State of the Economy: Much the Same

Anne Marie Waters

Tuesday August 11th 2020

 

It feels as though this column only ever features bad news, but that is hardly surprising given the times we are in.  Those times are tough and getting tougher.  It’s worth a quick recap to remind ourselves where we are.

It began in mid March, just about 6 months ago (it feels like a lifetime).  Actually of course it really began a couple of months earlier in China when a new virus, Covid-19, was first discovered.  China fails to take action to prevent its spread, and we have a global pandemic on our hands.

The Western world goes in to “lock down”.  This means that incredibly, businesses throughout the entire West (with the only exception of Sweden) simply shut their doors.  For three months or more, everything stood still, no businesses were open unless they sold food or medication.

What do governments do in such a scenario?  They spend; and spending is exactly our government has been doing.

To be clear, I support the measures taken to support business through this lock down, but what I don’t support is the lack of clarity on how we intend to get back on our feet, nor any reassurances that the British taxpayer will not foot the bill all by itself.

These measures included making billions available to business in grants and loans.  One big bill the government would pay was staffing costs.  The ‘furlough’ scheme was the Chancellor’s attempt to keep people in work by funding the bulk of wages throughout the lock down and beyond.  That furlough is still in place, but unemployment has been shooting up regardless.  Last week, I reported on yet more job losses, and this week I will do the same.

The oil industry has been hard-hit during this crisis as demand collapsed.  Now the BBC reports on its latest victim: the North Sea oil industry.  It has been described as “close to collapse”.  The price of oil makes it unprofitable, but that’s not its only concern.  Investment has all but stopped.

Robin Allan, chairman of the independent explorers’ association Brindex, said the industry was “close to collapse”.  He said:

“It’s almost impossible to make money at these oil prices.  It’s a huge crisis.

In terms of new investments – there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone.”

Throughout the pandemic, business has transformed.  Online sales have skyrocketed while the high street has collapsed.  Signs of going back to pre-lock down high street sales are not yet appearing.  In fact, there is every reason to believe that parts of the transformation are permanent.

Chancellor Rishi Sunak offered support in a variety of ways, including, most recently, by picking up half the bill at restaurants.

This scheme is now a week old and has been taken advantage of more than 10 million times.

The BBC reports:

“Under the scheme, which is intended to boost the struggling hospitality sector, the government pays for 50% of a meal eaten at a cafe, restaurant or pub on a Monday, Tuesday or Wednesday.

The discount, which is due to run through August, is capped at £10.

Treasury estimates put the average claim at close to £5, making the cost of the policy around £50m so far.

HMRC said that, as of 9 August, it had received 10,540,394 claims under the scheme.”

Every week for months the story has been unchanged: unemployment up, government spending up, positivity down, and a coherent government plan for how to pay for it all seems as far away as ever.

 

Anne Marie Waters

Leader 

For Britain 

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