Optimism High of a Strong Revival in Nation’s Economy Even If It Is with A Time Lag

A Quick Rundown

• Chancellor Sunak hopeful of the economy coming back to normal after the lockdown is lifted
• Phased easing in lockdown likely to help recovery in a measured way
• Some sectors may require support till long, while some just need the proper and conducive environment
• Government support still vital along with the success of the three-phased lockdown easing

The British Chancellor of Exchequer Rishi Sunak after a discussion with the lawmakers of the country has stated that he expects the economy to come back to normal after the lockdown is lifted but only after a time lag. The Chancellor who is currently working with the Bank of England and other industry bodies to ensure that the stimulus initiatives announced by the government reach its intended recipients at the earliest reiterated that he would do everything in his powers to ensure that businesses and jobs are protected in the country. In the recent past, the minister had extended the state-funded furloughing scheme till the end of October, in keeping with the demands of several industry groups not to withdraw the scheme abruptly, so as not to cause shock to businesses who would have just started to recover from the pandemic induced slowdown. The country with the arrival of the pandemic is staring at the possibility of a slowdown like the one which has not been seen in last three hundred years.

Phased easing of lockdown - a right approach

Last week the British government had decided to relax the seven-week lockdown that had been in place since the 23^rd of March this year. The government had announced a three-phased plan whereby it intends to open up the economy while keeping with strict social distancing protocols. In the first phase, the government would allow those businesses to open where personal deliverance of services is required, for example, factories, dairies, and construction sites. The government has also prescribed several social distancing measures that these businesses would follow to ensure the safety of their staff. Regarding the transportation needs of these people, the government has also advised appropriate social distancing measures on public transportation systems, while also advising people to take up cycling to commute to work which will not only keep them away from congested places but will also make them fit. In the second phase and the third phase, the government intends to open up businesses which have a higher risk to the transmission of the virus, like malls, pubs, restaurants etc. while also cautioning that any resurgence of the infections will necessitate a stricter lockdown and withdrawal of the relaxations given by the government.

Not all sectors require complete handholding

It is also worth noting here that the pandemic and the ensuing lockdown has not impacted the entire British economy equally, there are several sectors of the economy which have been very badly impacted and will take longer time to recover while there are some which have been relatively less impacted and will bounce back in a comparatively shorter period of time. The financial services sector and the banking sector among others have been able to function partially during the lockdown, thanks to several of their staff working and keeping critical functions going. On the other hand, the online retailing sector has been the lifeline of the economy throughout the lockdown period. The sector has been working day in and day out, keeping the people of the country provisioned while they are confined in their homes. Hordes of delivery vans and workers have been working throughout day and night to ensure that the country does not go hungry. However, the manufacturing sector has been a sufferer during the lockdown as very few if at all any workers have been able to show up for work because of the lockdown. Similarly, the Airline sector in the country is also virtually grounded because of the lockdown, and only a few of the planes are flying that too on military and humanitarian missions.

What is expected from the government now?

Given the above situation, the government will also have to rejig its stimulus measures to adapt to the needs of the different sectors. Earlier this month when the government had decided to extend the furloughing scheme, it had done that based on the varying situation of different industries as well as the decision to open up different sectors in different phases, given the state of the infection threat levels. The financial situation of different sectors is also different, and also the situation is different for large-sized companies, mid-sized businesses, and small-sized businesses. The small-sized businesses, in particular, are the most vulnerable of all. They include pubs, restaurants and recreation businesses and are more often than not dependent on their cash registers and are also the largest employer of people in the country, including skilled, semi-skilled and non-skilled people. The country cannot risk having many of its citizens becoming unemployed, hence must continue its support till at least most of the country becomes strong enough to stand on its feet after the dust settles on the pandemic.

It is highly likely that the government will be coming up with more measures to support the economy through these difficult times. The optimism of Chancellor Sunak does not seem to be out of place though, because the British economy was already in a jumpstart mode before the pandemic hit, because of the Brexit situation. The preparations made by the government as well as the businesses in the country will come to their aid. The Office of National Statistics (ONS) in a report published a few days ago had stated that economy would shrink by at least a third in the April to June quarter while the chances are that it may shrink by at least 13 per cent for the whole year. This assessment of the ONS seems to be in place as several other national and international institutions who keep a tab on the British economy had also shared a similar opinion. The ONS however, in its report has also stated that in 2021 the country will make a bounce-back of nearly 15 per cent, which has very much in sync with the Chancellor’s assessment.

The success of the government’s plans is highly contingent on the fall in the viral infection numbers in the country. Also, the success of the three-phased lockdown relaxation plan is critical for the government’s optimism to take effect.