When will there be a return to economic normality? Ron Wain, the managing director at Deep South Media, and a former business editor, explains why we may need patience…
It is a key question many of us are asking as the largest and fastest roll-out of any vaccine programme in British history gains jab-by-jab traction.
Aside from the human cost of the pandemic, which reportedly resulted in a 18% increase in excess deaths (80,573) in 2020, the highest since the start of the Second World War, there is the severe economic impact.
Many of our 5.9 million businesses are hurting, especially in retail, hospitality, travel, arts, entertainment and recreation, transportation and storage, to name but a few sectors.
Some may hang their hat on the vaccine lighting the way to recovery, hoping this third national lockdown in England will be the last if herd immunity starts to take effect.
Others have already adapted with online transformation since Covid-19 started making its parasitical presence felt in March 2020.
But for other firms, it may be too late – there are no savings and state aid left to purchase goods to sell on, pay staff or keep the lights and heating on, let alone cover business rates and other operational costs.
These are perfectly sound businesses which made profit or broke even, ones that served as the comforting daily backdrop to many of our workplace lives before many of us, following public health guidance, went remote.
Yet there is extraordinary help to get the UK back on its economic feet, having been kicked from pillar to post since March and with periodic start-stops.
To prevent even deeper damage to the economy, which experienced the severest drop in output last year since 1709 when sea trade was ice-bound because of the Great Frost, the government’s job retention scheme has acted as a knight in shining armour.
A record 9.9 million jobs from 1.2 million firms were furloughed in December, according to official data, at a record cost of £46.4 billion; it is likely the scheme will be lengthened into May and beyond, perhaps tapered, in order to prevent mass unemployment.
Pre virus, we were at a record low of 3.9% unemployment; it is currently 4.9%, according to the Office for National Statistics.
Since February 2020, the number of payroll employees fell by 819,000. Had it not been for furlough, the figure would be substantially worse.
Meanwhile the Bank of England pumped in a record £875 billion in bonds in November, dwarfing the £200 billion of electronic money in the aftermath of the global financial crash in 2008-9.
Aside from unparalleled state aid to the private sector, we appear trapped in suspended animation during the country’s darkest hours.
The death toll in early 2021 is unrelenting and the physical and mental scars deep for many of us.
Yet, there will be a finest hour.
It should come with herd immunisation, a thought considered barely plausible just a few months ago.
When that happens, we could celebrate in the way our families did during Victory in Europe Day, May 8th 1945, when Nazi Germany surrendered to the Allies.
It should be called Freedom Day.
This will be science’s finest hour.
But it would belong to us all.
We’d raise a glass to the memories of loved ones, frontline medical workers and virologists.
Perhaps though, after the symbolic Freedom Day, or whatever the milestone will be called, pre-pandemic normality is unlikely to be restored overnight.
It will take time, with the economy unlikely to make up ground until the second half of 2022, if not 2023.
Some economists forecast an economic reset in 2025, when figures will be as they were before the ominous arrival of Covid-19 to our shores.
Whether the cafes, dry cleaners, bakeries, charity stores and sandwich shops of 2019 are still there remains to be seen – remote and hybrid working may reduce customer demand in a way never previously envisioned.
Retail shops too will be affected, with sales online rather than in-person, albeit this was a consumer trend well before the infection.
But there is also pent-up demand from many households with savings, which are at record highs. They want to spend.
By way of example, as the vaccine programme got underway, coach operator National Express experienced a surge in bookings from vaccinated customers.
Yes, the economy is shrinking due to continued public health restrictions, with a deeper recession forecast than the one in 2008-9 following the financial crash, and the legacy will be adversely felt for generations.
But there is now hope, something which did not exist in March 2020, in the form of a jab, reducing the risk of experiencing Covid-19 symptoms.
At this juncture in our history, we can expect no more.