Lockdown – reflections at the end of week 15
This is the weekend at which, unless you live in Leicester, England’s lockdown becomes lockdown lite. The headline grabber is and will be the re-opening of pubs and the inevitable waves of cheering and condemnation of behaviour that will keep the 24 hour news industry fed for a while. But other things are happening as well. Social distancing rules are changing more widely, giving us greater opportunities to see friends and family, and a number of public places including libraries, playgrounds and places of worship will be allowed to open. And for the more hirsute amongst us, our excuse for our unkempt manes on Zoom calls will disappear because we can now get our hair cut.
This increased freedom and economic activity will produce some interesting results - whilst I have not been told by anyone I know that they’re planning to go to the pub tomorrow, it is reported that the police and NHS are gearing up for something akin to the Friday before Christmas, and who is to say that they’re misguided in doing so. If they’re right, we will see a raucous example of a bounceback effect.
The bounceback effect has been seen in other areas, for example 6 o’clock queues outside Primark on the day that they re-opened, a surge in interest in housebuying and Eurotunnel recording its highest number of bookings in one day ever last Saturday. Given the economic uncertainty which lies ahead and its inevitable effects on employment levels and the sense of job security, it was interesting to see an interview on local television news this week where a family who were checking in for a holiday flight to Spain said, in essence, that they were going away now because they didn’t know when they would be able to do this again.
I’ve written in this series before about the immense difficulties which face the Chancellor, and the bounceback effect won’t particularly ease them. This may seem a strange thing to say given that the bounceback will, of itself, increase GDP. But the issue for the Chancellor will be to try to sift through the figures to establish what of the increased activity is a return to a sustainable level of activity and how much of it is the froth which follows the popping of a champagne cork.
What’s at stake is how much support for businesses and fiscal stimulus is needed, what the blend should be and how to do it. It is encouraging to note that the Bank of England have suggested this week that the UK’s economic outlook improved during June due to higher than expected demand in the economy. On the other hand, we have also seen significant redundancy exercises and will see many more as the furlough scheme is phased out and businesses who have been significantly damaged by the strict lockdown execute their survival plans. The Chancellor will be acutely aware that struggling businesses don’t pay very much tax and that high and persistent unemployment will significantly hamper any recovery.
Dependent on where we are this weekend, we should perhaps be raising a glass or offering a prayer for good analysis, good advice, good judgement and as Napoleon recognised in his generals, good luck for the Chancellor as we enter the second half of what has been thus far the most peculiar of years - it feels like he’ll need all the help that he can get.