Confidence is key to economic recovery
It came as no surprise to learn from the Office for National Statistics that the UK economy is in recession. What else was expected after months of low activity, with millions off work being paid by the state, shops and factories shut, hospitality venues closed and public transport shunned? The latest GDP figures confirmed that a slump of historic proportions has been visited on these islands, much as has happened elsewhere in the world as a result of the response to the Covid-19 pandemic.
The technical definition of a recession is two successive quarters of negative growth. Some comfort was taken from the fact that the economy began to grow again in May as some lockdown measures were eased, thereby ending the contraction. But this is just statistical legerdemain. The economy has been shocked to its core by the worst downturn in 300 years. Moreover, the UK’S economy has fared marginally worse than that of many other countries because of its nature – highly reliant on service industries and consumption, both badly hit.
Indeed, the Government is accused by its opponents of presiding over both Europe’s highest Covid death toll and the worst economic collapse. The former is not proven until comparable excess fatalities have been made available. The latter depends entirely on how quickly we can recover.
It ill behoves the Labour Party, which supported all of the Government’s measures, now to duck any responsibility for the consequences. They have no policies or ideas of their own. It would help if Sir Keir Starmer joined in encouraging people to return to work and all schools to go back rather than standing aside opportunistically waiting for the next batch of grim economic news.
This week’s jobless figures were testament to the pressures being felt by once viable businesses no longer able to function in such a climate. The prospect that any rise in infections in the coming weeks will be met with further lockdowns and quarantines will make it hard to restore the confidence necessary to bring about a sustained recovery. The gradual removal of the furlough scheme is clearly not going to help, but what is the alternative? It cannot continue indefinitely.
Certainty and confidence are the essential ingredients of economic growth. Without them, a swift recovery is impossible. All Government energy and decision-making in the coming weeks should be devoted to their revival.