The fall-out from the coronavirus crisis is not just the human cost - it’s the recession to come

COMMENT: the casualties of the coronavirus crisis includes the economy (and common sense)

Ian Carrotte of ICSM Credit fears the cure is as bad as the disease.

They say the first casualty of war is truth, but during the coronavirus crisis the first casualty is the economy (and the second casualty is common sense)

If you were to propose during a general election that if elected you would close down most businesses, shut schools and colleges and ban most people from going to work you would struggle to get a single vote. In March 2020 this is the new norm with so-called lock downs around the world as the authorities struggle to contain the coronavirus outbreak. Nobody doubts the need to do what is necessary to prevent the virus from killing more people but have we gone too far?

In almost all sectors the economy is in trouble. Markets are down the pound has lost ground against the dollar and euro and house sales have effectively been banned. Apart from food stores, chemists, petrol stations and a small number of essential retailers most businesses have shut their doors while 90% of commercial air planes grounded - and as for the holiday trade – forget it.

Governments have declared the lock downs are only for a few weeks but if the numbers of those dying from the virus continues at a high level the situation could continue for months. This is mad. The genie was out of the bottle in January and will continue to infect new victims for the next two or more years around the world. In the meantime the economy is sliding into a recession and possibly worse. It has to stop.

There is no need to close down the entire economy. With social distancing measures and essential hygiene rules most stores could remain open from garden centres to department stores. Offices, factories and manufacturers could largely continue albeit at a lower level of production and public transport should be up and running - but again with common sense safety measures in place. And there is no reason why pubs, cafes, bars and hotels cannot open under the same conditions. Without this suggested level of economic activity in place there will still be a recession and around a million people could lose their jobs. And many businesses will go the wall – some with the help of the banks all too eager to pull the plug on zombie businesses that have teetered on the brink for years.

Without a partial reopening of the economy now or at the latest in mid-April things will only get worse and a global recession is on the cards. If you look back to the various downturns of the past they take up to four years for things to get back to where they were before the crash.

The chancellor Rishi Sunak has outlined billions of pounds in grants and loans to companies to pay wages and keep firms afloat while thousands of non-essential Government and local authority staff have been sent home on full pay. The bill for the billions spent will have to be paid which means higher taxes from a depleted workforce and smaller business sector. Already so many of the loans being offered come with high levels of interest and demands for personal guarantees, the help for around a third of the self-employed comes with delays and red tape while the grants for firms are not as comprehensive as promised due to the complexities of staff contracts.

The point is that unless the vast majority of the population contract the disease or there is an anti-virus jab available this spring, then the outbreak will continue with a lock down or not. The Spanish Flu at the end of the Great War went on for years and so will coronavirus.

The second casualty of this emergency is the disappearance of common sense. The ill-thought-out legislation rushed through parliament before the break, along with conflicting official advice has reduced the country to a land of curtain twitchers and panic buyers. Neighbours spy on neighbours - snitching on them for taking their dog for a second walk of the day. The police stop extended families from taking a stroll in their local park and send drones into the sky to film joggers taking a solo run across the moors. Shops and businesses have been boarded up for fear of looting, arsonists and thieves, and motorways normally busy with commercial traffic are largely silent.

The lock downs are instigated in the name of health. Shutting people in their homes for weeks on end will have a detrimental effect on their mental health and will no doubt lead to expensive social problems from domestic violence, alcoholism and a rise in online crime and fraud. Many of those people dying of coronavirus are seriously ill already. That is one of the inconvenient truths of the crisis which amid the hysteria and panic is being ignored.

There will be a reckoning. Mortgage payments are being missed, rents withheld and businesses are going bust. Carluccio’s, Brighthouse, Laura Ashley have gone for starters with a string of retailers and hospitality businesses unlikely to survive. Meanwhile the banks will see a chance to increase interest rates and call in loans on zombie businesses.

President Trump’s wish to get America open for business by Easter has been pilloried, but he has a point. Without a vibrant economy things fall apart very quickly. What Britain needs now is a vocal and articulate opposition to the policies coming out of Downing Street. The sooner the lawyer Keir Starmer and a revitalised opposition can start unpicking some of the emergency legislation the better. And the sooner the large numbers of Conservative backbenchers who are deeply concerned we are heading for a recession get their act together the sooner we can pull out of the economic nosedive. And hopefully common sense will once again return to those in charge.

ICSM Credit

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