How COVID has affected AD in the UK

COVID has lead to millions of people losing their jobs, and everyone spending more time inside and less time out shopping. Due to this the Uk’s aggregate demand has shrank massively.

As a result of COVID, consumer spending for the most part down in all industries, the main cause of this is lock down, due to shops being shut to try and contain the spread of the virus. Not only this though there is now an uncertainty of job security, which has lead to consumers being more cautious about their spending of money, with a large number of people expecting their household income to continue to fall in the upcoming months. However, there are some businesses which have managed to flourish despite the tough circumstances. An example of this is Ocado , an online retail company which brings people’s groceries and other goods to their front door. Ocado’s sales have exponentially gone through the roof as many people, whether at risk or not have decided to order their food to their door, as it allows them to spend less time in contact with people again another method at trying to contain the outburst of the virus.

During the global pandemic investment has gone down massively, in the UK index fell by 14.3% during 2020. The main cause of this would be due to lack of economic activity. As consumer confidence is low due to the number of unemployed people rising, it means that consumer spending is decreasing creating an unappetizing market for investment.

Government spending has changed massively as a result of COVID. Their spending on public transport and sectors similar would have of decreased, due to their lack of usage. However, due to schemes such as the furlough, government spending would have of also gone up massively as a result of that. The furlough scheme is a scheme which meant that people unable to work during these difficult times are still being paid 80% of their wages (up to £2,500 pounds a month). The government decided to do this, as it reduces the number of jobs being lost as it keeps people employed. Around 9.6 million jobs from 1.2 million different employers have been furloughed, since the scheme began in the UK.