UK's growth figures dim hopes of V-shaped recovery from Covid-19

There was nothing inevitable about a weak bounce back – the UK government has delayed the recovery by its dithering

Britain’s recovery from the worst slump in three centuries is going to be long and painful.

That’s the only conclusion to be drawn from figures showing the economy barely spluttered back to life in May and predictions by the Treasury’s independent forecaster, the Office for Budget Responsibility, that the recovery will take until the end of 2022 at best.

When the monthly GDP figures revealed a turnaround of just 1.8% in May from a 25% slump in March and April, the chancellor could be forgiven for thinking this was a meagre reward for all the rescue funds he has deployed since the lockdown.

If he was wishing for a V-shaped recovery, Rishi Sunak was short-changed. Rather than move through the gears, the economy remained stuck in first. And the early signs of this faltering growth path was most likely what prompted the government’s panicky easing of the lockdown.

There was also little to cheer from reading the OBR’s analysis of the situation, after it pushed back the date of Britain’s return to pre-Covis-19 levels of activity to the end of 2022.

Saying in its central scenario that GDP would shrink by 12.4% this year and unemployment would more than double to 12%, the report places the OBR firmly among the doomsters and gloomsters that Boris Johnson finds so difficult to comprehend.

The International Monetary Fund is another to believe the UK will be especially hard hit by the pandemic. Meanwhile the Paris-based club of mostly rich nations, the OECD, estimates the fall in economic activity during 2020 will be worse in the UK than any other country in the developed world.

Sunak should be concerned that their verdict shows his costly support for the economy, which the OBR also spells out in searching detail, is likely to persuade fewer companies than hoped against making mass redundancies and be judged a strategic mistake.

Better to spend more money and keep confidence levels high than spend slightly less and finish 2021 with an unemployment rate above 10% and the economy still spluttering.

There will be some who argue that the economic toll was always going to be heavy in the UK, however generous the bailout funds.

But France and Italy also suffered badly from the disease and yet have bounced back strongly in the last couple of months, even outstripping Germany.

The common denominator appears to be trust and the public’s faith in their government’s competence.

Harsh decisions were made by French president, Emmanuel Macron, and Italy’s prime minister, Giuseppe Conte, that dictated how people should behave and what businesses must do to avoid being fined.

While it was decried in some quarters for impinging on civil rights, the bulk of the French and Italian people have appreciated the strict rule making and the lessening of risk to their health this has brought.

It is clear from May’s figures that the UK government has put back the recovery by its dithering and delay.

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The prime minister has finally said masks must be worn in shops, although not until 24 July, a decision that has taken three months to make when other countries adopted the measure immediately.

The cost to the UK economy of the pandemic will be keenly felt in the labour market over the coming months. Provisional data released last month showed the number of employees fell 621,000, or 2.1% from February – the month before lockdown – to May. The trend for redundancies and layoffs continued in June.

Britain needs a V-shaped recovery, but doesn’t look like it is going to get it. And the costs of failure will last for a generation.

Contributor

Phillip Inman

The GuardianTramp

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