It would seem that a great many people still do not understand the nature of the economic crisis that coronavirus has created if comment I am reading and hearing are indicative of general sentiment.
The paranoia of ‘how do we pay for all this?' appears to be ongoing. I reiterate what I wrote on this issue here, but will no doubt return to it again.
But I now have another concern. This is that there appears to be a feeling that direct support for business can finish when the lockdown has ended because then we will be in recovery mode.
My concern is that whilst it is true that we will need a stimulus package from the time that lockdown ends, we will still continue to need massive injections of liquidity into the economy in general, and businesses in particular, at that point of time.
This is because many businesses will come to the end of lockdown with severely depleted capital resources, and very little cash, even if they have survived that far. This creates an enormous risk that many of them will fail when the economy starts to get going again because they will, in effect, be over trading based upon the capital resources that they will then have available to them. In other words, their cash flows are at least as likely to fail in the period when the recovery starts as they are now.
I have not, as yet, seen any awareness of this very obvious risk in government circles, and no discussion of it either, but unless extensive funding, with up to 100% government guarantees, is available to businesses at that time the chance that we will dip into deeper recession after the lockdown rather than see recovery is a very high indeed.
This crisis will, in other words, be far from over when we try to return to work: in fact, for many businesses that may well be the most trying period of all.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Hmmmm………good point.
And I wonder if the City will still betting on firms failing at that time – helping themselves rather than helping once again?
The unreal atmosphere over the future of the economy is compounded by the prospect of Brexit at the end of the year, a classic example of a risk multiplier. HMG does not have the competence to handle ONE of these. I regularly ask people what percentage of achievement necessary is happening. The common average is around 30 per cent.
I am reading in the Daily Mail that banks are asking people to put up their houses, or multiple houses to get a loan from them, basically they are profiteering off the covid 19 crisis. Also they are charging in some cases 22% interest rates. Furthermore they are denying 1 million firms covid 19 government loans, and the DM said 4 million people could be unemployed by May. This is from the Daily Mail, – think on it 4 million people out of work on top of the 1.5 million officially unemployed. i have posted the link on another part of this blog. However i will do so again for ease of access so please forgive me for repetition. Can the government survive in this situation? Or are they trying to repeat what Thatcher did in the early 80s when she threw 3.5 million out of work. Please note the population was smaller then so the ratio would be a lot higher.
https://www.dailymail.co.uk/news/article-8174967/Nearly-FIFTH-UK-firms-shut-four-weeks.html
The banks are being reasonable – the risk of these loans failing is very high
The government should have provided 100% loans
For once the banks are right – unless we want bank bailouts next
[…] The reality is that the British economy is going to look like a wasteland by the time the summer arrives. There is a real chance that most small businesses will have failed by then. If they don't they will as they try to recover. […]
[…] I am not going to guess by how many, but when it becomes apparent that many more businesses will fail as an attempt at recovery starts sometime this year I suspect the increase to be significant and will be millions more and not hundreds of […]
As a person with a science background and being 66, I and many more people in my situation will most certainly not be venturing out to cinemas, restaurants or heritage sites for the foreseeable future based upon the persisting greater risk of falling ill to this virus. Our reasons for not participating in a bounce-back is to do with health risk.
My neighbours that are all furloughed employees who will no doubt be hit with the reduced income of 80% of their normal salary and will also be worried that in the 3 months following lockdown lifting they will be holding onto every penny they have spare for fear of being made unemployed and have zero chance of finding another job in the short to medium term.
The self employed friends I have might survive a little better, at least the tradespeople – plumbers, joiners, electricians will all have work in hand to complete though their outlook 3-6 months after lockdown lifting will be bleak as homeowners shelve all home improvements and retail premises close or reduce their footprint.
Of those friends who have B2B businesses, only crisis-tackling ones will have full order books – one neighbour does office/warehouse fogging (sterilisation) and will be busy, but those selling ‘in-essential’ services e.g. graphic design, catering, life coaching will struggle.
The housing market will fall like a stone as all the homes of the old folk who died will flood the 2/3 bedroom semi sector and former B&Bs will be up for sale for whatever they can get offered since tourism will remain dormant for at least 12-18 more months.
My daughter just graduated with a First in Business and Marketing and before Christmas had high hopes of securing a decent graduate appointment. Now her entire cohort are worried they could remain unemployed for at least 12 months, putting even more pressure on parental household living costs as more council tax becomes due since they are no longer students as well as being an extra mouth to feed.
If young parents get made redundant and one parent is now left at home, their kids will not be going to nursery and so private nurseries will shut for good.
I cannot see ANY ‘green shoots’ from the landscape populated by my friends and neighbours, only misery. And the Tories are totally ill equipped educationally and ideologically to fix it if their competencies regarding buying PPE, ventilators and test kits are anything to go by.
Meanwhile, Bozo and the other clowns look on open-mouthed like deer caught in the headlights of a juggernaut travelling towards them at breakneck speed.
I am shocked by the scale of furloughing now – charities are doing it because of their collapse in incomes now