‘Never The Same Again’ applies not only to M&S

WRITING on behalf of the International Monetary Fund in June 2008, adviser Randall Dodd and senior economist Paul Mills talked about the “US subprime loan contagion” that would unleash the Great Recession. Read in today’s context, their analysis feels like a grim parody of the current reality.

“Like an epidemic in which an invisible virus infects many people and communities,” they described how flaws within the subprime market “raised concerns about liquidity and solvency elsewhere. Just as diseases are passed on by close human contact, pests, and contaminated food, so this financial crisis has been transmitted through connected markets and institutions.”

They were writing three months before the collapse of Lehman Brothers triggered the wider banking crisis, so it’s difficult to determine whether they envisioned the scale of the economic damage that was soon to come. But it’s pretty safe to say they never imagined a scenario where, 12 years later, an actual virus would bring the global economy to its knees in a way that makes the Great Recession look rather like a trial run.

Soon, Scotland will take a first few tentative steps towards loosening restrictions that have kept people largely housebound for the past two months. During that time, quite a few folk have acquired suntans normally only sported by those just back from a fortnight in Ibiza, which just goes to show what can be achieved when you’re at liberty to take advantage of this country’s intermittent fair weather.

But, summer body or not, we are undeniably keen to get back to something that resembles normal. The appetite is such that within minutes of publishing the First Minister’s “route map” to unlocking the country, the gov.scot website crashed under the pressure of more than 100,000 people attempting to download the document.

Most people are deeply concerned about their livelihoods, and rightly so as the job losses, debts and uncertainty continue to mount. They want to get back to work and restore their personal security, but as a panel of business leaders told Holyrood’s economy committee earlier this week, there will be no quick fixes in the current economic quagmire.

Like the pandemic itself, this economic crisis has reached every part of the globe. In our world of “connected markets and institutions” described by Messrs Dodd and Mills, this has inescapable consequences for Scotland and the UK.

On Friday, China took the prodigious decision to scrap its hallowed GDP touchstone for the first time in modern history. The fallout from Covid-19 has forced the world’s largest centrallyplanned economy to abandon growth in favour of pursuing economic stability and alleviating poverty.

The virus is having a similarly profound impact on most other economies around the world, which is why the International Monetary Fund is currently predicting a 3% decline in global growth during 2020. That’s down from January’s projected expansion of 6.3% – a massive revision in a very short span of time.

Here in the UK, the EY Item Club said this past week that it now expects GDP to fall by 15% quarter-on-quarter during the three months to June, and 8% over the course of this year. That’s a further deterioration from the think tank’s April forecast, when it estimated declines of 13% and 6.8% respectively.

Faced with this bleak reality, the UK Government has expanded and extended many of its financial support programmes for businesses and individuals. But as Chancellor Rishi Sunak has made clear, these can’t go on forever. In April alone, the Government borrowed an extra £62 billion to fund the fight against coronavirus, roughly half of the loans amassed by the end of 2010 after two years of bailing out the banks.

It is impossible to overstate the importance of schemes like the furlough programme, which is currently supporting the wages of about 7.5 million employees. Without it, many of these people would have joined the already swelling ranks of the unemployed.

It has been estimated that the pandemic could push half a billion additional people around the world into poverty, many in developing countries and emerging markets. But there are plenty of developed nations where a significant proportion of households are at risk of falling into the trap of poverty as

M&S is ramping up its transition to online retailing, but the inevitably increasing shift of consumer sales to the internet is not an adequate foundation for broader economic recovery