Bill Jamieson: Grim wait for an exit strategy proves the mother of invention
The prospect of another three weeks at least of empty high streets, shuttered businesses, sharp rises in unemployment and economy-killing social distancing is almost too much to bear without some sort of plan – indeed any plan – for a recovery out of the Covid-19 lockdown.
For many thousands of companies, particularly those in the retail, tourist and hospitality sectors – hotels, restaurants, pubs, social and conference venues – it may be already too late. Every day brings news of delays and bottlenecks in getting vitally needed cash and grant aid to stricken businesses. Access to that funding is proving too difficult or too slow, and fewer than 2 per cent of the 300,000 inquiries to the government’s loan scheme are thought to have reached fruition so far. Meanwhile supply chains remain seized up and manufacturing remains in lockdown.
A Royal Bank of Scotland Purchasing Managers survey last week tracked how Scottish firms were shedding jobs in March at the fastest rate for more than 20 years amid “shockwaves” from the coronavirus pandemic.
The services sector reported its steepest drop in activity since its PMI index began in 1998, while manufacturing output fell at its sharpest rate since early 2009. The survey also showed that Scotland outpaced the rest of the UK in terms of job cuts last month.
If you thought that was grim, consider the Office for Budget Responsibility forecasts that economic activity across the UK overall in the second quarter is set to plunge by 35 per cent. Assuming a three-month lockdown that is then phased out over another quarter, that would see unemployment rocketing to 10 per cent of the labour force, the highest level since the 1990s, despite massive payroll subsidies, and GDP would fall over the year by 13 per cent – the biggest annual drop on some calculations since 1709.
Government ministers and advisers now wrestle with the huge complexities of phased or partial lifting of restrictions – but which activities, exactly? Which age groups? All schools or just primary schools? Outdoor pubs and restaurants or those with customers staying two metres apart? And what travel would be permitted?
How do we begin to police an economy where something like a return to normality is allowed for businesses in some areas but most remain in lockdown? Perhaps the reason why minsters have been so reluctant to reveal their exit strategy plan so far is that there isn’t one – or one that would bear scrutiny: too many variables and uncertainties for a partial relaxation that is do-able, credible, capable of being policed and which does not run the risk of a second deadly coronavirus wave.
And as the exit strategy clamour intensifies, many are now doubting whether we will see anything like a recovery to “normal” for the economy. Specifically, this is growing questioning over the IMF expectation of a recovery in the US and Europe of 4.7 per cent next year and in the UK of four per cent. Likely relief will be partial and spasmodic. Customers will remain cautious long after the worst of the pandemic has passed.
Many will be wary of returning quickly to popular social destinations. Others will feel the need to replenish savings and pensions after the market slump. International trade is likely to remain depressed for years. And economies will have to contend with eye-watering levels of debt, portending tax increases for years ahead.
More immediate are the complex problems of devising a gradual recovery strategy that can be sustained and policed. Last week brought a chilling remark by Professor Neil Ferguson, a key adviser to UK government ministers, that “significant” social distancing will have to stay in place until a vaccine or treatment is found. That would sound a death-knell not just for individual hotels and restaurants but for many coastal communities critically dependent on the visitor economy.
At the same time, retail businesses would have to live for months ahead with social distancing rules and restrictions on the numbers allowed into shop premises at one time. Entertainment, conferencing and cultural events may need to adopt pre-booking systems and rationing.
Finally, any partial or staggered exit from lockdown would need to be fully advertised and explained to the public, for without massive public consent and compliance, such a system could quickly break down, giving rise to social tensions.
Against such a background, it is a struggle to find any positive aspect. But encouraging and growing signs of enterprise and adaptability there are.
Food suppliers and local produce companies have emerged with fleets of delivery vans to take sales of meat, fish, bread, vegetables and milk to the doorsteps of customers.
Pubs and restaurants are offering door-delivery meals. Garden centres, scunnered by totally contradictory rulings from local officials, have resorted to imaginative click-and-collect sales of summer bedding plants, shrubs and compost. And hundreds of retailers have boosted their online service and range of products.
DIY sales are booming while tens of thousands of households are adapting spare bedrooms into home offices, with a surge in demand for extra computers and software communications gadgetry. Water companies are making use of WhatsApp video calls instead of face-to-face visits to help with household crises such as loss of normal water supply or low water pressure.
At the same time, governments both north and south of the border have moved to fill gaps in the financial lifelines offered to business and speed up the bureaucratic process of claim process and delivery.
For these reasons, the scarred economy that will emerge from this crisis will be different to the one pre-pandemic – with a permanent leap in online business, internet-driven services, a swing to locally produced goods and services and a massive increase in home working.
It is this adaptability of response that is not easily captured in those deathly GDP forecasts but which offers a springboard of hope while we wait for that great government exit strategy… and wait.
Want to join the conversation? Please or to comment on this article.