When I wrote my last column a month ago, the full effects of the coronavirus pandemic were only starting to emerge.
It was the day after the UK Budget, and although the Chancellor had warned of a ‘significant economic shock’, there was still hope that the impact of COVID-19 would be largely temporary.
This has disappeared. We are in a recession, and one that will be deeper than the 2008 financial crisis.
Indeed, there is simply no precedent for the situation we find ourselves in. Never before have we sought to effectively shut-down all but essential parts of our economy.
Our own analysis suggests anywhere up to 20% to 25% of Scotland’s economic activity has been mothballed at the current time, with businesses shutdown or working at reduced capacity.
What is also unique about the current crisis is that we know that the underlying cause of all this is temporary. We will emerge – hopefully as safely as possible – in a few months’ time from the health crisis. Then we can look to re-build.
Sadly, the scale of the recession we are now in is such that even despite the best efforts of the UK and Scottish governments, businesses will go to the wall and many people will lose their jobs. There will be uncertain and dark days ahead for many.
Quite rightly, the focus of policymakers has been on prioritising our health through the challenging days and weeks to come. There is no trade-off. Investing in our public health today is an investment in the future of our economy.
But fairly soon, policymakers will turn to the future and to what happens next.
Some of this will no doubt focus upon learning lessons from our readiness to the current pandemic. Questions will be asked about our vulnerability to any major global risk in the future, from cyber-attacks through to environmental disasters.
But there are wider questions too, particularly with regard to whether or not our underlying economic model has helped, or hindered, our response to this crisis. Has our reliance upon global supply chains, coupled with our focus upon services and high-end manufacturing rather than core manufacturing capacity, constrained the ability of domestic industries to contribute to the pandemic response?
Big questions too will be asked around the nature of the ‘social contract’ in the UK, from levels of social security payments through to how we ‘value’ the jobs that people do. The irony that so many of us are now dependent upon workers who – just a few weeks ago – had been classified by some as ‘non-essential’ should not be lost.
As with any recession, a focus upon protecting the most vulnerable will be key to preventing long-term scarring.
But alongside these structural questions, we will need to turn our attention to the practical issue of rebuilding.
Re-starting our economy, when the time is right, will require careful thought. The nature of the health crisis is such that any return to ‘normal’ will be slow and steady. Planning out how businesses can start-up again, under what conditions, and at what capacity, will take time. Difficult decisions will be required about which sectors and businesses to prioritise. There will be setbacks.
All of this should be done as a partnership between business, employees and their trade unions and policymakers, with public health advice paramount.
Tens of billions of pounds has been spent supporting the economy 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.
It will be a long road ahead.
Authors
Graeme Roy
Dean of External Engagement in the College of Social Sciences at Glasgow University and previously director of the Fraser of Allander Institute.