Can Britain bounce back?
“Twice as bad as the US. Ten times worse than anything seen during the financial crash of the late 2000s.” Official figures released last week reveal that the UK economy is in big trouble, said Larry Elliott in The Guardian. It shrank by a fifth in the second quarter of this year, which is almost double the average for EU member states. And it’s not hard to see why the UK is proving such a laggard. Owing to government “dithering” we went into lockdown later than our EU neighbours, and have been slower to emerge: Germany reopened its non-essential stores after 29 days of lockdown; England had to wait a full 12 weeks. Admittedly, our “services-heavy” economy was always going to be disproportionately “clobbered” by measures such as social distancing, said Kate Andrews in The Spectator. But Britain’s sluggish return to work has made matters worse. Around three-quarters of German, French and Italian workers are now back at their desks; only a third are in the UK. No wonder we now face “our worst recession on record and the sharpest economic contraction since the Great Frost of 1709”.
I fear it’s only going to get worse, said Ed Conway in The Times. A series of economic “time bombs” are set to detonate in the coming months. Plenty of companies owe their survival to the business rates holiday conferred by Rishi Sunak and the deferral of VAT payments. What will happen when they’re forced to restart payments next year? The same goes for employment, said Vince Cable in The Independent. The furlough scheme is supporting almost ten million jobs; when it’s wound down in the autumn, as scheduled, the effect could be “catastrophic”. An optimistic forecast from the Bank of England (BoE) says unemployment could almost double to 2.5 million people – or 7% of the labour force – by the end of the year; pessimists reckon the true figure could be more like four million. Add the effects of a possible no-deal Brexit, and we’ve an economic disaster in the making.
It’s not all gloom, said Philip Aldrick in The Times. As lockdown restrictions are eased, parts of the economy are bouncing back, and last week the BoE announced record monthly GDP growth of 8.7% for June, far better than most economists had forecast. The first fruits of recovery are already plain to see, said Alex Brummer in the Daily Mail. In an impressive example of returning consumer confidence, new car sales in July soared to 175,000, 11% up on last year’s July figure. Gourmands have been quick to take up the Chancellor’s “eat out to help out” offer, guzzling some 10.5 million subsidised meals in the scheme’s first week. And our big-name hygiene brands, such as Dettol and Lifebuoy, are ramping up global production to meet rising demand in the new infection-aware world. The BoE’s chief economist, Andy Haldane, has been talking up the prospect of a V-shaped recovery for our “remarkably resilient free-market economy”. He could be right.