The Covid-19 pandemic has had a drastic effect on the global economy, with the IMF predicting “the worst economic downturn since the Great Depression.” Social distancing measures, supply chain disruption and economic uncertainty have caused British economic growth to plummet – GDP fell by a record 20.4% in April. 

The government clearly sees increased spending as an essential part of the country’s route out of this crisis and Chancellor Rishi Sunak didn’t shy away from opening the purse strings in his 8 July statement. Speaking to a socially distanced House of Commons, Sunak outlined his spending measures to fire up the British economy. Here are some of his key points:

Housing and stamp duty threshold change

The housing market has been hit hard by the crisis. Sunak said that transactions had fallen by 50% in May. It is understandable, then, that he announced a change to stamp duty threshold, to “give people the confidence to move.”

From 8 July to 31 March next year, stamp duty thresholds were raised from the current £125,000 to £500,000 in England and Northern Ireland. This means that nine out of ten people buying a home will pay no stamp duty, a significant saving for the vast majority of homebuyers. Currently just 16% of buyers avoid paying stamp duty.

Job retention bonus

To date, the furlough scheme has supported the wages of over 9m employees across the country. On Wednesday, the Chancellor announced a further support measure: the Job Retention Bonus.

Available from October when the furlough scheme winds down, the scheme will pay employers a one-off bonus of £1,000 for every previously furloughed employee who returns to full time employment in November. To qualify, employees must earn at least £520 per month until January 2021.

With over 9m people on furlough, the scheme could cost the treasury up to £9.4bn.

Kickstart scheme

Young people have borne the brunt of the current economic downturn. They are more likely to be employed in the badly affected hospitality and retail sectors, and youth unemployment is predicted to soar by 640,000 this year.

From this Autumn, the scheme will directly pay employers to create jobs for young people, aged 16-24, who are on Universal Credit. The scheme will cover six months of wages as well as the associated National Insurance contributions. To apply, jobs must pay at least the minimum wage for 25 hours a week. The Chancellor has initially made £2.1bn available to the scheme, with no cap on places.

Green Homes Grant

The Chancellor announced the Green Homes Scheme, which will give homeowners and landlords vouchers worth up to £10,000 to make their homes more energy efficient. The aim of the scheme is to enable homeowners to upgrade their homes with energy saving features like insulation or double glazing in order to reduce energy usage. 

The scheme kills an impressive three birds with one stone: reducing people’s energy expenditure at a time when many may be hard up, supporting job creation and helping the country meet its emissions targets.

Treasury estimates say the scheme could save people who upgrade an average of £300 per year and support 140,000 local jobs. The scheme hopes to upgrade approximately 600,000 homes across the UK and will also apply to landlords.

Support for the hospitality and tourism sectors

The hospitality sector has been hit hard by social distancing measures, with many businesses struggling to stay afloat. 

The government announced a temporary VAT cut for the hospitality and tourism sectors. Standard VAT is 20%, but the government has said it will cut VAT on food, accommodation and attractions to 5% for businesses in the hospitality sector.

 However, those of you hoping for a discounted pint or gin and tonic will be disappointed. While the lower rate applies to non-alcoholic drinks, it doesn’t apply to alcoholic ones.

The scheme could mean consumers save on meals and hotels for the next six months. 

However, there is a big “but”.  It remains to be seen whether businesses pass on the VAT savings to customers or pocket the difference themselves. 

The VAT cut wasn’t the only support for the hospitality sector. Sunak unveiled his “eat out to help out” scheme, a deal meaning people can get up to £10 off per head if they eat out Monday to Wednesday during August. 

Businesses can register for the scheme on a government website and Rishi Sunak gave some detail on how businesses can reclaim the cost. He said: “Each week in August, businesses can then claim the money back, with the funds in their bank account within five working days.”

We all have a different relationship with money. Recognising your money personality can help you better understand yours. Although no member of each group has exactly the same attitude towards their finances, researchers have identified four common attitudes towards money: Money Worship, Money Avoidance, Money Vigilance and Money Status. 

Psychologists think that our internal beliefs around money were formed by our childhood experiences, the community we grew up in and the spending habits of our family. Here is a description of the four money personalities:

Money Worship

If you’re a money worshipper, you might think that money could solve all your problems and that you can never reach a point when you’ll have enough. People who fit into this category are most likely to overspend on themselves or others and rack up credit card debts.  According to research by Creighton University, this is the most common money personality among Americans.

People who fit into this personality type might have to put some measures in place to control their spending habits. They could make a monthly budget and remind themselves to regularly check their bank balance to keep a tab on their spending.

Money Avoidance 

Money avoiders believe that they don’t deserve the money they have and try to avoid thinking about their finances. If you’re a money avoider, you might try to shift your money onto others, rather than take responsibility for making financial decisions. 

Money avoiders can benefit from setting up automatic contributions to savings accounts or speaking to a financial adviser to remove some of the responsibility around their finances.

Money Vigilance

If you’re extremely frugal and firmly believe saving for the future is the best use of money, chances are you’re money vigilant. People who fit in this category tend to derive more satisfaction from reading the interest rate on their bank statement than from buying something new. What’s more, they’re likely to prefer a conservative investment strategy and avoid financial risk.

If you fit into this personality type, you should be careful not to allow secrecy to stand in the way of better money habits. 

Money Status

People who fit into this personality type equate money with status. As a result, they may be driven to earn more money than their peers purely for the sake of earning more money. Although people who hold their net-worth in such high regard are likely to be high earners, they can be liable to make risky decisions and buy expensive things that reflect their wealth. 

If you tend to focus on “money status”, it’s a good idea to stop and think before making an expensive purchase as you could be at risk of buying things on impulse.

The coronavirus pandemic will have long term implications for all aspects of the residential housing market. As restrictions are gradually lifted, the sector is starting to operate again, albeit under social distancing measures. But with the Chancellor confirming that it is “very likely” that the UK is in a significant recession, consumer confidence will be slow to return.    

Development activity 

Although the official guidance allowed construction sites to remain open during lockdown, the majority of large housebuilders shut down due to the difficulty of maintaining social distancing. They also closed sales offices and show homes.

This halt in construction is inevitably going to cause a fall in the delivery of housing and the number of new build sales this year. Data from industry analysts, Glenigan, showed that, as of 31st March, construction had been stopped on sites with capacity for 193,000 homes in England, the equivalent of 79% of the total supply in 2018/19.

But with sites now re-opening and local councils permitting extended working hours to allow the extra time to implement safe social distancing measures, work is beginning again. Under revised guidelines, new homes developers in England have also been able to start reopening show homes. 

Land market

Although the land market had strengthened after the general election result, the coronavirus outbreak has had an adverse impact on it. Some existing land deals went through but housebuilders stopped most new land buying activity.

Of course, any changes in the land market will be linked to what happens in the wider housing market. The number of residential transactions has already significantly reduced. In 2019, 1.175 million house purchases were recorded. This year, Knight Frank predicts the figure could be as little as 734,000, while Savills places its estimate in the range of 566,000 and 745,000. If the housing market is slow to recover due to economic uncertainty, this may cause land values to drop.

Planning and land supply 

In contrast, the planning system has not been so severely affected, with the flow of land still going through. This is partly because the Coronavirus Bill made temporary provision for councils to meet without councillors being physically present. As a result, some planning decisions have still been made and sites have received consent for residential development. 

The outbreak has had an impact, however, on the Local Plan process, with all examination hearings having been postponed. This could mean a significant number of areas may see delays in the adoption of their Local Plans.    

New build sales demand 

Housebuilders will certainly want to start making sales as soon as possible to maintain cash flow. To encourage this, more buyer incentives may be offered. There may also be more Build to Rent developments. One issue to watch out for is that some properties may no longer be eligible for the Help to Buy scheme, as a result of the delays. After April 2021, the scheme will be subject to regional value caps, and only available to first-time buyers.

What will happen to house prices? 

According to a report by Which?, house price growth will stagnate in the short term and price data may fluctuate for some time, given the low number of transactions going through. Savills offers two different predictions depending on the coronavirus outcome. The first forecasts a 5% drop in prices this year and a 5% rise in 2021, while its second forecasts a 10% fall this year and a 4% rise in 2021. It seems it’s going to be a case of closely watching how the situation develops and how the market responds.

The Covid-19 outbreak has provoked a crisis of such enormous proportions that things will not just go back to the way they once were. When some semblance of normality emerges, things will be different. We are set for huge social, cultural and economic changes. It’s unlikely that we will suddenly wake up in a world where anxieties around the crisis have vanished into thin air. Rather, a new normality will gradually emerge from its ashes during a transitional period that could last for an extended amount of time. 

When lockdown restrictions are eased, it’s probable that we will enter a phase where life will hang between normality and lockdown. The government may again assert its need to tighten the rules depending on infection rates or the capacity of the health system. The operation of some businesses may be severely restricted and some social distancing rules may remain for some time. In short, we are not going to be able to draw a line in the sand behind coronavirus when the lockdown ends, as much as we may like to.

How the world will look after the outbreak is difficult to call. It depends on many factors, for instance whether or not countries are able to reduce infection rates around the world, and how long it takes scientists to formulate an effective vaccine.

However, there are a few changes that we can infer from what we have already seen during the crisis.

Working culture seems set to change for good. For many, social distancing has seen a complete shift to working from home. Technologies like Zoom and Slack have enabled many to move seamlessly into this way of working. If employees can maintain the same kind of productivity while working from home, there will probably be a large shift towards remote working in the long run. 

The impact of large scale remote working would be huge. London and Manchester would no longer see their daily deluge of commuters from the surrounding area. Experts have hinted that this could change the entire makeup of the country. Rural villages and suburbia could again become a centre of working life. Big city offices may only host a businesses’ core staff and be used occasionally for whole-company events. Flexible office spaces or co-working spaces could become a regular feature in suburbs, towns and villages.

The Covid-19 outbreak also looks set to accelerate the country’s shift to becoming a cashless society. People are being discouraged from using cash as it’s thought that cash can carry the virus, raising the risk of transmission. The crisis may mean that we are increasingly accustomed to using contactless to make transactions and this could continue even after a vaccine is found.