Economy

We have, of course, been transformed into a nation of hoarders and panic buyers. We know this because everyone keeps telling us. There are the queues around the block, waiting for Asda to open; the tearful nurse on Twitter who couldn’t get any food after a 48-hour shift; anecdotes galore about people loading loo rolls into their trolleys by the tree trunk-load, fighting over each consignment as it arrives. How much more civilised we all were – it has been claimed – during wartime. I’m sure there are people panic-buying and hoarding vast quantities of tinned foods, but is it all quite so bad as being made out?

At least no one can say it isn’t bold. The United States is fiddling around with some possible cuts to payroll taxes. Most of Europe is stuck with some printed money from the ECB. But the UK is embarking on one of the most radical experiments in modern economic theory, and one that will no doubt be studied for decades to come. With his latest announcement today, a whole 48 hours after his last intervention, the Chancellor Rishi Sunak has effectively turned the UK into a wartime economy.

UK and Scottish government modelling shows that the economic and fiscal costs of a Covid-19 epidemic could be on a par with the costs of the 2008 banking crisis. According to a senior government source: ‘that is what our modelling shows’. If millions were unable to work and significant numbers of businesses unable to trade – as usual during an epidemic – there would be a huge automatic rise in Universal Credit and other welfare payments to those quarantined. Further costs would be incurred from whatever schemes are put in place to shelter otherwise viable businesses from collapse, coupled with any emergency top ups to health and social care spending.

The post-election economic bounce appears to be more than a fluke. Positive news came in waves this week, as data for employment figures, weekly wages and economic activity painted a good picture for newly-Brexited Britain. People are in work and wages are finally back on track. Employment has hit a new record high (76.5 per cent) while unemployment has dropped to a new 44-year low, at 3.8 per cent. Most notably, weekly wages are (finally) back to their pre-financial crash levels ie, the highest since March 2008. And yes, it has taken a very long time get here – it has been the slowest wages recovery in economic history – but the pre-crisis target has been surpassed years before forecasters like the Institute for Fiscal Studies predicted.

What are the four things that can go blooey for President Trump in the next year? First, he can get mired in a new Middle East war — the very thing he promised to avoid. The much-ballyhooed pullout from Syria turned out to be none at all. Now turmoil in Iraq, not a North Korean nuclear launch, turns out to be the Christmas present Trump didn’t want to receive. American strikes against the Kataib Hezbollah militia have got Iraq and, by extension, Iran, in a hugger-mugger. Trump could be on a slope toward further escalation with Iran that is as slippery as an oil slick. The hawks in Trump’s administration will exult; his nationalist followers, blanch. Second, there’s the economy. So far it’s humming along on a sugar high of tax cuts and deficit spending.

The government has lost its majority. The constitution has fallen apart. The country no longer has any idea whether it is leaving the European Union or not. Historians and political commentators are queuing up to tell us this is the lowest point in the country's history since the Suez Crisis/Civil War/Dissolution of the Monasteries (delete as applicable). And yet, amid all this chaos and confusion, something else is happening. The economy, slightly surprisingly, is purring along quite smoothly. The explanation? In truth, the EU doesn't make much difference to the economy anymore. And insofar as it does, leaving is a marginal improvement. The City expected the economic data released this week to make grim reading.

The sense of excitement among some Remainers is almost palpable. Finally – after three years of waiting – a quarter of negative growth has materialised following all the grim warnings of Brexit-related economic turmoil. The Office of National Statistics (ONS) this morning released its first estimate for economic growth for the second quarter of this year, which has come out at minus 0.2 per cent. That counteracts unexpectedly strong growth in the first quarter of 0.5 per cent. Manufacturing, which shrank by 2.3 per cent, was the worst-performing sector of the economy. The dominant services sector expanded but only just, at 0.1 per cent.