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12 June 2020

The UK’s plummeting GDP cannot be saved simply by lifting lockdown

Consumer confidence is not something Boris Johnson can turn on and off, whatever some in the Conservative Party might think.

By Stephen Bush

Britain’s GDP fell by 20.4 per cent between March and April — the biggest monthly fall ever, wiping out the equivalent of the last 18 years of economic growth lost in a single month. This will increase the pressure on Boris Johnson from within the Conservative Party to end the lockdown in order to bring a halt to the economic damage.

The problem is that this argument for “ending” the lockdown is based on a flawed premise: that the lockdown and ensuing recession is something that was created in Downing Street; that Johnson woke up one morning and pulled a lever that sent us into the worst recession in three centuries.

The reality is that in the weeks before the British government U-turned and formally mandated that we go into lockdown, people were already reducing their social contacts. Businesses were transitioning to working from home. Restaurants, bars and attractions were pre-emptively shutting down in order to protect their staff, and those that were trading were half empty.

Several of the local businesses I know well were already wondering, in the days before Johnson compelled them to close, whether they would end up going bankrupt or shedding staff thanks to the fall-off in custom. That picture is one that has clearly been repeated throughout the country, as bookings at restaurants, hotels and bars have fallen precipitously.

It’s not clear, then, that you can simply repair the damage by pressing a button and ending the lockdown from a legal perspective, not least because 54 per cent of our country’s consumer spending is driven by the over-50s, over-60s and over-70s. This group is also forecast to provide much of the growth in consumption over the next 20 years. Until the age groups most at risk from Covid-19 feel safe and able to participate fully in our society again, there will be no recovery — merely a less severe recession.

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Nor can you maintain the economy in its pre-coronavirus shape even if people are willing to take greater risks. To speak personally for a moment: I’m happy to take greater risks to go to a nice restaurant again or to watch Arsenal capitulate at home to a relegation candidate. To go to a pub? I’ll pass, frankly.

Others will have different risks, but that’s the point: my local cinema can’t just live off my desire to see as many flicks as possible. It also has to attract back someone who has subscribed to Netflix or Disney Plus in recent months and is happy to watch most of their movies at home.

The only path to a full-scale economic recovery is to see off the novel coronavirus. That’s the real choice before governments, and any recovery plan has to run through that objective, not around it.