Economy

France’s deficit is set to reach 9.4 per cent of GDP this year, more than last year, even though France's first lockdown was more severe and lasted for a longer time. This may relate to accounting issues, as some spending is only reported this year even if it is related to last year. But these are details – the main issue is something else entirely. The journalist Dominique Seux wonders whether France has maxed out its spending capacity at the moment when environmental challenges require extraordinary efforts. Were France's spending choices last year done with full awareness of how they would compromise future fiscal room for manoeuvre? France was always amongst the high deficit countries in the EU.

Is President Joe Biden living up to expectations? It’s hard to say, since the expectations generated on his campaign trail were so murky. Biden made plenty of promises on the stump but only one thing was ever clear: he wasn’t Donald Trump. Beyond that, no one was really certain what iteration of Biden would enter the Oval Office on Inauguration Day. A pragmatic moderate or a progressive ideologue? A return-to-normal steady hand or a malarkey-scourging bomb thrower? The law-and-order author of the PATRIOT Act or the 'Black Lives Matter' anti-racist he suddenly morphed into last summer? Biden was so defined by who he wasn’t that no one ever quite worked out who he was. Now we have our answer. Whatever moderation was once attributed to him has been quickly abandoned.

‘Consider a temporary cut in executive salaries’ was the Confederation of British Industry’s advice to members at the start of the pandemic. Back then I was gripped by fears of a backlash against capitalism: top pay cuts would indeed be wise, I wrote, not least because ‘sacrifice now is sensible insurance’. Looking at last week’s election results, I needn’t have been concerned about a second coming of socialism. But I’m one of many advocates for responsible capitalism who have long worried about growing disparities between executive and average pay — the key multiple having risen from 50 to 120 over the past two decades — that rarely reflect underlying performance.

New growth figures were released this morning show that the economy contracted 1.5 per cent in Q1 this year and remains 8.7 per cent smaller than it was in Q4 2019 (the last quarter not to be impacted by the pandemic). Alongside this update, the Office for National Statistics also released its latest set of monthly figures, which saw GDP rise by 2.1 per cent in March — the biggest boost since August last year — taking the economy to 5.9 per cent below pre-pandemic levels. That GDP fell by just 1.5 per cent overall once again illustrates the extent to which businesses have developed a resilience to lockdowns. The first quarter of this year saw much economic activity either wildly distorted or banned outright.

Might the 2020s be the seismic decade in which the post-war consensus, that liberal democracies do not and should not break apart, is broken? Scotland's First Minister Nicola Sturgeon certainly thinks so. Her lifelong quest to break up Britain must feel closer than ever after winning last week's Holyrood elections. But there are hurdles yet to be cleared. Sturgeon insists on an exact repeat of the process that took place after Alex Salmond won an SNP majority in 2011 – even though she did not manage to replicate his success, achieving instead another minority administration. As in the 2011 to 2014 period, she wants the referendum booked and in the diary before presenting an updated economic case for Scexit. This will not hold.

It’s been a good week for seeing the vaccine factor at work. We’ve had multiple real-world updates on the Pfizer vaccine’s effectiveness against new variants of Covid-19 (this bodes well for the UK, which was the first country in the world to use the vaccine to protect its most vulnerable residents). And today we’ve had a revised economic forecast from the Bank of England, suggesting the UK’s impressive vaccine rollout could translate into the strongest growth since records began in 1949. The Bank of England now predicts that the economy will expand by more than 7 per cent in 2021, up from its forecast of 5 per cent in February.

When the Office for National Statistics released the last antibody survey a fortnight ago, the results were underwhelming. After watching prevalence in the population shoot upwards for months, the figure had plateaued at 55 per cent. There were several reasons suggested for the stall, including the move to giving second doses and difficulties detecting fading antibodies (which the ONS is quick to point out does not necessarily mean a person no longer has immunity). But, regardless, it raised concerns that it might take longer to reach high antibody prevalence rates than previously hoped. Thankfully, today’s update has provided plenty of cheer. In the two weeks following the last update (taking us up to the week ending 11 April), antibody prevalence has risen across the UK.

Britain may be about to go from one economic extreme to another. This winter the OECD calculated Britain suffered one of the highest levels of economic damage in the developed world, compared with the year before, due to its stringent lockdown. Fast forward to spring and the UK’s trajectory for economic recovery is now being revised, with forecasts only moving in one direction: up. Today alone, two heavy hitters boosted their predictions. This morning EY Item Club revised its 2021 growth forecast from 5 per cent to 6.8 per cent – which, if accurate, would see the UK grow at its fastest rate on record, recovering to pre-pandemic levels months earlier than originally anticipated.

Compared with the United States, the UK has so far been relatively cautious about launching stimulus programmes to kick-start the economy. And yet perhaps it doesn’t need to. People are paying off their credit cards, putting some money into the stock market, buying new houses, as well as finally booking a restaurant and getting back to the shops. A lot of money is about to be unleashed on the economy, even if this stimulus is largely invisible now. The interesting question is this: where will all the money go, and which sectors will be the big winners? It may at times seem as if Rishi Sunak is spending like crazy. By global standards, however, he is far from exceptional.

This column generally takes a sceptical view of financial novelties and gimmicks. So my antennae have twitched in recent days at frequent mentions of Spacs, or ‘Special Purpose Acquisition Companies’, which are the latest plaything of Wall Street and could be about to go large over here. Also known as a ‘blank cheque’ company, a Spac is a stockmarket-listed cash shell that raises money with a view to merging with a real — usually hi-tech, often relatively early-stage — business seeking a fast route to listed status. Hundreds of Spacs have been created in the US since the craze began last year, many with celebrity names — sports stars, astronauts, rappers — attached to win attention.