Anne Marie Waters
Tuesday July 7th 2020
It’s back! Our economy has now pretty much re-opened, so how is it going? The short answer is: mixed (again).
The re-opening of pubs and restaurants (and others) on July 4th did not deliver the economic boost that was hoped. High street footfall for that weekend was still down by almost half compared to the same weekend last year. In response, and with the end of the furlough scheme looming large, the British Retail Consortium (BRC) has asked Chancellor Rishi Sunak to take action to boost consumer demand. According to Sky News, the BRC urged the government to “act fast to protect the three million retail jobs, as well as millions more throughout the supply chain”.
Its chief executive Helen Dickinson said “It remains a long way back to normality for the retail industry.
“The reopening of pubs, cafes and other hospitality businesses this Saturday does not appear to have benefited shops much, with the Saturday showing more modest growth than the days prior to these locations reopening.
“By European standards, the UK’s recovery remains slow, and while safety measures introduced by retailers have been well received by customers, many shoppers are still reluctant to visit physical shopping locations.”
Indeed visiting shops has become more cumbersome, and many will be put off, as can be seen by the sparse numbers venturing out in comparison to 2019.
Barclaycard said spending on leisure however was up by 19% on the previous weekend, but still down by 45% compared with a year ago.
For now, we are forced to continue our wait-and-see approach. The next big hurdle on the path to ‘normality’ is the end of the furlough scheme. The Chancellor’s Job Retention Scheme has been extended until October, and is then that employers will be called upon to pay their staff, something that the government has been doing since March.
Meanwhile, Sunak continues to spend. In a bid to rebuild the economy with ‘green’ concerns in mind, the Chancellor has promised £2bn for projects including home insulation. This is part of a £3bn package to “cut emissions”.
The BBC speculates today as to what steps Rishi Sunak may take next, and the idea of VAT cuts is floated. It is hoped this will increase spending, because as the BBC notes, “A skilled workforce isn’t enough; you need the demand for their talents”.
The budget will provide a chance for the Treasury to take a fresh approach, but it will be a difficult path. Sunak is due to set out the country’s finances in the autumn, and he will be expected to explain how he intends to fund coronavirus spending, and what more needs to be done to accelerate the economic comeback.
As usual, let’s end on a positive. A few months ago, we were lost. We were setting out on a journey with no discernible end in sight. Now we’ve a bit more clarity on the road ahead, provided of course there aren’t more nasty surprises.
Anne Marie Waters
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