It’s got all the more confusing about how Britain’s going to open up the economy with the UK government’s new and rather vague message ‘stay alert’ while First Minister Nicola Sturgeon tries to steer Scotland towards a different path out of lockdown.
Senior lecturer at University of Aberdeen’s Business School Mr Mark Whittington says the outlook ahead is very confusing with different sectors reopening at different times depending on social distancing protocol.
Open up retail and schools ASAP
“I think Johnson is going to find it difficult to go for the higher tax route to pay for coronavirus.“
Mr Whittington identified getting the retail sector on its feet as quickly as possible as well as tackling the challenging task of getting children safely back to school to free up people to work being some of the most important measures that need to be put in place.
Mr Whittington said: “I think it will be a very mixed picture with some sectors trying to bounce back quickly but limited by people’s lack of ability and willingness to spend. Getting the retail industry back on it’s feet is important as it employs so many people. And getting kids back to school to free up people to work.”
Mr Whittington highlighted there are risks both to opening the economy too soon and delaying removal of lockdown restrictions out of a sense of over-caution.
Mr Whittington said: “Both open quickly and open slowly have their risks. Quickly; the upside is that maybe the economy comes back faster, but on the other hand causing a second spike in the virus would be a disaster. If you were a gambling man (which I am not), 10/1 that this could happen would be an interesting bet.”
“Trying to think through something that deals with all the questions. You do not want to prioritise one sector and forget about another.”
Mr Whittington, who taught at Warwick University Business School for thirteen years before coming to Aberdeen and who has a degree in economics from Bristol University, identified what he calls ‘interconnectivity’ as something that needs to be considered when trying to negotiate the roadmap out of lockdown.
Mr Whittington said: “Interconnectiveness is an issue. Trying to think through something that deals with all the questions. You do not want to prioritise one sector and forget about another.”
Mr Whittington highlighted the care sector as an area of the economy that was hugely neglected in assessing how to protect people from covid-19. This view is also held by one of the government’s top advisors Sir David Spiegelhalter of Cambridge University who earlier this week described to BBC’s Andrew Marr that covid-19 is an “over-75 disease”.
Sir David told Mr Marr: “There are 10million under-15s in England and Wales. How many of this group have died and had covid on their death certificate? Two. In the under-25s, it’s about 1 or 2 per million which is the equivalent of the risk we face over a couple of days of general accidents. In the over-90s more than 1 per cent have died from covid in just 4 weeks. That is a substantial proportion and ten thousand times the risk of the younger people.”
A second period of austerity
“Whether banks are going to make any money out of this? That’s not certain. Whether banks are going to survive? Probably.”
Mr Whittington does not completely buy into the idea that austerity was ever over, describing it as having been “paused” in the months before coronavirus shut down the economy.
Mr Whittington said: “The only way austerity would have ended is if the government suddenly gave people the amount of money they would have got if they hadn’t stopped giving people on benefits inflation related increases year by year.”
Mr Whittington is sceptical about the government giving people the money they should have got and instead believes Johnson will side more with those who put him in power.
“Do you un-pause austerity and keep pushing down on those who are currently struggling now or do you impose higher taxes on those who have wealth and high incomes? The people who bankrolled the Conservative election victory would clearly back the rebooting of austerity so I think Johnson is going to find it difficult to go for the higher tax route to pay for coronavirus.”
Banks will be ok with subtle bailouts
“Second spike? If you were a gambling man, 10/1 that this could happen would be an interesting bet.”
Whether the banks have done enough in supporting the economy through this crisis is yet to be seen but Mr Whittington thinks one thing is certain, the boys in The City will survive.
Mr Whittington explained: “One thing we learned from the 2008 global financial crisis is governments believe banks are so fundamental to our way of life that they can’t let them go bust. There’s been some movement on the ‘too big to fail’ debate but I can’t imagine the government will take the risk to let banks go under. Whether banks are going to make any money out of this? That’s not certain. Whether banks are going to survive? Probably. Maybe with bailouts of one sort or another, subtle or less subtle.”
A boost to the holiday industry?
It’s been widely reported that tourism is on its knees with resorts in the Highlands and on the coasts fearful for their future as international travel remains shut. Mr Whittington identifies custom from closer to home could be key in seeing the tourism industry through the corona crisis.
Mr Whittington said of the holiday sector: “At the end of this lockdown everyone is going to want to go on holiday somewhere so there could be a boom. Everyone will be thinking ‘I have been locked up for 3 months I need to get out’. International travel is going to be very expensive for some time and there are going to be a lot of people who will want to go away but not have the option to go abroad.”