Economy

We have seen crashes before, recessions and depressions, but nothing like this. Our fear of coronavirus has hindered and halted every aspect of daily life. We look out of our windows and barely recognise the country we’re in: police film dog-walkers and pour black dye into lagoons to deter swimmers. We wait in queues for empty-shelved supermarkets. The stock market collapses, surges, then collapses again. None of the old rules make sense. Welcome to the world of Coronomics. If this were a normal recession, the remedy would be simple: encourage people to go out, spend money and boost the economy. But today’s public health concerns require the government to repress the economy, while trying to keep it afloat at the same time.

It’s hard to think of a place more deserving of a post-Brexit boom than Grimsby. In the 1950s it had the largest trawler fleet in the world, brought in hundreds of tonnes of cod a day, and you could cross its harbour by walking over ships in the dock. But the Cod Wars were lost and the EU’s Common Fisheries Policy began to bite. Now Grimsby is one of the most deprived areas in the country, and its long road down to the docks is littered with shuttered shops. Simply put, it’s exactly the kind of place the Tories are hoping to ‘level up’ and win over before the next election. In 2016, along with Hull and much of the rest of the Humber, it voted to leave the EU and it elected its first Tory MP in 75 years in December.

Let nobody tell you that the second decade of the 21st century has been a bad time. We are living through the greatest improvement in human living standards in history. Extreme poverty has fallen below 10 per cent of the world’s population for the first time. It was 60 per cent when I was born. Global inequality has been plunging as Africa and Asia experience faster economic growth than Europe and North America; child mortality has fallen to record low levels; famine virtually went extinct; malaria, polio and heart disease are all in decline. Little of this made the news, because good news is no news. But I’ve been watching it all closely.

Close your eyes, and you could have been listening to Gordon Brown in his pomp. Seven billion for schools. Six billion for the NHS. Money for youth centres, the police, and social care with overall spending rising at the fastest rate for fifteen years. If Chancellors were measured simply by their ability to spend more of other people’s money than any of their rivals – and in truth plenty of them see that as their main goal – then Sajid Javid would have already got off to a great start. But will it be enough to win the looming election? Sure, it will help – but he will need to do a lot more to command a majority for his Prime Minister. It is a long time since we have seen a Chancellor as free-spending as this.

Ed Conway, Sky News’s economics editor, tweets this morning that sterling has notched up a dubious record – it stands out as the worst-performer of all major currencies over the past 24 hours, month, three months and 12 months. But does that matter? Yes, if you are about to go on a foreign holiday. Take a longer view, however, and you might conclude that a weak pound might be rather a good thing. The most obvious point about a sinking currency is that it makes the country’s exports cheaper in global markets and makes imports more expensive. It thus helps to boost production while simultaneously helping to switch consumers towards home-produced goods.

How can a new incumbent of No. 10 survive without a majority and with Brexit to solve? It defies the imagination. Yet if they do survive Brexit, against all odds, there could be an even bigger horror waiting around the corner: global recession. For three years the economy has defied doom-laden predictions by aggrieved remainers. Suddenly, though, the economic news is looking ominous. In May, retail sales fell by 2.7 per cent compared with a year earlier. The manufacturing Purchasing Managers’ Index (PMI), an indicator which runs a month ahead of Office for National Statistics data, plunged from 53.1 in April to 49.4 in May, where any figure below 50 denotes shrinking activity. It was inevitably blamed by many on Brexit, but the gathering downturn is global.

In what Communities Secretary James Brokenshire described as 'the biggest change to the private rental sector in a generation', the government has announced a ban on so-called 'no-fault evictions' of tenants by their landlords. 'By abolishing unfair evictions, every single person living in the private rental sector will be empowered', Brokenshire claimed. The Prime Minister said that 'Millions of responsible tenants could still be uprooted by their landlord with little notice, and often little justification […] This important step will not only protect tenants from unethical behaviour, but also give them the long-term certainty and the peace of mind they deserve.

IN ASSOCIATION WITH The “era of austerity is over,” the Chancellor proudly declared in his Autumn Budget on 29th October 2018. In the increasingly labyrinthine world of British politics, a lot has changed since this bold pronouncement: the Government has been defeated on critical legislative votes by margins of historically significant proportions; the Prime Minister has survived a vote of confidence in her leadership; 16 ministers have resigned; and MPs from both Labour and the Tories have formed the breakaway “Independent Group.” Needless to say, this has all occurred against a backdrop of profound uncertainty over the ultimate outcome of the negotiations over the UK’s departure from the European Union.

IN ASSOCIATION WITH Given the United Kingdom’s forthcoming departure from the European Union, few of us who follow the Chancellor’s Budget announcement closely were expecting 2018’s offering to be anything other than cautious, and so it came as little surprise that, once again, Philip Hammond has steered away from making any grand gestures. The unconventional timing of the speech – it was moved from the usual 12:30 slot on a Wednesday, after PMQs, to 15:30 on a Monday – meant that the day’s stock market session had closed when Hammond finished speaking, and so there is little to say about the reaction of the financial markets.

‘Uncertainty is draining investment from the UK, with Brexit having a negative impact on eight in ten businesses,’ says Carolyn Fairbairn of the CBI. OK, let’s pause for a chorus of ‘She would say that, wouldn’t she?’ But even if we shade off for ‘scaremongering’, her survey (of 236 firms) is bleak: ‘44 per cent of businesses with contingency plans intend to stockpile goods… 30 per cent intend to relocate production and services overseas… 15 per cent intend to move jobs…’ And I’ve seen no rival surveys that contradict the gist of it. So what can Monday’s Budget do to make business feel better?