Coronavirus, Scottish Economy

Looking to the future….

Quite rightly, policymakers remain focused upon supporting us through the challenging days and weeks to come as safely as possible.

Investing in our public health today is an investment in our long-term economic health tomorrow.

But the immediate economic cost is huge.

In recent days, including from our own Scottish Business Monitor, we are starting to hear more about the hardship that many businesses, their owners and employees are going through. We are on track for a deep recession. And whilst, in time, we will start to gradually remove our economy from its hibernation, the scarring effects are likely to last for many years.

When the time is right, we must turn our attention to the rebuilding. This won’t be easy. Our economy can’t simply be switched off and on. Restarting it, whilst protecting public health, will require careful thought.

As we discussed in our podcast with Sir Harry Burns last week, there will need to be frank discussions about what we can learn from the current crisis.

Some of this will undoubtedly focus upon our vulnerability to any major global risk in the future. There will also be important questions about the long-term balance of activity within our economy, the nature of the ‘social contract’, and how we ‘value’ the jobs that people do.

But alongside these ‘big’ questions, we will need to turn our attention to getting our economy up and running again. A strong economy will be an important pillar in the recovery from this crisis.

The nature of the health crisis is such that any return to ‘normal’ will be slow and steady – with possible setbacks. Planning out how businesses can start-up again, under what conditions, and at what capacity, will take time to work through. Difficult decisions will lie ahead.

It goes without saying that what we need is a clear strategy for this phase that captures society’s priorities and which is then carefully communicated to the population at large.  Paul Johnson’s excellent article in the Times on Monday highlights some of the huge ethical trade-offs that exist.

But following on from this, what practical considerations might frame any discussions on the starting-up of our economy?

Firstly, simply ‘switching our economy back on’ and hoping for the best won’t work. We need a clear plan to help support a gradual restart of economic activity, whilst not jeopardising public health. And we need to recognise that all of this will take place under huge levels of uncertainty and a time of stress and anxiety for many.

Secondly, decisions will have to be made about the right point for government support packages to be scaled back; about where – and for who – support needs to be extended for longer (perhaps indefinitely); and, what new measures might be needed to assist the recovery (e.g. for industries such as tourism badly impacted).

Thirdly, unwinding the social distancing restrictions and advice will need to be worked through carefully. At the moment, legal restrictions actually only force a certain number of businesses to close – such as restaurants, pubs and non-essential retail, with ‘strict advice’ and guidance for everyone else. However, restart plans will need to consider the whole economy given the large swathes of businesses who have closed in the interests of public health even if not strictly required to.

So what issues might come into play here?

  1. Clearly public health is paramount – Any rolling out of a relaxation of restrictions has to be mindful of the risks to public health and closely monitored (most likely with a major escalation in testing). But human rights are important too and any changes need to be mindful of these as well.
  2. Essential vs. non-essential businesses – At the moment, the advice is only for essential workers (NHS, food producers, carers, food retailers) to go to work. But clearly there is a wide scale between essential and non-essential workers, even within the same workplace. Thought needs to be given to a clear sense of economic and social priority about what parts of our economy to prioritise, and when.  For example, university academics like us are likely to be toward the lower end of ‘essential’ workers at this time (and we have the benefit of being able to work from home)!! Subject to the safety of workers and consumers being protected, it would seem to make sense to prioritise support and relaxation of guidance and legal restrictions in some sectors/businesses and in some locations over others….but this will be by no means easy to do.
  3. Working patterns – Considering working patterns through the period of remobilisation should also be a factor. It would seem sensible to give priority to workers whose work cannot be undertaken appropriately – or at least satisfactorily – from home vis-à-vis those whose work can.
  4. Transportation patterns – Transportation patterns matter too. We have seen already that the provision of transport has to be carefully planned to avoid a collapse in social distancing, notably in urban areas. For some, exploring the greater use of cars, despite the environmental concerns, may be a necessary short-term contribution. But clearly this option is not open to everyone. Introducing different commuting patterns might help – at the margin – to reduce peaks at rush hour.
  5. Identification of ‘reasonable measures’ to minimise risks – Not all businesses are the same in terms of the risks that they pose in terms of social distancing. Some manufacturers have highly automated production facilities and require few people to operate them. If adequate social distancing practices exist, and that any changes are proportionate and minimise risks, then they would seem to be obvious candidates for any easing of guidance. But others are by their nature labour intensive with social distancing very difficult to do. If reliable antibody testing emerges then this could allow for partial return of labour. If not, tougher measures and advice might need to last longer for them, with appropriate financial support. Large scale public events – such as sporting or music activities – are clearly off the agenda. But smaller gatherings – e.g. faith groups, small venues etc. – seem to be a better place to start.
  6. New standards and guidance – Building on this, government could explore developing much clearer and implementable objective new standards and guidance that all businesses can follow – e.g. health and safety, social distancing etc. – if they wish to scale up their operations. For example, increasing space between staff on a production line, managing shift change-over times to limit large numbers of people coming in contact with each other, regularity of cleaning of premises and equipment and altering tasks undertaken. All of this could help reassure workers and consumers, thus helping to support a gradual restart of day-to-day activity. Collaboration and agreement with businesses themselves, employer representatives and the health and safety executive will be key to ensure guidelines are fit for purpose and workable across different sectors.
  7. Partial re-starts – Alongside all of this, an option is to support a partial re-starting of some businesses (perhaps following the procedures already in place for supermarkets and the like). For example, limits could be put on the number of customers allowed in coffee shops, public galleries etc; partial opening of businesses for certain days of the week; phased returns of different years for universities and colleges; manufacturers operating at 50% capacity etc. Setting this out as roadmap that puts in place milestones and review points may help businesses plan ahead, but inevitably there will be unexpected bumps along the way. Transparent and coherent communication of any changes (and reasons why) will be needed if confidence is to be upheld.
  8. Repeated shutdowns – There may be an extended period where we may need to reinstate more stringent guidance and restrictions in order to manage demand on the NHS. Businesses who restart will need to mindful of this, and some may not feel able to restart under such conditions.

The above list is not designed to be exhaustive. And clearly many are interlinked. But they illustrate just some of the issues that will need to be considered to get things moving again, when the time is right.

Of course, there will be huge challenges in lifting restrictions/advice on social distancing on some parts of the economy and not others. For example, businesses even within the same sector will face quite different challenges in terms of their ability to implement social distancing. Some businesses who may be encouraged to restart within new guidance may find it impossible if their supply chain isn’t back up and running.

It is likely there will need to be some employer discretion. Government will not be able to produce detailed guidance for each and every unique situation. Of course, with discretion comes the risk of confusion and concern and possible mistakes.

It will also be important, given businesses and their supply chains operate nationally, that there is coordination across the UK when re-mobilisation kicks-off.

At the heart of all this will be considerations of people’s human rights and the consistency of any changes in guidance and restrictions with this fundamental underpinning of our society.

Given all these complexities, a structured approach will be tricky. So instead, the government may opt to allow all businesses to restart (albeit perhaps within limits) under the understanding that shutdowns will probably need to be reinstated more often than would be the case under a more ordered approach, but many businesses would struggle to survive repeated full shutdowns over an extended period of time. A structured approach will be more difficult to manage, but is likely to be easier for businesses to cope with.

Two important points to reiterate to underpin all this. Firstly, the public health risk needs to be paramount. Secondly, any discussion of such issues – particularly around the partial re-starting of businesses – needs to be a partnership between businesses, employees, trade unions, and government.

It may seem far off just now, but policymakers will also have to plan for the recovery. Tens of billions of pounds has been spent supporting businesses and families through the current crisis. But this is just the start. An unprecedented recovery package to help rebuild businesses and to get people back to work will be needed. And some day we’ll need to start to pay this back.

It will be a long road ahead.



Picture of Graeme Roy, director of the Fraser of Allander Institute
Graeme Roy

Dean of External Engagement in the College of Social Sciences at Glasgow University and previously director of the Fraser of Allander Institute.

Emma Congreve is a Senior Knowledge Exchange Fellow and Deputy Director at the Fraser of Allander Institute. Emma's work at the Institute is focussed on policy analysis, covering a wide range of areas of social and economic policy.  Emma is an experienced economist and has previously held roles as a senior economist at the Joseph Rowntree Foundation and as an economic adviser within the Scottish Government.

Mairi is the Director of the Fraser of Allander Institute. Previously, she was the Deputy Chief Executive of the Scottish Fiscal Commission and the Head of National Accounts at the Scottish Government and has over a decade of experience working in different areas of statistics and analysis.

Head of Research at the Fraser of Allander Institute

Stephen Boyle
Stephen Boyle

Stephen Boyle is a visiting researcher at the Fraser of Allander Institute. He was previously the Head of Group Economics at the Royal Bank of Scotland.