2021 – year business would like to forget
There are certain moments in economic history that stand out for their sheer horror. Black Thursday in 1929 which heralded the Wall Street Crash and a worldwide depression. Black Wednesday in 1992 when John Major’s Conservative Government were forced to withdraw the pound from the European Exchange Rate Mechanism costing the nation more than £3bn and hiking interest rates to 15%. Then there was August 9th in 2007 when there was a run on the bank of Northern Rock triggered by the sub-prime mortgage scandal in the USA. And who can forget 9/11 on 2001 then global markets plummeted in the following days after the twin towers of the World Trade Centre in New York were destroyed by terrorists.
The Wall Street Crash of 1929 saw economic ruin for many
And there are others closer to this year. The Brexit referendum in June 2016 has seen a major hit to a range of sectors including haulage, farming, fishing and hospitality – although politicians in the two main parties are not keen on talking about it. The Government tends to blame all the problems caused by Brexit on Covid although its own experts in the Office of Budget Responsibility estimates Brexit is a 4% hit on GDP compared to 2% from Covid. Perhaps the lesson is to never again allow referendums to be decided on a simple majority – but rather a minimum majority of 60-40% – including the potential Scottish Indi-ref 2 as they are so divisive.
Another day the economy took a turn for the worse without realising it was on January 20th, 2020, when Peter Atwood from Kent died of the Covid-19 virus. It was only months later that covid was identified as the main factor in his death but within weeks the numbers of patients succumbing to the virus rocketed, prompting the first lockdown. And that was another dark date in the UK’s economy – when the Government implemented the first legally-enforced Stay at Home Order on March 23rd, 2020. Suddenly whole sections of the economy had their business and cash flow halted. The knock-on effect was felt by taxi drivers, airports, airlines and tourist industries, train and bus operators and the countless firms who supply offices, factories and places of work with everything from sandwiches to paper clips.
The economic problems of Brexit are now well documented from a shortage of labour to harvest crops, to healthcare workers returning to their home countries and truck drivers from Europe preferring to work nearer to home. And there is the massive drop in trade from Northern Ireland due to the bungling of the Government’s EU Trade Agreement that has left the province adrift of the UK in all but name. It will take years to sort out the economic problems it has caused but neither the Government or the Labour Party seem interested in re-joining the EU or striking a more liberal trade deal. My prediction is within 10 years or so there will be a change in attitude in Downing Street and a more cooperative policy with Europe will emerge with potentially renewed membership in the decades to come. I say this not as a fan of the EU but from the point of view of business and the UK’s social and economic wellbeing.
The effects of Covid on the economy are obvious but just as the so-called Spanish Flu that killed millions around the world from 1919 to 1923, it will pass. Doomsters predict it will be around for many years but that seems unlikely based on past epidemics. Not because it will naturally die out but because modern medicine and vaccination programmes will dent its effects and create immunity for most. Nobody doubts the lockdowns have changed society and the economy. Some sectors have boomed – from PPE manufacturers to courier companies – while others like pubs and high street shops have been hit badly. I suspect that when the virus disappears people will return to the saloon bars of Britain and their High Streets as we are essentially a social species.
From the point of view of business one of the talking points of the year has been the uneven help given to companies. The Chancellor of the Exchequer Rishi Sunak was quick to dish out cash to the private sector at the start of the pandemic, but his generosity seems to have been curtailed this Christmas with his less than generous help for hospitality. Retailers appear to have been left out as have many businesses associated with the high street as the public have opted to stay at home. There are countless tales of firms abusing furlough payments, Coronavirus Business Interruption Loan Scheme (CBILS) and bounce back loans with the Government predicting it will lose at least £7bn to fraud. That is incredible. Especially when most freelancers and self-employed workers got nothing – other to claim benefits – as their work was taken away by the lockdowns. Actors, photographers, musicians, designers were given zero help – and they number in the millions.
Figures are yet to come in, but the recession caused by the Covid crisis has created six consecutive quarters of economic contraction in the UK from Q1 in 2020 to Q2 in 2021. There has been a recovery this summer but again the economy is stalling. It is longer than any slump in the 20th and 21st centuries. The way the Government has (and still is) trying to stimulate the economy is by printing money through quantitative easing (QE) and helping sectors with investment such as new infrastructure of grants and loans.
And the economy has not been helped by the hike in energy and fuel prices which universally affect everyone and every business.
The long-term effects of Covid and Brexit on the economy are unknown but in the short term they have seriously hit Britain, led to a fracturing of the United Kingdom and produced a Government that spends much of its time arguing with its own MPs. Whether it can get its act together in 2022 remains to be seen but right now for many in business the outlook is a question of survival. Someone once said to me back in the teeth of the early 1990s recession that if you can survive in business during a downturn then when things pick up you should be fine. On that optimistic note may I take this opportunity as business editor for ICSM to wish you all a healthy and solvent New Year.
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