Two weeks ago the conventional wisdom was that COVID-19 might cause a minor economic impact on the UK economy.
Last week it was beginning to look as bad as the financial crisis. This week, it is looking like the worst economic catastrophe in modern history.
It is hard to think of another moment – in health, diplomatic or economic terms – that has escalated as quickly and as dramatically as the coronavirus crisis.
Politicians around the world have had to effectively ditch their domestic agendas, their fiscal rules, their policy proposals and replace everything with what they now agree is a “war effort” to keep their countries afloat.
As countries impose lockdowns and normal life goes into hibernation, vast swathes of the economy are now under grave threat.
The consumer-facing services sector which accounts for the majority of UK gross domestic product, is now in deep jeopardy. Many companies are in the process of laying off workers – some temporarily, some permanently.
Some can only survive a matter of days. Surviving the next few weeks represents the difference between life and death for many companies.
It is in that light that we should consider the extraordinary set of fiscal measures being introduced around the world – from the US and France to, this evening, the UK.
In normal times, the package announced by Rishi Sunak would constitute one of the biggest public spending turnarounds in history.
For one thing, the government has negotiated that mortgage lenders will give those affected by the virus a three-month holiday from their loan payments.
There will be a whopping £20bn of extra spending on grants and business rates holidays for companies.
That’s on top of a £12bn package already announced in last week’s budget.
If you add that to the other pre-COVID-19 commitments in the budget you’re talking about a grand total of £42bn of extra stimulus.
That’s not far off the extra €45bn unveiled by France’s Emmanuel Macron last night, but a long way short of the $850bn stimulus package pledged by Donald Trump earlier in the day.
But comparing these packages is fiendishly difficult, especially since many of the details remain unclear.
And in a sense the more interesting scheme unveiled by the chancellor today is not the straightforward giveaway – the £20bn grants bit – but something else entirely: a £330bn loan guarantee in which the government will offer businesses cheap loans to help them through the coming years.
That might represent the difference between life and death for a restaurant or retailer considering whether they can make it through the next 12 months.
However, it is unlikely to prevent them laying off workers.
There will still have to be another scheme to support those who lose their jobs. This is a work in progress, but according to Treasury insiders will be unveiled in the coming days.
Put it all together and it certainly amounts to a big stimulus. The real question is whether it will be enough to prevent a cataclysmic recession.
Many parts of the economy will effectively go into hibernation in the coming months.
The nuclear option is for the government to step in as the buyer of last resort for all companies but today’s package does not imply it is willing to go that far: it implies that it will step in to help businesses when banks do not.
Does it represent the big bazooka so many investors, households and businesses were hoping for? Not quite.
The chancellor and prime minister said they were willing to do “whatever it takes” to support the economy – but the stimulus remains well below the levels seen during the financial crisis, let alone the Second World War.
Still: investors may be cheered by the fact that the PM and Mr Sunak emphasised repeatedly today that this is not the end. There will be more measures in the coming days.
As the scale of the economic crisis becomes clearer it may well be that they are forced to inject untold amounts of cash into the UK economy. They are likely to have to engage the Bank of England to print more money.
After all, a week is a long time in this crisis. Come next week the economic response may have to be even more dramatic.
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