Economic recovery after lockdown – prospects and pitfalls
The depths from which we must recover…
Quite simply, we haven’t encountered a peacetime situation such as this for over 150 years. The Bank of England are forecasting unemployment of up to 10% later this year, reflecting the virtual halving of available job vacancies in a matter of weeks this Spring. The claimant count is its highest for 27 years, nearing three million people. It seems inconceivable that the private sector can conjure up new jobs to counteract that trend in the near term.
Some sectors have taken the brunt more than others. Retailer have lost £1.8bn for every week of the shutdown – unsurprising when footfall felt by 85% in April. Imports and exports fell by their greatest volume since records began. The housing market literally froze, with viewings and moving impossible – so it is no wonder that house prices are forecast by some to take a knock, perhaps down by 4% this year.
This isn’t a cyclical set of circumstances; this is economic scarring with a structural impact. As such, policy will need to be extra creative to respond to the destruction of whole sets of skills across swathes of businesses that simply won’t be able to retain personnel, let alone afford to invest in training. Our productive capacity will be knocked, and as a result our ability to snap back to business as usual is severely degraded.
Three months of coronavirus stasis have taken their toll, stopping the world in its tracks and smothering normal economic activity. The British economy lost 25% of GDP in March and April. But with shops re-opening, production lines restarting and families reuniting, we are finally on the cusp of our ‘post lockdown’ next chapter. What will this period of recovery look like? While a ‘V’ shaped rebound is highly desirable, a ‘reversed square root’ profile may be the reality. Only by assessing the scale of damage done in different ways across different sectors can we get a true feel for how far we are from normality and the nature of government intervention necessary to restore it.
What options are available to the Treasury, how does Brexit impact on the recovery to come, what role will the markets play and where are the green shoots of recovery to be found?
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Chris Leslie was Shadow Chancellor of the Exchequer in 2015 and formerly MP for Nottingham East.
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