Lockdown – reflections at the end of week 16
The Chancellor’s statement this week was, as it would not have taken extraordinary gifts of clairvoyance to predict, met with a wide array of reactions. Whilst there were some in the news media who suggested that the Chancellor should not have committed public money in further business support measures, a view based on free market philosophy and the apparent belief that the economic effects of lockdown presented a great opportunity to exorcise the UK of zombie businesses, the majority expressed a broad approval. Nevertheless, even within the friendly camp there were comments that he had not gone far enough, that furlough should have been extended and that the plight of a number of industry sectors had been ignored. At the end of it all, the inevitable conclusion must be that in these most unusual of times, the complexity of the Chancellor’s balancing act means that it will be impossible to please everyone.
It is plain that we are going to see significant job losses in the months to come. This is not only because the lockdown closed down the operation of many businesses and significantly impaired the trading of many others. A substantial secondary cause is that the lockdown will have accelerated changes which were in the offing in any event. Yesterday saw two significant staff reduction announcements, one being from Boots and the other from John Lewis. Both announcements indicated that the battle between high street trading and online retail was going to bring reorganisation and job losses in any event, and that this process had been accelerated by lockdown. There are many other businesses who will have shifted functions from people to IT to enable work to be done from home during the lockdown who will not be ditching the IT and bringing back people in October. In that context, the £1,000 bonus for retention of furloughed staff is likely to prove to be a handy extra for businesses who would have retained people anyway rather than the reason that people are retained, because the £1,000 payment will not cover several months’ wages.
Right at the heart of the debate is the conflict between a global free market, the decision of states to intervene in the workings of that market to protect public health, how the cost of that intervention is shared and what it is reasonable to expect businesses and individuals to regard as their duty. We have already seen extraordinary examples of civic duty, particularly amongst health, care and other key workers and in people’s help given to vulnerable people in their communities. The public at large is now being asked to perform an economic duty by spending, whether in the retail sector or by supporting the hospitality and leisure sectors. This will be easy for some, but much more difficult for those who fear for their jobs or who have become afraid to go out.
Businesses are also being asked to play their part, and, in reality, the £1,000 retention bonus appears to be a reward for doing so rather than an attempt to compensate for employment costs. But how much can we expect businesses to do? Many fear for their future in an environment that carries economic threat. Others have traded well through lockdown but face demands from shareholders to turn opportunity into profit in an era where investors can easily abandon a company for another investment somewhere else in the world. Notwithstanding that pressure, it is hard to square away the reported current conduct of one of the major supermarkets and a significant online retailer, both of whom have been economically benefitted by lockdown, in putting further price pressure on their lockdown impacted suppliers in order to protect and enhance profits which are already large.
One of the frustrations expressed at the Chancellor’s statement this week is that he did not go on to give a more comprehensive pre-budget statement. It is understandable that, in a fast moving situation he has chosen to retain his flexibility of movement for the future and more business support and fiscal stimulus is likely. If he is going to succeed, and in this case success will have to be assessed in terms of damage limitation, he will need support from all of the participants in our economy, because people eating subsidised meals, possibly on the eve of losing their jobs, just won’t be enough.