FEATURE
THE UK MUST FORGE A NEW PATH OF RECOVERY FROM COVID-19 By Jonathon Marshak
O
n its current trajectory, the United Kingdom’s economic recovery from the governmentmandated shutdown looks bleak. Not only are we facing a protracted downturn in consumer and business confidence, but the economy must also grapple with being pulled out of the European Union’s single market from 2021. A radical approach in how we finance government expenditure and therefore stimulate the economy must be taken, or we face the prospect of being left behind for good. As the United States contends with civil unrest, the UK must heed its ally’s warning. We cannot let our hidden economic problems continue.
The Chancellor was able to push through policies that would have been thought too radical for the party that brought us austerity only a decade ago. The Treasury has reacted to the crisis so far with £176.7bn of immediate fiscal stimulus, £50bn of tax deferrals and up to £330bn in business loan guarantee programmes, and the highlight being the Coronavirus Job Retention Scheme which has effectively nationalised wages for 31 per cent of employees. Not to downplay the scale of this government intervention, but simply propping up businesses until 1st August, at which point businesses will have to pay an increasing share of their employees’ salaries, will only delay the inevitable. The Office for Budget Responsibility warned that up to 20% of the 9.5 million workers placed on furlough could be made redundant. We must avoid what has been seen in the US, where unemployment has doubled compared to levels seen
Figure 1: UK Consumer Confidence Index. Source: OECD
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