A year on – four financial lessons from the Covid-19 pandemic

Posted: Feb 5, 2021
Expert:
Simon Brownbill

As the pandemic enters its second year, Manchester Accountants HURST ask, what have we learned?

A year on – four financial lessons from the Covid-19 pandemic

The World Health Organisation declared Covid-19 a pandemic on 11 March 2020, coincidentally the day that Chancellor Rishi Sunak presented his first Budget. At the time, the Chancellor announced a £12bn stimulus to counter the impact of the pandemic. By November, the Office of Budget Responsibility was estimating the cost had reached £280bn.  

The last year has been a traumatic one in which much has changed, perhaps never to revert to the old ‘normal’. It has also provided some useful financial lessons:

Make sure you have an up-to-date will 

Early on in Lockdown 1.0 the importance of having an up-to-date will (or, in some cases, any will) was highlighted to many people just as it became difficult to arrange one. HURST work with a number of legal firms well placed to help entrepreneurs who often have complex estates and arrangements.

Relying on a state safety net is dangerous

The pandemic saw the number of Universal Credit (UC) claimants more than double to 5.8 million in the year to November 2020.The lowly level of benefits – even after a £1,000 temporary uplift – was a shock for many of those new claimants, including people who fell between the gaps in the job support schemes. The affects on your workforce or new entrants could be long - lasting.                                                                                                                                 

Keep an adequate cash reserve

In a world of near zero interest rates, you may be reluctant to leave cash on deposit, earning next to nothing. However, cash gives you valuable flexibility and time to react to changed circumstances. 

Don’t panic

Whether you’re an active investor or simply make pension contributions, watching the performance of world markets has been stressful over the last year. The UK’s FTSE 100 hit its low for 2020 on 23 March, the day that the Prime Minister launched Lockdown 1.0. It was a dark time, but any investor who panicked and sold up at that point, when the FTSE 100 was below 5,000, would have chosen the worst time to pull out.

By the end of 2020, the index was 29.4% above its March nadir. That performance was also a reminder of another lesson: trying to predict market timing is almost impossible.

COVID and lockdown has affected many business and people's personal finances in many ways, if you think you might need our help, email inspired@hurst.co.uk, or fill out out the below enquiry form.