Stock market falls are only the start...
ASTHE World Health Organisation declared Europe the epicentre of the coronavirus, European stock markets crashed.
Over the week the Italian market fell 23 per cent, the German and French indices fell 20 per cent and the FTSE100 here in London was down 17 per cent.
It’s an indicator of the economic damage to come.
In a normal recession, activity slows gradually. With the coronavirus, the economy comes to an abrupt stop. Many workers and businesses will see their income collapse almost overnight. A taxi driver told me he was already getting 30 per cent less business as Londoners were beginning to work from home.
Once offices and nightlife fully shut down, will a black cab driver still earn a living? Can he pay his mortgage and the loan for his cab?will contract cleaners still be paid to go into offices every morning if the offices are closed?
And it’s not just the hit to the sandwich shop that sells office workers their lunches. What about the catering company that supplies the sandwich shop with coffee, coke and crisps?what about those working in the sandwich shop who are no longer earning enough to pay their rent. What do their landlords do? There are great swathes of the workforce that can’t just “work from home”: labourers on building sites; restaurant and bar staff; airline flight crew; plumbers and electricians who can’t go into people’s homes if the households are in isolation.
The emergency 0.5 per cent rate cut from the Bank of England last week doesn’t help these people to replace any lost income.
And if households haven’t got money to spend, the economy is
hit. That’s why the rate cut didn’t avert investor panic.
Investors are looking for governments to act. And this is why Presidenttrump’s ineptitude at his coronavirus press conference onwednesday night caused the biggest one-day fall in the UK and US stock markets since the Great Crash of 1987.
He had to come back two days later to try again. This time investors were more assured and US market rallied late on Friday.
In Europe, the brutal week for its stock markets has shaken politicians out of their economic apathy. So what about the UK and Chancellor Sunak’s £30billion coronavirus budget?
There is still no sick pay for the five million self-employed, no increase to the £94-a-week statutory sick pay (miserly compared with the £585 average weekly wage) and although there is some support for small businesses, many say it’s not enough.
I was at my son’s school’s swimming gala on Friday and two mums in the coffee queue were worried about losing work.
Both ladies assumed the Government would have to do more, and quoted the example of Italy which has announced a suspension to mortgage payments to help hard-hit households.
I agree. Like Presidenttrump, the new Chancellor Rishi Sunak is likely to have to come back.