20.4% plunge in GDP last quarter. Is this the end of it?
Updated: Aug 14
The stats are in, the figures checked and doubled checked, the results are breath-taking: 20.4% plunge in GDP last quarter (double that of Germany at 10.1, and more than double the 9.5% of the US), that’s following a preceding quarter of falls. The UK is the worst performing country in the G7.
We are continuing to see reports of thousands of workers being let go by companies, 2,500 jobs going at Debenhams joining the ranks of thousands departing the likes of John Lewis, BA, Virgin, TSB and many more as yet unreported. Some are predicting unemployment rates of 7.5m when the furlough taps are turned off. We currently know of the ExcludedUK 3million self-employed and company Directors who have been left out of schemes and grants, add this on top of the steady flow exiting our large corporates and banks, plus the charitable sector, retail and the arts, and this is a recipe for utter chaos. It would not surprise me, and I am no economist, if our unemployment hits 10m over the winter and into next year - and there is every possibility it might.
It is easy to be critical when looking at the result of failures. In this instance however it is the continued failure to avert what are clear mistakes in the Government strategy at various stages. We locked down too late; abolished our track and trace too soon and still have no reliable alternative; created mass hysteria during the lockdown that wiped out any residual confidence in the economy and failed in getting schools back are a few examples. There is no questioning the unbearable loss of life that is the huge tragedy of this pandemic (even though it is noted that deaths in England have been over counted, Scotland, under), but it has been compounded by the indecisive lurching and constant contrary messaging and behaviours of those making the decisions. This flimflam has done nothing but erode confidence further and undermined our ability to tackle this pandemic.
So what now?
Listen to economist all leaping onto video calls and microphones talking with journalists and commentators and the outcome would appear to be rosy. Many, if not most, say we are already seeing growth in the current quarter and this should continue to increase. The reality however is that we are facing a resurgence in the virus and with a watchful eye on central Europe who seem to be having flare ups reported almost daily now, it is only a matter of time (as before) the UK sees it’s own second round. Even the guiding beacon New Zealand who had hitherto been virus free for 100 consecutive days has seen a low number of new infections. Scientific advice is that the cold weather will bring with it our familiar seasonal flus and viruses but also the right conditions for CV-19 to flourish. If this happens and we lockdown again, the losses and collapse of businesses will exacerbate further the effects of CV19 on our economy. We haven't even considered the B-word yet either!
Can the economy muster some resilience with those who have benefited from CV19 propping up the rest? Will the millions teetering on the edge find themselves adding to the unemployment statistics in the coming months? Right now, we wait in the deafening silence of this lull in CV19 cases (albeit, starting to rise again). If it comes back and we have a repeat of the previous few months the consequence don’t bare thinking about. If however we can avoid large scale lockdowns, get support to those who desperately need it, we have a chance of returning to sustainable growth.