The collapse in national output by 25 per cent, reached at the end of April, is dispiriting. But having locked down most of the economy, it was inevitable.
It would be naive to think that there is going to be a full or speedy recovery, in spite of earlier optimism by the Bank of England and others.
Yes, the Treasury and Bank unsheathed titanic fiscal and monetary support. And there is more on the way, with governor Andrew Bailey and his merry men in Threadneedle Street ready to reload the cannons with £100billion more of quantitative easing perhaps as soon as next week.
Leading the way: Bank of England governor Andrew Bailey and his merry men in Threadneedle Street are ready to reload the cannons with £100billion more of quantitative easing
But there is too much scarring to the economy for a giant leap forward, and great swathes of it – notably airlines and hospitality – may take several years to recover.
Motor manufacturing and sales also have been decimated by the lockdown. The industry was anyway in the midst of huge structural change, with mega-mergers and job losses, as traditional makers seek to adjust to a greener world. It is a sector which could almost certainly do with targeted assistance, including scrappage schemes, but also a national commitment to ramp up R&D on green technologies. Companies such as Johnson Matthey deserve both tax breaks and matching funds.
The encouraging message to be drawn from the April data is that it is the nadir, and the economy can only get better from here. It is critical that furlough and various government loan-guarantee schemes do not become a crutch for zombie companies. The UK economy largely is about services. Output from hospitality and food services was down by a catastrophic 91.4 per cent from pre-pandemic levels in April.
And export of services, a shining star of UK plc, down by 27.8 per cent. This is despite the fact that in many ways City brokers are having a good crisis because of heavy trading volumes and impressive fund raisings. Ocado – now worth a stunning £15billion – picked up a further £650m of equity in the last 48 hours.
Services ranging from Britain’s brilliant creative sector, to architecture, gaming and consulting are people and global enterprises. If these high growth activities are to be revived then a safe end to travel quarantine needs to happen rapidly, and social distancing eased.
For insight into what is going on in European aerospace, tune into Eurocontrol flight data for a typical June day.
It shows Wideroe, a carrier connecting Oslo to Norway’s outer reaches, operated the second highest number of passenger flights, behind Turkish Airlines in lead spot. No surprise, then, that the three largest London-quoted carriers – British Airways, Ryanair and Easyjet – have come together to launch a legal case against the Government over quarantine rules.
BA is being labelled a ‘national disgrace’ by MPs on the Transport Committee for choosing this moment to axe 12,000 jobs and cut the pay and conditions of other staff. One is sympathetic to those facing the axe. But in uncertain times it is better for management to act early rather than allow firms to tip into an abyss.
All three carriers have benefited from the Bank of England’s Covid facility, but the UK lags far behind US and the EU countries in directly supporting aerospace.
The fallout for the UK is worrying. Rolls-Royce reacted by seeking to cut at least 9,000 posts. The next shoe to fall may well be at Airbus which employs 13,500 in the UK. Chief executive Guillaume Faury cautions that unless the Government comes up with support (France has committed £13.4billion), UK plants are more likely to face job losses than their French and German counterparts. Tough talk.