronavirus spending and how it impacted the economy

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Creating a hospitality surge has arguably been number one priority of the United Kingdom’s government to boost the economy since lockdown lifted. Figures released by Her Majesty’s Treasury reveal restaurants across the country have made more than 87,000 claims on discounted meals, via the Eat Out to Help Out scheme. By the third week since its inception, the British government had spent £336 million reimbursing businesses.

The scheme, which was announced last month, was one of many plans devised to drive custom to establishments, in support of almost 2 million jobs within the hospitality sector. Data from OpenTable, a booking system used to track and monitor restaurant reservations in the UK, revealed that 10.5 million meals were claimed for in the first week, rising to a total 35 million meals in the second, continuing the upward trend in the plan’s popularity. This indicates an average increase of 12% in the first week and 41% in the second week in relation to the same period in 2019. During the third week, the number of customers at restaurants was 61% higher on average than the same days last year.

Photo: Annie’s Burger Shack Nottingham/Facebook

Data released by HM Treasury also revealed over 34 million searches on the Eat Out to Help Out restaurant finder, from 13 million unique users. Approximately 80% of hospitality firms halted traded in March and April, with 1.4 million workers furloughed, the highest figures in any public UK sector.

Rishi Sunak, Chancellor of the Exchequer, said, “[the] figures continue to show that Brits are backing hospitality, with more than 64 million meals discounted so far, that is equivalent to nearly every person in the country dining our to protect jobs. The scheme has reminded us how much we love to dine out, and in doing so, how this is helping to protect the jobs of nearly 2 million people who work in hospitality. I am urging everyone, where they can, to continue to safely enjoy a meal while the scheme remains open.”

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Figures follow previous concerns about how the efficacy of the scheme would be measured, and many feel the multitude of meals claimed for indicates great success.

The government’s offer was aided by pleasant weather at the beginning of August and has encouraged customers to return to restaurants. However, as the winter rolls in and the furlough scheme comes to an end in October, there are concerns that a brief stint of discounted meals will not be enough to truly revive a struggling economy.

Hospitality provides over £30 billion in taxes every year. The British government has now injected £330 billion of its own money to the economy in one month, far outweighing the average value the sector contributes to taxes yearly. Despite the plans to save the sector, hundreds of branches across the United Kingdom has faced closure since the pandemic. UK Hospitality reported revenues plummeted by 87% between April and June this year, compared to the same period last year.

Schemes offered by the government have aided only the branches of the hospitality sector that have been able to reopen; thus, excluding traders that cannot operate safely within the COVID-19 restrictions. These measures include cutting VAT for tourism and hospitality by 15%, a £2 billion Kickstart Scheme and a £8.8 billion investment in new infrastructure. However, even large household names like Gusto and YO! Sushi, have been unable to commit to reopening every branch, meaning many staff remain furloughed, displaced, and facing the possibility of redundancy come October.

The United Kingdom has officially entered a recession for the first time in 11 years. The Office for National Statistics has released figures which indicate the UK’s debt has now risen over £2 trillion since spending increased during the pandemic, £227.6 billion more than at the same point last year. Recent figures show the UK government borrowed £26.7 billion in July 2020, the fourth highest borrowing in any month since 1993. The UK borrows within the financial markets by selling bonds, and repayments are promised to the holder of the bond by a certain date. Interest is also paid to whoever own the bond in the meantime.

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Photo: Nick Fewings/Unsplash

Government net cash requirement in the current financial year-to-date (April-July 2020) was £199.5 billion, £187.2 billion more than in the same period last year – the highest cash requirement in any April to July period on record. Although there were attempts to curb the economic impact of the virus and prevent this level of debt, necessary coronavirus-related spending included testing and PPE, emergency coronavirus wards, furlough pay, as well as tax cuts and reimbursements on discounts. Typically, large government debts are repaid on the due date with new money – and the UK already has the backing of the Bank of England to proceed with an initial £200 billion of quantitative easing. Given these facts, perhaps the al fresco dining discounts may serve only as a momentary guise under which the government attempts to veil its capital concerns.

However, external factors might sooner indicate that the supposed façade of eatery concessions may not be enough to sustainably reboot the economy. Temperatures are dropping as the country heads into September, meaning a likely decline in outdoor dining. Social distancing measures are still being strictly enforced, and many facilities are operating at reduced capacity indoors. Local lockdowns have also been permitted across the country, with methods ranging from placing limitations on party sizes at public places, to preventing different households from mixing with one another. Now, local governing bodies have been issued with rights to close venues if they are not adhering to social distancing laws.

The government placed a sharp focus on engineering an economy boom by strengthening the hospitality industry, but could this be the reason the UK sees another bust like the one that occurred in April?

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Emily Lowes is an Eat News correspondent in the UK who has experience writing social, political, and economic features for a range of news outlets. She is an avid communicator, activist, and advocate for the freedom of information.

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Eat News is a Taiwanese digital media, analyzes current events and issues through column articles, videos, visual aid, and exclusive interviews.

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