To understand how severe the pandemic’s economic toll has been in Britain, you have to stretch back three centuries. The economy contracted by 9.9 percent in 2020, initial estimates from the Office for National Statistics showed on Friday. A study of historical data by the Bank of England shows that recession to be the worst since 1709, the year of the so-called Great Frost, an extraordinarily cold winter in Europe.
Even with nearly 300 billion pounds, or about $415 billion, in stimulus for businesses, jobs and public services including the National Health Service, the restrictions introduced to contain the pandemic shrunk the economy back down to its size in 2013.
Britain’s service sector, which makes up four-fifths of the country’s economy, declined by 8.9 percent. But the pain has been uneven: Restaurants, hotels, theaters and other leisure services have been particularly pummeled, while professional, financial and health services weren’t as badly hurt. A recent survey suggests that about half of hospitality businesses have less than three months of cash reserves.
The economic cost, in some ways, reflects the broader devastation of the pandemic. There have been more than 115,000 Covid-related deaths in Britain, which has the harrowing distinction of recording the most deaths in Europe.
But the outlook is improving, both for public health and for the economy. The country looks set to avoid a double-dip recession, which would have resulted from two consecutive quarters of negative growth following the downturn in the spring of 2020. In the last three months of the year, the statistics office reported, gross domestic product increased 1 percent from the previous quarter, more than most forecasters expected.
Despite the discovery of a more contagious variant of the coronavirus in Britain, the economy grew at the end of the year because more businesses were able to adapt to restrictions, schools remained open and contact tracing and widespread testing added to economic activity. Warehousing and transportation also added to growth as consumers spent more online during the holiday period and businesses stockpiled ahead of the end of the Brexit transition period.
While the economy is expected to contract again in the first few months of 2021 because most of Britain is under a strict lockdown and trade has been disrupted by Brexit, the rapid rollout of vaccines has bolstered expectations for an upbeat recovery later in the year. The Bank of England expects the economy to return to its pre-pandemic size by early 2022 as consumers spend the savings they accumulated while services, such as restaurants, hairdressers and hotels, have been closed.
Millions of people received stimulus payments and unemployment assistance last year — but they are treated differently for tax purposes. In this week’s Your Money Adviser column, Ann Carrns lays out the implications for both.
The good news is that you don’t have to pay income tax on the stimulus checks, also known as economic impact payments. In fact, if you were paid the amount you were expecting and your family circumstances haven’t changed, you don’t need to include information about the payments on your 2020 tax return, the Internal Revenue Service says.
If you were eligible for the payments, but didn’t receive them for some reason — or didn’t receive the full amount — you can still get the money by claiming a “rebate recovery” credit on your 2020 tax return. You must file a return, even if you’re not otherwise required to do so, to claim the credit.
Similarly, if you had a life change in 2020 — like the birth of a child, or if you are supporting yourself and are no longer claimed as a dependent on a parent’s tax return — you could be eligible for more cash by claiming the credit on your 2020 return.
Unlike stimulus payments, jobless benefits are taxed by the federal government as ordinary income. (You won’t, however, pay Medicare and Social Security taxes on jobless benefits as you would with paycheck income.)
You should receive a form, 1099-G, detailing your unemployment income and any taxes that were withheld, which you enter on your tax return.
You’ll probably also owe state income taxes on the unemployment benefits, unless you live in one of the nine states that don’t have a state income tax or a few others that exempt jobless benefits, including California, Montana, New Jersey, Pennsylvania and Virginia. Wisconsin exempts jobless benefits for state residents, but taxes benefits paid to nonresidents, according to the Tax Foundation.
Disney on Thursday reported a 98 percent decline in quarterly income, the result of steep losses at its coronavirus-devastated theme park division. But the company’s fledgling Disney+ streaming service is now closing in on 100 million subscribers worldwide, enough to easily convince investors that Mickey Mouse is well positioned for the future, despite the continuing pandemic.
Over all, Disney pulled off a slim $29 million in profit, or 2 cents a share, down from $2.13 billion in the same period a year ago. The company’s vast theme park business was the most troubled, with more than $2 billion in operating losses in the company’s first fiscal quarter, which ended Jan. 2. That was the result of major properties that remain closed, like Disneyland in California, and a dramatic decline in attendance at the flagship Walt Disney World in Florida, which is capping daily attendance at 35 percent of capacity as a coronavirus safety measure. Other Disney divisions — moviemaking, the ESPN cable network — mostly had results where the negatives (the cancellation of movies) were offset by positives (sharply reduced film marketing costs).
Revenue totaled $16.2 billion, a 22 percent decline.
Wall Street had expected per-share losses of 41 cents and revenue of $15.93 billion.
From a stock market standpoint, Disney has had a year of extremes. In March, when the company first closed theme parks, postponed movies and, for a time, operated its sports cable network without any major live sports to broadcast, shares declined 38 percent. But investors have been remarkably forgiving since then, even as Disney reported quarter after quarter of doomsday financial results. Disney shares closed at $190.91 on Thursday on the New York Stock Exchange, by far an all-time nominal high. Even some senior Disney executives have been slack-jawed by the surge — the best of times, the worst of times.
Analysts say investors are overlooking near-term losses and focusing on the potential of Disney+, which now has 95 million subscribers worldwide, the company said. It had only about 30 million subscribers a year ago (and did not exist a year and three months ago). Increasingly, streaming is looking like a two-company game, at least at the top, between Disney and Netflix, which had a long head start. Disney+ has benefited from the pandemic, stepping in to sell a monthly subscription to homebound families. But the upstart service also found a megawatt hit, “The Mandalorian,” straight out of the gate. A plethora of original television series and movies are headed to Disney+ this year.
Even so, there is one not-so-minor asterisk on the heady subscriber numbers: Average monthly revenue per paid Disney+ subscriber declined 28 percent, to $4.03. That is because Disney+ has signed up millions of subscribers in India by offering them an almost-giveaway price.