Literature Review

According to OECD (2020), unemployment is expected to increase as a result of COVID19 impact on the economy. The young graduates are projected to be the most hard-hit because they do not have the work experience or financial muscle to start small businesses (OECD, 2020). The pandemic has caused companies to close or downsize, forcing many people out of employment. New graduates are set to compete over a few job opportunities available, leaving many of them without jobs for a prolonged period. Unemployment increases the number of dependencies and also affect society's purchasing power. In essence, there will be an increase in the number of people who rely on relief support to survive.

According to King’s Business School (2020), COVID-19 will leave thousands of small businesses bankrupt, which means loss of jobs and incomes to many. The closure of business firms denies the owners a source of livelihood. The number of people living in poverty will surge as families exhaust the income they had saved from collapsed business and the jobs they lose to COVID-19.

The 2020 quarterly report by the Bank of England projects that the economy is going to shrink as investment continues to drop. Corporations and individuals have lost opportunities to make incomes, implying that there is little or no saving for investment. Investment in small business increase with increased income and saving. Loss of jobs and businesses reduce people to survival, which does not favor savings and investment. According to the Bank of England (2020), investment fell by 5 percent in the first quarter of 2020. This was at the time when Covid-19 had not peaked. As the virus surge and takes long to manage, the investment will continue to go down, leading to further shrinkage of the economy.

Comley (2020) established that countries are going to increase taxes to try and meet their financial obligations, which include serving debts. Tax inflation will hurt the taxpayers and business entities more as they struggle to pay taxes and meet their financial needs. High taxation will also result in the low purchasing power of the public, impacting the recovery of business and the economy at large.

Mallya and D'Silv (2020) assert that the UK gross domestic will dwindle due to a drop in production. The closure of business restriction to traveling reduces the productivity of the economy. The labor force and machinery are underutilized. Covid-19 has made it hard for the economy to maximally use resources to produce goods and services, affecting the GDP (Mallya & D'Silv, 2020). The shrinking economy due to low production will also affect countries' ability to borrow and cushion themselves from the effects of the pandemic.

References

Bank of England (2020). The impact of Covid-19 on businesses’ expectations: evidence from the Decision Maker Panel.

https://www.bankofengland.co.uk/quarterly-bulletin/2020/2020q3/the-impact-of-covid-19-on-businesses-expectations-evidence-from-the-decisionmaker-panel Comley, P. (2020). Inflation Tax: The Implications of the COVID-19 Debts for Personal Finance. Pete Comley.

King’s Business School (2020). Covid-19's impact on business, employment, and consumer behaviour. King’s Business School.

https://www.kcl.ac.uk/business/research/covid19reasearch/understanding-covid-19'simpact-on-business-employment-and-consumer-behaviour

Mallya, P. D. & D’Silv, R. (2020). Impact of Covid – 19 Crisis on the Global Economy and Other Sectors Worldwide. Idea Publishing.

OECD (2020). OECD Economic Surveys: United Kingdom 2020. OECD Publishing.