The eye of the storm…If you’ve ever been there, you know it’s not a comfortable place to be. The UK has weathered the first leg of a Category Five economic hurricane. Destructive, disruptive and painful – with so many lives and livelihoods already lost.
Yet beyond the eye lies the second leg, which is invariably more destructive, more savage and more life-changing than the first.
This sunny summer is the eye of the storm. The final few months of Government support packages are propping up consumer spending.
Gathering storm: The UK has weathered the first leg of a Category Five economic hurricane
Many businesses are busy, buoyed up by the pent-up demand they couldn’t service during the long months of lockdown. Companies, both small and large, have more cash on their balance sheets thanks to billions in loans and furlough grants.
International supply chains, which sputtered and seized up at the same time as the global economy, are now working again, albeit at a somewhat reduced clip. All this is little more than a fragile veneer, accentuated by high-visibility but low-impact schemes like the Treasury’s Eat Out to Help Out discounts. Sunshine, the holiday season and our craving for a return to some form of normality have created a heady mix of collective intoxication.
Only the slow, steady drumbeat of redundancy announcements from household names, plus hastily-announced quarantine rules for our favourite holiday destinations, seem to cut through the reverie.
As autumn approaches, we must shake off this national somnolence. And we must be under no illusions about the difficulties ahead.
The next six to 12 months are going to be tough for businesses, tough for our communities and tough for both the country and the world.
So we must put the remaining days and weeks of respite to good use.
Individual businesses will be evaluating their position and deciding whether to take new risks or to batten down the hatches.
Government, on the other hand, does not have this choice.
Ministers acted swiftly and admirably at the start of the crisis – working with business and the financial sector on the emergency measures that staved off a near-complete economic collapse.
But they have lost their way since, with a disappointing Summer Statement, fingers in their ears regarding the existential plight of some businesses excluded from their rescue schemes and an unwillingness to support some of the strategic sectors that other countries have rushed to protect.
Noise levels in Westminster are increasing, with unrealistic demands from the extremes of the political spectrum. Those who say that nearly every job can be saved, if only the emergency measures enacted by the Government are extended, clearly haven’t seen the writing on the wall for so many business models that simply no longer work.
And at the other extreme, we have those who would simply leave things entirely to the vicissitudes of the market, who see the annihilation of thousands of businesses and millions of jobs as simply an inconvenient fact of life.
Surely the right answer lies somewhere in between.
As autumn approaches, Rishi Sunak must get back to taking risks to support the economy – not slip back into ‘wait and see’ mode. As he winds down the furlough scheme, the Chancellor should be slashing the jobs tax to help viable businesses keep skilled workers and as a fillip for growing firms to hire.
Hacking back the nearly 14 per cent that employers pay the Revenue in National Insurance contributions would help businesses manage their cash flow and avoid many thousands of extra redundancies.
He should be crafting a new support package for businesses in areas affected by local lockdowns – learning the lessons from firms in Leicester, Aberdeen and elsewhere.
Money should be dedicated to speeding up the installation of new fibre broadband to accommodate the shift to more agile working patterns – and to developing a flexible season ticket system for the railway network that will help get people back into city centre workplaces.
Companies, in discussion with their employees, will decide how and when to return to offices safely. To take those decisions, and help more people get back into the workplace, businesses need crystal-clear official guidance and confidence in test and trace systems.
For many employees, returning to the workplace depends on schools reopening, the availability of childcare and confidence that they can use public transport safely.
Businesses working to help their staff return to the office should also be able to offset the investments they make to ensure their premises are Covid-secure against their tax bill, which would help many get back into city and town centres over the coming months.
The Government should use its purchasing power to help employers roll out mass testing in workplaces, public and private, which would give a huge confidence boost to a still wary workforce and to the battered high street.
Massive incentives should be put in place for business investment, which would have the double benefit of tackling both the Covidinduced economic crisis and the end of the Brexit transition.
While many businesses are struggling, there are some with cash on their balance sheets that could be invested in ways that help both their future growth and the rebuilding of the UK economy.
And the Chancellor must act quickly – before thousands of good companies face existential risks next year, weighed down by the burden of unsustainable debt.
These are huge commitments – similar in size and scope to the emergency measures already put in place. They will be needed, however, if we wish to move beyond a tentative restart and towards a more comprehensive rebuilding and renewal of the UK economy.
As the winds rise again, and the calm of recent weeks is broken – far better to help businesses weather the coming storm, rather than leave them to its mercy.