Trust in UK government dwindling due to COVID-19
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While professional concerns over the ongoing pandemic have remained stable in the last couple of weeks, worries about personal and family well-being have risen again, by 8% and 7% respectively. While the risks of a second wave and a looming recession persist, they are nothing new on the radar of our COVID research panel, so what is driving the increase in concern?
Loss of confidence in the UK government
Close to half (44%) of respondents to our bi-weekly survey now feel ‘very’ to ‘extremely’ worried about the UK government’s COVID-19 guidance – a level last seen when the UK economy first started reopening at the end of June. Despite confusion about ever changing rules, the proportion most worried was previously on a declining path, but this changed at the beginning of September.
Some in our research panel say that the government appears not only incapable of making its mind up about public guidance, but it can no longer explain its stance, which appears increasingly driven by public opinion rather than science. The regular u-turns in COVID-19 rules are eroding the public’s trust.
Macro effects of the pandemic to be felt until at least Q2 2023
This measure has been perhaps the most volatile in recent weeks, with double-digit swings reflecting fluctuating economic optimism. In the last two weeks, the minimum expected duration of macro effects has extended by 21% to 2.5 years from the start of September.
The looming economic recession is a key concern for UK pensions professionals, and rising unemployment will likely lead to a prolonged lack of consumer demand. A no-deal Brexit will bring additional challenges. All this means we have likely not yet seen the full scale of deterioration in sponsor covenants.
Fiscal, inflationary and regulatory pressures continue building
88% now think that taxes will rise as a result of the pandemic, compared with 69% two weeks ago and prior. Additionally, 88% expect inflation to rise – a proportion which has risen significantly in the last month. If these risks materialise, they will further dampen economic growth. Rising interest rates will only add to an otherwise perfect storm.
What are the key risks to the economic recovery post-COVID? Click here to tell us in our bi-weekly survey.
Previous articles in this series:
- 26/08: Another step in adjusting to COVID-19 uncertainty?
- 19/08: COVID-19 outbreak to last at least until February 2021
- 12/08: Trustee sentiment around COVID-19 pandemic deteriorates
- 05/08: Relaxed attitudes towards COVID-19 threaten economic recovery
- 29/07: Does COVID-19 mean the ‘end of the world as we know it’?
- 22/07: COVID-19 could weaken covenants and raise taxes and inflation
- 15/07: COVID expectations set, except for economic recovery
- 08/07: COVID concerns rise as economic outlook improves - why?
- 01/07: Lockdown easing raises COVID concerns
- 24/06: The UK government’s COVID-19 guidance attracts criticism
- 17/06: COVID concerns shift to life after lockdown
- 10/06: Will lockdown easing cause COVID concerns to rise?
- 03/06: COVID concerns at an all-time low – is the worst over?
- 27/05: Personal COVID concern subsides – but this may be a problem
- 20/05: UK pension trustees worry there may be no ‘going back’ after COVID
- 13/05: UK pension schemes don’t trust the lockdown exit strategy
- 06/05: Concerns over duration of COVID lockdown and macro effects intensify
- 29/04: Professional COVID concern spikes by 18% as trustees brace for a longer lockdown
- 22/04: Macro effects of COVID to last until 2022, with personal concerns up by 10%
- 15/04: COVID concerns fluctuate – there is no path to normalisation in sight
- 08/04: The magnitude of COVID’s economic impact remains unclear
- 01/04: Have UK pensions schemes settled into the ‘new normal’ of COVID-19?
- 25/03: Rising levels of concern about COVID and a changing economy
- 23/03: What do pension funds think about the economic impact of COVID-19?
- 19/03: COVID-19: Government response divides pensions community
- 18/03: 96% of pension funds and trustees preparing for a long-term COVID-19 fallout
- 18/03: mallowstreet Flash Insights Report: COVID-19 – what’s on trustees’ minds
About the COVID Concern Index
This short survey helps gauge sentiment of our community on the pandemic. The results are distributed via the community newsletter. Until 31/08/2020, this was a weekly survey. From 01/09/2020, the survey shifted to a bi-weekly cadence.
The COVID Concern Index values should be used as indication only and do not constitute advice. Their values are bound by the choices available in the survey on which they are based.
COVID Concern Index:
- 0 = respondents are not worried at all
- 100 = respondents are extremely worried
Expected minimum duration of outbreak:
- Lowest possible value = 1 month
- Highest possible value = 6 months
Expected minimum duration of macro effects:
A methodology change took place on 15/04/2020, affecting data from 21/04/2020 onwards.
Prior to 15/04/2020:
- Lowest possible value = 3 months
- Highest possible value = 12 months
Following 15/04/2020:
- Lowest possible value = 3 months
- Highest possible value = 60 months
Concerned about the coronavirus outbreak and its macro implications? Click here to take part in the bi-weekly COVID-19 survey.
