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Regardless of when lockdown is lifted, we face a long, hard road to recovery after coronavirus

Andrew Webb



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Ann Street in Belfast. The hope for the economy as we entered lockdown was that businesses would go into limbo, with jobs protected by the Government. (Justin Kernoghan/PA)

Ann Street in Belfast. The hope for the economy as we entered lockdown was that businesses would go into limbo, with jobs protected by the Government. (Justin Kernoghan/PA)

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Ann Street in Belfast. The hope for the economy as we entered lockdown was that businesses would go into limbo, with jobs protected by the Government. (Justin Kernoghan/PA)

The Government has been at pains to avoid talk of how we exit the lockdown, largely because it wants to maintain focus and discipline and quite possibly because it is a difficult judgment to make.

However, as time moves on and other countries ease back on restrictions, it is inevitable that we will start to think about how the lockdown ends.

The speed at which the Government was able to react with a 'whatever it takes' injection of support to the economy, coupled with a sharpened societal appreciation of the NHS and all key workers, will inevitably and rightly prompt a national conversation about the role of government, public services and the business support needed to recover.

The hope for the economy as we entered lockdown was that businesses would go into limbo, with jobs protected by the Government. The intention was then that the economy would pick straight back up from where it left off - the hoped for V-shape decline and immediate bounce-back.

While that remains the hope, and the furlough scheme is achieving success in that regard, there is data to suggest that lasting damage is being inflicted and a longer recovery might be more likely.

Confidence is falling. McKinsey & Company has been tracking consumer confidence since the lockdown began. The proportion of respondents to their survey that are confident that the economy will rebound and continue as it was has fallen from 23% to 15%

The uncertainty of these times, and the experience of furloughed employment, will inevitably give consumers pause for thought. Further cause for worry about the path of the recovery comes from an Enterprise Research Centre study suggesting there has been a 70% increase in UK company dissolutions in the first quarter of 2020 compared to 2019.

The sectors that are particularly impacted are retail, professional services, ICT and construction. Younger firms also appear more susceptible to closure. The gaps in support for newly established businesses is well-documented.

It is increasingly likely that the economy won't just switch back on overnight and that the climb-back will require ongoing support to people and businesses.

Doing this will require the same 'whatever it takes' attitude from the Treasury and will require an Executive prepared to take bold decisions.

Calls for rates holidays to be extended have emerged in recent days. Other calls will come forth as business identify where they most need help.

Consumers might need help too - businesses need customers. VAT reductions or direct cash payments to people might engender some confidence to spend.

How we pay for the largesse of government is another key issue that will come to the fore in the weeks ahead. Given that austerity and public sector cuts remain in our collective memories, I sense no appetite for a repeat.

It may be a case of the Bank of England issuing and forgiving government debt, 100-year bonds at very low interest, targeted tax increases or even government taking equity stakes in return for bailouts, that forms part of the payment plan.

That's a discussion for another time. The economic and social cost of mass unemployment, especially long-term unemployment, far outweighs the cost of supporting people to remain in work through supporting businesses which remain viable.

Andrew Webb is chief economist at Grant Thornton

Belfast Telegraph