Tragically, the COVID-19 pandemic crisis has had a devasting effect on a large number of individual lives, businesses and the British economy generally.
What makes this perhaps even more tragic is the fact that HMG and The Treasury have indeed acted and provided unprecedented support, which fortunately has provided practical and financial support to varying degrees and levels for both individuals and businesses; and yet economic and accompanying social and personal devastation has occurred.
The latest Office for national Statistics (ONS) figures – 25th November 2020 – though are stark and deeply worrying for the short-term stability and recovery of the UK economy and business survival. It has been suggested that across all sectors 7% of businesses temporarily or permanently close their doors; that 25% of businesses involved in accommodation, catering and food and drink expect to close; and that arts, entertainment and recreation sector has seen highest levels of workforce on partial or full furlough leave, at 34%, as compared with 9% across all industry sectors.
As we write, many businesses of all shapes and sizes fear that the latest set of tiered restrictions may well be the final death knell for them; and whilst measures such as the extension of the furlough scheme to the end of March will see some temporary respite, there are genuine fears as to what happens next and how we will recover.
The impact of the pandemic doesn’t stop its ‘end’ and return to ‘normal’ or a ‘new normal’. There are series issues of business routines, macro and micro business and economic atrophy and changing goal posts, which even with vaccines in place and a return to ‘normal’ will bring its own challenges.
The costs associated with the pandemic and hit on the economy are terrifying and enormous. National debt in UK is now over £2 trillion. UK borrowing expected to reach almost £400 billion for 2020, almost 20%% of GDP. The IEA has calculated a cost of £50 billion per month as the cost of the current crisis, and the IMF has suggested that the deficit will jump to 16.5% in 2020, and that debt levels rise to 106% of GDP.
So, as many ask and fear, how will all this be paid for and how ca we stimulate economic and business recovery? Will there be higher personal and business taxes, lower wages or both? And what happens if a no-deal Brexit occurs and the pandemic impact is compounded by the effects of such a scenario?
Nor is it the macro economic and financial impact alone that is deeply worrying. The ONS reports that the most recent unemployment rate was 4.8%, up 0.7 percent, meaning that 1.62 million men and woman, real lives, were being harmed; and it is likely that as we write, over the ned of 2020 and into Q1 2021 this figure will increase.
The parallel performance and productivity metrices are equally depressing. By September GDP was about 8% below its pre-pandemic level, with the OBR predicting a 2020 fall of 11.3%, with pre pandemic levels not being seen until end of 2022 / start of 2023.
Whilst we may be facing the worst economic slum for 300 years, we have recovered before. The Great Frost of 1709 saw a 14% slump, the 1919–26 depression saw slumps of 10.9% in 1919 and 6.0% in 1920, all of which we bounced back from.
There will be a long and difficult road ahead to recovery, with further disruption, and we must never forget the human impact and costs that have already been, and will continue, to be borne. Businesses and jobs have been lost, some irretrievably. Whilst all of this is deeply distressing, even The Chancellor sounding the seriousness of the current situation, let us remain positive. These dark days will end.
It is unlikely that whilst the new dawn will see a return to an uncharged normal. Already, business and work practices have changed, responded and innovated. At the heart of such recovery will be how firms have used the current crisis as a catalyst for constructive change and how they can adapt and respond to the new ‘normal’ and the challenges and issues it will bring.
Whilst there may not yet been any real green shoots of recovery, there are positive signs and reason for hope. In September 2020 GDP rose by 1.1%, a fifth consecutive month of growth’, with June 2020 seeing growth at 9.1%. Such growth has been led by professional services, education and health, along with manufacturing sector growth and construction which rose 0.9% in September 2020; and overall Q3 of 2020 saw a rise of 15.5% in GDP following a fall of 19.8% in Quarter 2.
Alongside there will be pent up demand, not the least perhaps for a holiday, a pint or six and a damn good nosh up!
More seriously, the recovery will be probably driven across multiple swim lanes and sectors. A vaccine with high levels of efficacy will allow a return to more normal, and so boost consumer confidence and activity, as well as allow those sectors which have bene hardest hit, such as hospitality, retail and tourism, to reopen in a much increased manner. Parallel to these however will be government policies and stimulus, such as build back better and the Green economy which will be used to fuel and drive the recovery; along with continued ‘strong’ performances by the professional services, construction and manufacturing sectors.
Finally, there will be ‘new’ winners, especially those which are innovation and technology driven and based. This in turn will drive higher level skills jobs, which will in turn require education and training. It may also be that HMG will also put together a wider economic and business stimulus, investment and opportunity platforms and frameworks; and maybe a from January 1st 20201, a new global Britain may afford opportunities.
As Johann Wolfgang von Goethe wrote, “…..the greatest thing in this world is not so much where we stand as in what direction we are moving….”