State of the Economy: Struggling Again

Anne Marie Waters

Tuesday 28th July 2020

 

The UK hospitality sector, it was reported today, dropped a massive £30 billion worth of sales during lockdown.  Revenue plummeted by 87% between April and June, in comparison to the same time last year.  This means the state will be down £38 billion in tax revenue in 2020.  This is a blow for an already overstretched public purse, and given the industry employs 3.2 million people, potential job loss will add to the burden.

This is a burden that will be shared by most of the world.  The Financial Times has published an extraordinary graph showing employment downturns across the globe.  Job losses are in the millions and every major nation has suffered vacancy drops of between 20 and 60%.

The uptake of entertainment has also dropped significantly, with a notable exception in Sweden – which did not impose any lockdown throughout the crisis.

The FT writes that tourism is recovering, but there is bad news in that regard for Spain.  The UK government has imposed a 14 day quarantine on people returning from holiday there.  This is  something few people can afford in terms of time or money, and will have a huge impact on Spain’s important tourism trade.  Pedro Sánchez, the Spanish Prime Minister, has called the measures “unjust.  According to the BBC:

Mr Sánchez said he was hoping to convince the UK to reverse its decision to remove Spain from the list of countries exempt from quarantine rules.

He said: “We are talking with British authorities to try to get them to reconsider a measure that, in our opinion, is not well adjusted if we consider epidemiological criteria of Spain, particularly in some tourist destinations in our country.”

Back home, since my last economics update, mandatory face masks have been introduced for shops and enclosed spaces – this now applies in both Scotland and England, but not Wales.

Meanwhile, negotiations for Brexit continue; clarity on this, as soon as possible, can only benefit the economy’s recovery, but clarity is in short supply.

A major sticking point is the UK’s desire for tariff-free access to the EU market, while the EU wants assurance of a ‘level playing field’ in return.  This would mean that the UK would be obliged to mirror EU laws on workers’ rights and other regulations, to prevent us undercutting EU countries.

According to the Financial Times:

The EU is adamant that it will not allow the UK “zero tariff, zero quota” access to the EU single market unless it signs up to a set of “level playing field” principles that minimise the risk of Britain undercutting the EU on environmental regulation, workers’ rights and state aid to business.

Brussels has signalled a willingness to drop its demand that the UK accepts future EU state-aid rules and the oversight of the European Court of Justice (ECJ), but in exchange it wants the UK to sign up to a “shared philosophy” on future subsidy policy. Britain argues that an independent dispute resolution system should be sufficient to give confidence to both sides, but has thus far refused to tell Brussels what the UK’s new subsidy regime will look like. 

Mr Barnier [EU chief negotiator] told EU diplomats on Friday that the level playing field was the most difficult subject in the entire future-relationship negotiation. Closing the gap here will be critical to any deal.

After a couple of weeks of relatively good news – economy reopening for example – we are back on the bottom end of the see-saw this week.  Uncertainty remains, and new (and rather surprising) restrictions in terms of face masks will slow recovery down once again.

Who knows what the news will be next week?  The only consistency throughout this pandemic has been unpredictability.  We’ll soon see how the next chapter will read.

 

Anne Marie Waters

Leader 

For Britain  

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