What has long been anticipated has today been finally confirmed: Britain has entered a recession for the first time since 2009. With reports flying out thick and fast of the biggest economic slump on record, in the midst of fears of both a second wave of the pandemic and mass levels of unemployment, the government is under even further scrutiny. But what lies ahead? MDs Tanya Joseph and Nick Clark share their sector views of the situation.
Tanya Joseph, Managing Director
Chancellor Rishi Sunak is said to be considering postponing the autumn budget. I don’t blame him. Delivering a budget will inevitably have to address the question of how are we going to pay for the government’s justified COVID-19 support package. Who would want to be talking about tax rises and public sector spending cuts if we are in the middle of a second wave of the pandemic?
So far, so obvious. Why then, have ‘friends of the Chancellor’ chosen to today to start briefing that he has reservations about delivering a budget in a few short months? I suspect he has been mulling it for a time and, yesterday morning when he saw his early copy of the latest economic data from the Office for National Statistics (ONS), he decided that it was worth running a potential delay up the flag pole. The figures, made public this morning, confirmed we are in a recession; and it is a big. The economy contracted 20.4 per cent in the period April to June compared to the first three months of the year – the biggest collapse on record.
No one should be surprised at the downturn, but the magnitude of the slump is nevertheless breath-taking. Worse still, just yesterday the ONS reported that 730,000 fewer people were in work in July compared to March. The Chancellor has thus far been steadfast in his refusal to extend the scheme beyond October but with 7.5 million people still temporarily away from work he must be bracing himself for massive job losses in the last quarter of the year.
No wonder Dishy Rishi is contemplating a delay. Of course, the cynic in me (and after years of working in and then watching government I am deeply cynical) would also say that he also wants to see the impact of Brexit – almost certainly without a trade deal – on our fragile economy before making big decisions.
Nick Clark, Managing Director
Financial + Professional Services
Today’s figures and announcement that we were in a recession shouldn’t be a surprise to anyone. You simply cannot shut down an economy to the extent we did and not expect to see some scary graphs on news reports. Comparisons with previous major economic events are worthless though because nothing like this has happened in living memory.
Focusing on this being the “worst ever” month or quarter is pointless. There will be some interesting questions to answer later about the make-up of our economy and why GDP plunged so far so fast. But if you want some good news, the economy is, certainly, growing again. And we are probably already out of the recession that has been announced today. The question now is how to rebuild confidence.
It’s hard to believe, but there are people and businesses out there who haven’t been materially affected by this crisis; their incomes have held steady or grown. Some will have been able to save and will have plans which will create jobs, create wealth, keep vital house buying chains moving, buy cars, fridges, conservatories… all the things the economy needs. There will be more bad news on jobs, more closures. But keeping that news in context and providing the impetus for growth is the critical next step.