I noted in a video that I published yesterday that the biggest economic stress from Covid is yet to come. Businesses reopening at the same time as the government withdraws its support is bound to create a new crisis in which many businesses will fail.
In this context I was interested to note this in the FT:
The UK's audit watchdog is beefing up its enforcement and supervision divisions ahead of an expected raft of corporate failures this summer when the government withdraws its Covid-19 business support schemes.
As they also noted, the interim chair of the Financial Reporting Council qualified this comment by suggesting that it was inevitable there is going to be a lot more corporate stress in the UK.
I wish I did not agree with this, but I do.
It says to me that current economic optimism is deeply misplaced.
It also suggests that inflation fears are wholly inappropriate.
Our biggest risk now is that the government will believe it's own hype and think that this crisis is over. That is a long way from true. The economic scars are going to last for a long time as yet, and the biggest risk is still serious unemployment as businesses fail as they attempt to get back to ‘normal'.
I just wish the Treasury understood that.
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All this combined with the Brexit impact and I suspect a significant increase in strike and protest movements throughout summer as lockdown is unwound. On the matter of inflation, as someone that works in the landscape industry, it is notable that price increases of 5 to 8% are the current norm. Speaking to the owner of an independent garden centre earlier this week, this was also his view of price trends across a significant range of horticultural products. Is the traditional measure of inflation out of touch with much of real life expenditure?
All indices are out of touch right now because so much is changing so often
The UK government and the Treasury are no different from our “friend” Rajiev who got involved in the discussion about the NPIF gthe other day. They understand the world in terms of the internal layout of their own ivory tower. They are able to rearrange the furniture and change the decor but anything outside their walls is beyond their comprehension.
Unfortunately, I tend to agree with you but I might be wrong. However, even if one takes a more positive view we should STILL be aggressively supporting people and firms.
The asymmetry of situation means that if you are wrong and the economy starts growing gangbusters in the summer there might be the mild inconvenience of supply bottlenecks and one-off price rises in some areas.
But if you are right and support is withdrawn too early many people will suffer real hardship.
Agreed