Global oil prices have plummeted and the global financial markets are following suit, as worry about Covid-19 makes itself felt on an already fragile world economy.
Boris Johnson will today decide whether to implement yet further measures to contain and delay the spread of Covid-19 here in the UK. But governments across the world not only have to make epidemiological decisions about what to do next, they also need to make economic decisions about how best to weather the crisis.
As the FT reports, businesses in the hospitality sector are the first in the firing line, thanks to their tight margins and their extreme vulnerability to consumer panic. At least it’s good news for the supermarkets, as people are bulk-buying? Well, yes and no. The thing about non-perishable items is exactly that, they’re non-perishable. Today’s rush is tomorrow’s unusually quiet trading quarter. It’s easier for big businesses to live off their humps than small businesses, but taken together it makes for a grim outlook for practically everybody.
It means that Rishi Sunak exchanges one headache for another. The Chancellor’s original headache was that he had inherited a tricky set of pledges on tax and spending, which, coupled with the government’s pledge to reduce the United Kingdom’s debt-to-GDP ratio, made for a very tight spending round. But those pledges are predicated on the UK economy continuing to grow – take that assumption away and the limits on Sunak’s freedom to manoeuvre similarly fall away. The political challenges of ending the fuel duty freeze, too, just got a lot less challenging.
But as he examines a long, long list of businesses and individuals badly needing government assistance to help them get through the crisis, Sunak will be forgiven for wishing he was still stuck with his fiscal straitjacket.