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3 July 2020

The three challenges that stand in the way of unlocking the economy

There is no great surge of consumer confidence waiting to sweep us back into economic growth.

By Stephen Bush

Will England’s post-lockdown reopening be a party, or the prelude to a round of bankruptcies and closures? Boris Johnson has a day of big, set-piece media interventions, all with the same theme: go forth and stimulate the economy (but, ah, do it cautiously).

The British government believes that it has sufficiently reduced the spread of infections that it can focus instead on tackling the economic cost of the lockdown. But there’s a threefold challenge. The first is that the United Kingdom may not have successfully flattened the spread of new cases, that the reopening will trigger a second spike in infections, and that the country lacks the competent leadership and/or state capacity necessary to control a second wave through testing, tracing and isolating new cases.

This challenge is a known unknown. Speaking personally, I have serious doubts about the operational competence of the Prime Minister and the institutional ability of a state that has had ten years of devolved austerity to contain new outbreaks on a local or regional basis. But who knows? One way or another, the proof will be in the eating if England does properly unlock over the coming weeks and months.

[see also: The government is looking for someone to blame for its handling of the Covid-19 crisis]

The second challenge is that large numbers of British people may not believe that the UK has successfully flattened the spread of new cases, and therefore “reopening” merely triggers wave after wave of bankruptcies and closures. The government’s operational competence may never be tested because people opt not to take advantage of the reopening. Don’t forget that large numbers of people were reducing their social contacts before the government formally locked down – and there is no evidence that they are going to take their cues from the government about when to emerge from lockdown either. The United Kingdom locked down “from below” and will unlock the same way.

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The third challenge is that, due to the continuing closures elsewhere, the economy may revive, but merely in a way that changes the trajectory of large parts of it from “immediate bankruptcy” to “imminent bankruptcy”.

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The announcement that close to 2,000 people will be made redundant by the Casual Dining Group – owner of Bella Italia, Café Rouge, Las Iguanas and various airport restaurants – is a case in point. These restaurants live off passing trade and casual drop-ins in shopping centres, cinema multiplexes, around theatres and concert halls, and business districts: all places that won’t reopen any time soon.

[see also: Four out of five hotel and restaurant workers have been furloughed, ONS stats show]

These are also, it could be argued, chains being left behind by the evolving tastes of British diners. Their rapid expansion had left a once-viable business in need of shrinking even before the novel coronavirus – but they are still particularly vulnerable because of the nature of their trade.

That the government’s message is, inevitably, muddy, further deepens the challenge. Boris Johnson’s message today – stimulate the economy (as carefully as you can!) – sums up the fundamental contradiction at the heart of the government’s message for England: people do not relax, socialise and spend when they are also Staying Alert.

If the polls are right, most people are going to look at that confused message, and the Leicester lockdown, and decide the way to stimulate the economy cautiously is to stay at home or meet friends outside. The nightmare scenario is that the next week is the prelude both to job losses and closures, and a second spike.

[see also: Leicester’s lockdown shows how Covid-19 is worsening the UK’s inequalities]