What does the roadmap out of lockdown mean for the economy?

Last month, Boris Johnson stepped into the Downing Street press conference and promised a slow but irreversible move out of lockdown, noting he wouldn't be buccaneering with people's lives.

What does the roadmap out of lockdown mean for the economy?

Last month, Boris Johnson stepped into the Downing Street press conference and promised a slow but irreversible move out of lockdown, noting he wouldn’t be buccaneering with people’s lives. 

A marked shift from the devil-may-care Johnson who infamously travelled down a zipline for the 2012 Olympics and drove a digger through a wall in the 2019 general election. Maybe he’s traded it in for an electric vehicle given his promise of a more prosperous, greener future? 

Either way, this press conference was more about what Boris was presenting rather than how he said it. 

The economy will, according to Johnson’s plan, begin to open up no earlier than April 12th with all shops opening, along with hospitality venues for outside services. This will be followed by the opening of indoor entertainment, such as museums and cinemas, on 17th May. And, if all goes to plan, we should be living restriction-free by 21st June.

The reaction to the roadmap out of lockdown

The initial reaction to the PM’s plan was perhaps indicative of how much the public has been worn down by the pandemic, with social media erupting in joy at the prospect of nightclubs opening in the first half of the year. 

However, until then, there is still the prospect of another three months of restrictions on some businesses, having already suffered so much economic disruption during the pandemic. 

The economic impact of COVID-19

In January, the International Monetary Fund downgraded its forecast for the UK’s recovery this year and predicted that GDP would expand by 4.5% in 2021, down 1.4% from the 5.9% growth forecast made last October. 

And last month’s ONS unemployment statistics revealed that nearly 200,000 young people have been without work for over six months. 

With the COVID-19 pandemic inflicting such widespread damage to the UK economy, there is no guarantee that lifting restrictions will get us back to normality any time soon. 

The Chancellor recognises this and sought to outline the road to economic recovery in the budget earlier this month. 

The headline news that the furlough scheme has been extended is a smart move, but it is ultimately a short-term solution to the economic issues caused by COVID-19. 

The issue with zombie companies

The pandemic has changed consumer behaviour for the foreseeable, with shoppers now prioritising digital and online services. As such, various sectors are only solvent because of Government support and may find themselves no longer profitable once lockdown has lifted. 

These so-called zombie companies are, in some ways, masking the true economic impact of the pandemic and could, in time, become unviable due to high levels of debt and poor sales.

A similar trend occurred in the 2008 financial crash, with digital-first brands, like Spotify and Uber, emerging at the expense of high-street brands, like Blockbuster, that were unable to adapt to changing consumer demands.

Why the Government should subsidise training 

If the Chancellor is committed to preventing unemployment tipping over five million, then he must act now to ensure the workers impacted by these changes are not left behind. 

A subsidised training scheme which provides jobseekers with the digital skills that recruiters crave is one option available to the Government. Such a scheme could be achieved by a three-step approach: firstly, help jobseekers identify if they have the aptitude for digital skills, such as coding; secondly, provide meaningfully accredited part-time, full-time, remote, and in-person courses; and finally, offer financial support incentives to get people to take the courses. 

Although this may sound like a short-term financial hit for the Government, the long-term outcome is more Brits in high-skilled employment and a workforce teeming with in-demand digital skills. 

A return to a restriction-free economy may be within touching distance, but this doesn’t mean that we are back to normal. The COVID-19 pandemic has plunged the UK into one of the deepest recessions in modern history, and it’s expected that it will take a minimum of 18-months to reach pre-pandemic levels. 

However, even when our economic activity matches 2019, the business landscape will be unmistakably shaped by the past 12-months. The pandemic and the subsequent lockdowns have changed consumer behaviour for good and led to fundamental structural changes within our society. Some businesses will be able to adapt to the changes, while others will not. With this in mind, the Government must create a training scheme to futureproof our labour market and prevent an economic crisis that stretches far beyond the pandemic.

Paul Naha-Biswas
Paul Naha-Biswas

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