The stress of ending lockdown, which I have long argued is what will really destroy much of British business, became more apparent over the weekend. A few simple examples will suffice.
Public transport can now only function at 20%, or less, of capacity.
Schools can, maybe, manage thirty percent capacity.
Those returning to work should go by car, or walk, or cycle, but for many that is impossible, or dangerous. So it will not happen.
And for some sectors, like airlines, the impediments have grown, even if appropriately so.
Whilst a great many businesses must simply stay shut.
The simple fact is that post Covid-19 business is going to be incredibly slow and, unavoidably, deeply inefficient. And that means it will be loss making.
I have already explained the inevitability of this.
And I have explained that this demands difficult decisions of the government. They have a duty to decide if they are supporting jobs and business or banks and landlords. But as yet they have not made any indication of their awareness of the need to make this decision, let alone suggest what they will decide.
As a result the crisis facing business in this country is growing daily. It may now be getting some support now - which is enough to keep it furloughed - but the idea that this support will be sufficient to ensure that many businesses will survive the restart from lockdown or ever have the capacity to repay the borrowing that they have taken on is ludicrous.
Business, and with it jobs, can only recover from where we are now subject to three conditions.
One is it needs more capital. Only government can supply that. It isn't, but should. And conditions should be attached. But there are no signs of any of this happening.
Second, overheads have to be cut: that means rent and bank financing cost reductions with all the consequences that gives rise to. Again, there are no signs of this happening.
And third, significantly changed patterns of consumption will have to be managed as our efficiency, and so our ability to produce, as well as to access goods and services, changes. And that is an issue almost no one is taking about as yet, but which will have to be addressed.
We are nowhere near addressing this crisis as yet. And the casualty rate is going to rise the longer we wait. I would have thought we should have learned that by now, but apparently not.
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A splendidly succinct summing up of the deep and deepening mess into which the ‘U’K has descended.
Just one apparently small issue – relating to your equally well-judged last paragraph.
It is a thought on the wording appropriate to where “we” – that’s all of us suffering under Johnson’s government – are now. Perhaps it is time to avoid “we” when the sentence is really addressing what “they” I.e. Johnson’s Tory government, are doing/failing to do or have done/failed to do. It has been a central part of their poisonous communications strategy to ‘normalise’ the multiple disasters for the mishandling of which they, and they alone, are responsible, by flooding the MSM with the communal assumed plurals of ‘we’/’the country’/’our history’ etc. – even to the nauseous extreme of the recruitment of the dead of the Second World War. Let us reclaim the appropriate and, in this case, accusatory third person. This is what “they” have made and what “they” must bear the burden of now undoing – and in due time what “they”, every last one of them, and not least the oleaginous past Health Minister Jeremy Hunt, must be held to account for.
Point well made
And noted
Predict a spike in 2-3 weeks to coincide with failure to negotiate a Brexit deal with EU in June thus giving MSM another dead cat to distract away from crash out at end of the year…..a few thousand dead people seen as collateral damage by the Tory Party.
I agree with the problems you point out with a return to work and restarting the economy and indications of what needs to happen. A minor point, you say that government is the only source of capital that is needed by companies to resume production. How does this fit with the explanation you made about electronic money and the creation of loans by banks (you give the example of the £10,000 created by a bank for car purchase). Does this mean that banks have to have a certain level of liquidity to enable them to make loans despite the fact that it does not cost them any more than the typing out of some figures on a computer?
Banks must be liquid by the regulations imposed
If they are not they cannot lend because in effect their licence is constrained because they may not be able to meet inter bank settlement
So the ability to make money comes down to permission granted by the government
I will try to address this soon
I really do hope they are seriously working hard on a food supply strategy and contingency plan, with a contingency for rationing if required.
However, I’d say it’s quite unlikely, given their ill preparedness every where else.
We may need it….
Call me a devils advocate if you like but I dont see owners of businesses throwing in the towel because of a temporary fall in demand.
They have savings , credit lines and the ability to cut costs. There may be another story that some businesses may take advantage of the crisis to voluntarily liquidate, repudiate contracts and dump pension liabilities. Then they may try to buy back their business from administrators.
The other issue is what countervailing measures the government will take to maintain effective demand. They can furlough workers for longer, they have cut interest rates already , give tax holidays and have a series of public investment and public employment initiatives in train.
They can work with other governments to co-ordinate international efforts to maintain demand or to boost demand.
So there are things that can be done. the issue is will they?
I think you believe the owners are in control of this
They’re not
They simply do not have enough capital
Most will try exceptionally hard – that’s almost always the case
But the failure rate is still going to be very high
When a business folds in normal times, many people make adverse comments on Business Rates and rents, stating how high they are, the majority do not appear to realise that Business Rates are set centrally.
Few offer solutions to high rents.
Local Authorities do not escape criticism though, in my area, there have been several requests for the market (which had/has many vacant stalls)
to have pop up stalls for local produce and live food stations etc…
This is showing no signs of happening, either before or after.
For some reason (maybe yourself or some commenters could elaborate)
Nail salons, hairdressers and takeaways seem to have no issues.
A frequent comment heard when a store closed was:
“Oh what a shame, I’ll miss it”
“When did you last buy something from them?”
“Oh I never bought anything from there, its just nice to look in the window and know its there”
?????????
(On a side note, a local village, and its councillor, campaigned to reinstate the bus that went into town, the bus company said hardly anyone used it, locals said it didn’t run often enough.
A revised service from the consultation was provided, it still runs empty.
This can be repeated in many villages across the country)
A full strategy on Village/Town and City Centres is needed, covering transport, rents, rates etc…
I doubt very much anything will be forthcoming.
No one is in control.
But there are things that can and will be done, some of them unrevealed at this stage.
Where I live the only casualty so far is a gift shop which should have gone out of business a long time ago.
One way of looking at this is it will free a lot of moribund assets not doing very much for alternative uses, rents will decrease , and barriers for entry for new businesses will be less. the government will find it much cheaper to do the things it would want to do.
And the evidence from across the world is that central Banks will be lenient and governments supportive of banks propping up businesses. Japan, China, the Fed, the ECB , BOE all seem to be singing from the same keynesian hymn sheet.
I live in The South West.
We have been the area least affected by Coronavirus so far.
What concerns me is that with the shambolic lifting of lockdown we could see second and holiday homes being occupied as Londoners look to move out for the summer. This might prove the catalyst for ‘public disorder’ not only in the South West but in other ‘holiday’ areas – Wales & The Lakes spring to mind.
Comments anyone?
Don’t vote for this lot ever again?