Three articles that I noted in this morning's papers suggest the scale of the economic crisis that we are facing.
One, in the Financial Times, suggests that the port of Felixstowe is already chaotic, with containers taking many days to now leave the port. Apparently, things have got much worse during the coronavirus crisis. It has been suggested that too many staff were furloughed. Whatever the reason, Felixstowe is clearly in no position to pick up any problems from cross-channel trade routes, and apparently Southampton is already working at 95% of capacity. Calls have apparently been made for government intervention. Right now I am not sure that would be wise.
A second is in the Guardian and refers to shop closures. As it notes:
A record number of shops disappeared from high streets across the country in the first half of 2020 as the Covid-19 lockdowns hammered the retail sector.
A total of 11,120 chain store outlets closed between January and June, while 5,119 opened. The 6,001 net store closures was a record high and compared with 3,509 in the first half of last year.
The accompanying graphic is pretty stark:
The downturn is real, in other words. I feel sorry for all those impacted. I did so when walking past an Edinburgh Woolen Mills shop, which admittedly I have never been into, at the weekend, and noting its closing down sale sign.
The third is, if anything, the most significant. Again in the Guardian, it refers to supply chain issues for public sector food supplies, like those for schools and hospitals. It makes this point:
The supply of food to care homes, schools, hospitals and prisons is at risk unless the government steps in to support struggling wholesalers, the UK chancellor, Rishi Sunak, has been warned.
Trade bodies representing major food companies said the loss of business from the hospitality sector, which has been rocked by the 10pm curfew and limits on household mixing, meant that firms which also serve the public sector could fail.
Here we are back to my perennial theme since March, which is that it is cash flow that will kill businesses. If there is not enough business flowing through them and they have not got the capital to adapt they will fail. And that is the risk being seen here, that I very strongly suspect that few in government understand because most have been taught be economists who make the assumption that neoclassical economics usually makes, which is that businesses react instantly to new information, when the reality is that they cannot do anything of the sort.
All three messages are that we are in trouble. The last may be the most serious of the three though because it is the one that this government just cannot understand. A career trading in the City is not the same as a career in real business and teaches them none of the things that they need to know about how business really works. The danger is that I very much doubt that they know that.
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My line of work – housing development – is also hit badly by Covid and the lock down (or should I say ‘The lack of local testing capacity’?).
We’ve had contractors with men self-isolating, contractors going bust and then having to re-procure, supply problems with plaster, plaster fixer, skirting boards – you name it.
Everything is going to take longer. Everything.
Except perhaps, death.
PSR funny I’m just an old cynicl but let’s keep the covid panic going until December release placaebo vaccines so we can call off the silliest rules and then blame Brexit chaos on Covid 19. Too cynical?
You may have a point.
Except about the fake vaccine.
As a contractor I can concur. We lost a chunk of our cashflow in April (VAT). Building materials are scarce. Even if I had opened our site earlier we had no access to plaster products, wood, carpets, some paints and electrical supplies. Even now I still haven’t had the special fire doors I paid £12k for back in March. These problems have been cause partly by furlough but also as most of the stuff we use comes from the continent. At one point thistle multi finish was selling for £50 a bag on e-bay, as against £5 a bag normally. This will be a huge problem after Christmas, particularly with these idiots in charge.
The vista that lies before us is truly appalling.
I have just found this article from January, written by Prof. Prem Sikka.
it is discussing the state of the economy as it was before the pandemic arrived on our shores. It makes for sobering reading, but does illustrate the depth of the hole we were in before this crisis.
https://leftfootforward.org/2020/01/this-is-the-state-of-our-economy-after-a-decade-of-tory-rule/
“In this present crisis, government is not the solution to our problems; government is the problem.” Ronald Reagan. Perhaps this is true at present in the UK.
But only with this government
He was talking generically, and in general he was wrong
It seems to me Reagan was speaking specifically – “In this present crisis, government is not the solution to our problems; government is the problem.” And he may even have been right, in that crisis. But he meant it to be taken generically, and he was. When it is quoted, people often miss off the important first part.
A little like Thatcher’s quote about there be no such thing as society, but most people leave out the next sentence which makes it clear that she does in fact believe that society exists as a web of mutually dependent relationships between individuals: “There is living tapestry of men and women and people and the beauty of that tapestry and the quality of our lives will depend upon how much each of us is prepared to take responsibility for ourselves and each of us prepared to turn round and help by our own efforts those who are unfortunate.” She later clarified she meant society is “not an abstraction, separate from the men and women who composed it”.
In our present circumstances, the tragedy is that the UK government could be a force for good (look at Germany, or New Zealand) but sadly seems wedded to a policy of destroying the country in multiple ways simultaneously. They might say it is creative destruction, but what are they creating?
Nothing, I fear, but chaos
They trust to the invisible hand thereafter
If Reagan was talking ‘generically’ he wouldn’t have said ‘in this present crisis’.
The rest of what he said is apt “In this present crisis, government is not the solution to our problem, government IS the problem. It isn’t so much that liberals are ignorant, it’s just that they know so much that isn’t so.”
And he was wrong about most things…
So let’s move on
Touché, and you could turn that around: “It isn’t so much that conservatives are ignorant, it’s just that they know so much that isn’t so.”
That sentiment probably applies to most people. As the quotation apocryphally attributed to Mark Twain goes, “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”
The one issue that does not appear to be widely discussed is something I have an intuition is being overlooked. One element of the economy that is expanding exponentially, I suspect is the Black Economy: business for cash. This is its big opportunity. The only way to monitor this would be through the old M1 etc., circulation of money. Clearly cash circulation has fallen in the conventional economy, but if the overall circulation of money has not fallen as fast as that shown by the decline in income in conventional business, then that may suggest something else is happening.
I was not merely joking when i said that the British were essentially pirates. That is demonstrated by our history.
I would absolutely expect this to be happening John….when the state loses its legitimacy people avoid paying their taxes (just like the wealthy tax dodgers do all the time). And along side that local communities will start finding their own course through this mess. We are witnessing the break up of the UK as we have known it…not just the Scottish and now emerging Welsh independence movements but at deeper levels as people revert to reliance on local networks they can trust. In just hope Greater Manchester continues resistance…I still have family there who back Andy Burnham all the way.
More and more businesses in my “group” relocating to mainland. One quote: “We are getting out late, but at least we will have a business in 2021” .
“Mainland” where?
If I had to guess, I suspect he means away from this little island to mainland Europe.
We in the UK have little idea what is going to hit us, come January. But as sure as eggs are eggs the government is going to blame the EU, even though we apparently hold all the cards.
My shorthand for the remaining European Union. “Fog in Channel, Europe isolated”.
“refers to shop closures”
“I feel sorry for all those impacted. I did so when walking past an Edinburgh Woolen Mills shop, which admittedly I have never been into”
And there is, as I have commented on many times, the issue.
It is a recurring theme, and I will replay the same comment again.
“I can’t believe XXXX shop is closing”
“When did you last buy anything from there?”
“Oh, never, I just like to look in the window”
People complain about parking costs, well in a small town near to where I used to live, they did have free parking, but, all the spaces were taken up by people who worked in the town, so 8-6 was a write off.
Look back through the years and human beings attitude to convenience shines through, why go in a grocers, then to a butchers etc…. when you could get everything and more from the new Tesco, complete with (usually) free parking.
This is why online has done so well, you have endless choice, can compare prices and you don’t have to leave the comfort of your armchair.
And they wonder why obesity is the next health crisis.
@Jim Round
Trouble is it’s not just the comfort of the armchair that is the problem – it is also the food ‘business’ engendering the lack of metabolic health about which few of us -including medics- understand much.
This helps to explain, when ‘ultra’ processed food in the UK is probably more than 50% of the diet:
https://www.crossfit.com/health/dr-aseem-malhotra-and-dr-robert-lustig
About Felixtowe, you get a sense of the problems there in The Loadstar website ( https://theloadstar.com/ ).
They have very informative news about Brexit and its repercussions on supply chains.
(And if you’re keen on checking on food: https://www.thegrocer.co.uk/ )
Hi Richard.
I last posted in March of this year to confirm your observations about cash flow in businessess and once again here I am to say pretty much the same thing.
Almost all of our pub customers ( I run a brewery) nationwide have either stopped purchasing or are running stock at tight levels for fear of lockdown / entering tier 3.
We did all the right stuff during and post lockdown which means financially we are solid for approximately 4 to 5 months, although our cash flow has almost halfed over the last two weeks which isn’t sustainable. My employer like many others in the industry will not be using the new furlough scheme after October so it’s tighten belts, use up holidays and then down to 4 day weeks.
We are a well run, healthy and profitable family business whose cash flow has plummeted in a matter of weeks. This will be happening all over the country right now. It’s going to be brutal.
Thanks Karl
Good luck
Send me a private email to tell me who I should be buying from…
It seems there is a convert – Mervyn King – urges spending whatever it takes,,!
https://www.theguardian.com/business/2020/oct/19/mervyn-king-says-covid-furlough-scheme-may-be-needed-throughout-2021
A repented sinner is received in heaven