Austerity?
Sunak has said there will be no return to austerity. However, a different kind of austerity has been inflicted on the economy with huge structural damage delivered to the arts and entertainment sectors, travel, hospitality and traditional retail. It is possible that demand for these sectors will ultimately re-establish itself to pre-covid levels.
What is less certain is whether the current owners and investors in those enterprises will survive to supply it. The Chancellor noted that corporate insolvencies were down this year, possibly as a result of the generous assistance of furlough, BBLs, CBIls, grants, rates relief and toleration of delinquency on rents and taxes, not to mention a temporary relaxation of company law in this area. But businesses require cashflow and capital to trade and the pressure on both these fronts is increasing.
What was marked in the SR20 review was the lack of additional help for businesses as it becomes clear that some form of COVID restriction will remain at least until the end of the financial year, The bounce back loans to spur the summer’s ‘V shaped’ recovery have been deployed, rates grants spent and freelancers are still hanging in the wind coping with a longer term existence on Universal Credit than anyone would hope for. Sunak may not be planning to revisit austerity, but neither is he going to provide any more insulation against the personal austerity of unemployment or business collapse.
So what happens next?
At this stage nobody knows. What is apparent is that some houses of cards are falling, Arcadia being just one. How many other businesses and banks they take with them and the de-multiplier effect of loss of their turnover and expenditure is difficult to gauge. In particular, it is known that there is a tipping point on individual high streets, where shop closures start to drive shoppers away. Combine that with office workers staying at home during the day, disincentives to use cars in cities such as congestion and parking charges and a storm in the high street can become a tsunami. In previous times it would have righted itself eventually as people had to shop somewhere, but the internet has taken that place now.
The market alone will not decide the future. Political decisions in the UK, in Europe and the rest of the world will have the greatest impact. These remain uncertain times.
