Reflecting on nearly six months of COVID-19 measures I must admit to some frustrations with the present administration for missing opportunities to deliver some positive strategic impact on the economy.
The furlough scheme has been a lifesaver for some businesses and their employees but it’s clear that it has been abused in some quarters, accessed by some companies that could probably pay a bit more tax and been used by businesses that really didn’t need it with very large underpinning cash reserves.
It could be argued that furlough has merely delayed the inevitable redundancies that would have happened but it certainly helped firms suffering when the economy dived in the Spring, when economic activity virtually ceased. Good businesses would have either closed or been compelled to make substantial redundancies. They would certainly not have borrowed money to pay staff to stay at home. CBILS should not have been thought of for that purpose.
The impending cessation of the furlough scheme will reveal the extent of this but the “cash back” bribe for keeping people on until the New Year is a very crude instrument. It will be interesting to see in November whether it has been effective.
Additionally the 3 million small businesses that have received no help at all from Government during this crisis, will not welcome further tax rises when the Treasury seek to raise revenues to pay for the fiscal stimulus packages used at the height of the pandemic
For the long term, the pandemic has given us a huge opportunity to “rebalance” the economy, something that governments have been attempting to do since the days of Mrs Thatcher.
For an economy that became too unbalanced, away from science, technology and manufacturing, it has long been a goal to increase our manufacturing base, retain and prosper from our technology growth businesses, export more and create high value jobs.
At the height of the “first” wave of the pandemic, manufacturing companies made herculean efforts to reinvent themselves as PPE manufacturers and produce ventilators from scratch demonstrating impressive cross-sectoral collaboration. It also exacerbated how vulnerable our “just-in-time” and overly long supply chains were when tested and proved that some core activities needed to be re-shored, at least to Europe. Work by Innovate UK and the Knowledge Transfer Network is certainly helping focus the sector on innovation and productivity and a revamped Industrial Strategy, looking at secure supply chains for products and services that make us as a society more resilient, must be the way forward.
However, the measures taken at the moment seem to wish for a return to the old way of doing things, based upon unsustainable consumption and consumer debt.
A race back to buying cheap imported clothes, getting our haircut and going to the restaurant/pub has taken priority. I can live with my foppish 80’s fringe which hasn’t been cut since February.
This race to consumption has even taken priority over schooling. This will come back to haunt us I’m sure.
Even the push to get people to stop working from home and go back to work seems to appear be not about sustaining the improving levels of productivity in the service sector, which have gone up through the embracing of technology. It seems to be more about supporting coffee shops and sandwich shops in City centres. My good friend Geoff Glover, former senior executive at Ford and Volvo summed it up pretty well on LinkedIn.
“This is purely being driven by concerns about workers not being in the city centres as consumers. It has nothing to do with individual health, public health or whether working from home can be economically productive. This is completely the wrong approach. It is like trying to force people back onto the horse and cart when cars have been invented, to save the cart makers.”
The elephant in the room is that high streets need to be repurposed away from retail and that the commercial property market is in for a shake up for sure.
It’s worth remembering that most manufacturing businesses have continued production throughout the lockdown despite mixed messages from Government.
Particularly in the service sector, technology has enabled huge leaps forward in improving productivity and it would be a shame to lose this. The upside is that most firms realise this and want to strike a balance, recognising the needs for face-to-face teamworking and safeguarding mental health when this is finally over. Flexible working is with us to stay and it this helps solve some of the “productivity conundrum” then this will be welcomed. Gains in the service sector will be welcomed as, pressured by globalisation, manufacturing has been battling to improve for many years.
I should add at this point that I like a cup of coffee and a sandwich as much as anyone but if the UK economy has shifted away from this a tad, then we need to understand this and not try to retrace our steps. The key will not be staff working full time at home but achieving a more productive balance between the two.
A Conservative Government with a penchant for “propping up lame ducks” and expecting us to regress seems a strange thing to me, when sound “value adding” manufacturing and engineering companies with large societal impact have often been allowed to go to the wall.
This strategy of getting back on public transport (now publicly owned) to consume food and drink in city centres will not produce a “world beating” post Brexit economy for sure. The people in these sectors need higher value jobs that will be sustainable in the long term and maker a greater contribution to our economy. Even better if these jobs are distributed locally away from large city centres where nobody lives and time and money is wasted on commuting.
We have also missed an opportunity to address Climate Change.
Surely as a country we should be investing in technology such as home solar and energy storage to “green” our economy, reduce peak loading on our electricity supply network and provide sustainable energy security to home owners? It also supports the roll out of the electrification of vehicles (I do prefer Hydrogen). Instead we are funding loft insulation, in a rushed initiative, until the end of March 21. Yes, our housing stock is still not as good as it should be but this technology would be of great help to many people both end users and those who will develop new skills. It would certainly move the country forward rather than back.
We have also missed an opportunity to strike whilst the iron was hot in peak lockdown, when car use was almost 90% below normal levels and the price of oil had collapsed. Some fiscal efforts should have been used at this time to cement the good things of moving away from the car to other means of transport. The £50 grant to get an old bike back on the road is a welcome idea. The changes being made to road systems to make it safer for these new cyclists is essential. Additionally the rise of the e-bike makes cycling even more accessible. It will be part of the future of transportation. As Brompton Bicycles say “owning a Brompton is like having your own, personal flying carpet” and as a keen cyclist it certainly feels that way.
Being in the midst of the three Tsunamis of Covid-19, Brexit and Climate range has caused up monumental problems but even within all of this we need a Government that can keep an eye on the strategic ball.
The Government has the opportunity to address this and set out a way forward with the strategic reviews it will publish this autumn which include spending, defence and infrastructure.
Our lives have changed and so has the business environment and Government must respond accordingly to this test of strategic vision.
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