WIG CEO Blog August 2020: Economic Recovery – That was then, this is now, but what next, and what if?
I am not an economist. If you are after razor-sharp economic insight, this piece will not offer it. Nevertheless, here's a reflection. What were we talking about before COVID? There was concern about a lack of budget as the fiscal rules were going to fall out of date by March. The global economic backdrop was gloomy. Not on the cusp of an actual crisis, but investment confidence had been knocked by both the trade wars that had been rolling on since 2018 and the uninspiring performance of advanced economies. In 2014 the IMF thought the growth for 2019 was going to be 4% globally with India and China contributing to 75% of it. In the years following, their estimates were reduced with advanced economies growing between around 1.5 to 2%. The underperformers club included the US, Germany, Japan and the UK. The talk was of the UK's productivity conundrum and the so-called 'lost decade', with it being suggested that growth could not be more than 1.5% as a result of it. Interestingly 1.5% is about 50% of the post-war average. The projected effects of Brexit were variously criticised for either being ‘too optimistic’ (Bank of England) or ‘somewhat pessimistic’ (HM Treasury). The cost of achieving net-zero by 2050 was a live debate ahead of COP 26, which of course never happened, and everyone wondered how we could afford the Government’s ambitious policy agenda. Oh, to have just those problems today!
The debate now is about a recession in an economy shrunken by a fifth, and the balancing act of coping with a mass health issue, restarting the economy and 'building back better '. The bill is huge – the Office of Budget Responsibility puts the bill for between April 2020 and April 2021 at between £263bn and £391bn. The Treasury figures suggest the cost of COVID support measures is currently nearly £190 bn (that's £60 bn more than the 2020 NHS budget for England). Predictions on recovery are a risky business and vary wildly. Whether one supports the 'U', 'W', 'V', hockey-stick or any other shape in terms of our salvation, it took around five years to recover from 2007; the Great Depression in the US took six years. The residual debt as a result of measures to counter the effects of the pandemic may be as high as 120% of GDP, and clearly, inflation is not going to work its magic in dissolving this mountain. So the question becomes, taxes, borrowing, growth or printing money? Of course, those things we were talking about before the pandemic haven't gone away: levelling up, Net Zero, Brexit and global trade polarisation sadly haven't been wiped out by the virus. However, there seems to be a fresh context—perhaps because there is nothing like dire circumstances to add perspective.
COVID has proven to be an accelerant in several ways and not just in persuading many that there is a different way of working. Amongst other things, it has sharpened awareness of the differences in vulnerability in society - geographic, financial and ethnic. It has drawn attention to the importance of SMEsand their link to employment and supply chains. It has asked questions of public spending policy and what we consider to be 'State' and 'Market' business but also what might be achieved in unison. It has shaken assumptions about urbanisation and the inevitable rise of cities as the only possible centres of gravity. It has also opened the filters on what big change looks and feels like and in doing so, may have recalibrated ambition and aspiration.
The aspirations, though not new, are impressive: inclusive growth, more drastic and faster action in support of climate goals, digital skills and infrastructure, regionalisation, localised delegation and delivery, joined-up data and the adoption of technology to improve productivity. One can't help but feel that these sort of things seem less daunting and 'difficult' as a result of where we have been. None of these challenges can be addressed without working collaboratively across government, the private and the NfP sectors. The starting point is having the all-important conversations that frame the issues in a larger context, provide situational awareness and access different perspectives and ways to move forward. This is where WIG comes in, convening expert voices and those at the forefront of the crises with stakeholders from all sectors.
To see what topics we have in store for you in the autumn, visit our events listing.
Simon Ancona CBE
Simon Ancona enjoyed a full career in the Royal Navy including service in the Fleet Air Arm and appointments abroad in both Hong Kong and Bahrain. He commanded 4 warships, the UK’s Carrier Strike Group and UK maritime forces in the Middle East but also spent about 10 years in Whitehall including time in Ministerial outer office. His final appointment was as the Assistant Chief of the Defence Staff in charge of world-wide defence diplomacy and engagement. On leaving the military he worked as the Chief Operating Officer responsible for Network Rail’s North East London and Anglia region, which provided experience of commercial delivery and the challenges of operating at the seam of both the public and private sector. Married to Lisa he lives in South London and has two university aged children. Interests include cycling, walking, theatre, cooking, books and playing the blues Harmonica (normally when the house is empty).
Simon writes a CEO Blog for WIG on topics that he identifies as relevant to and impacting on our members.