This post was originally published on CBI.
Politics is simple. It is events that complicate matters. The remarkable speed at which coronavirus has overwhelmed the British economy means that the rules of the game have changed. For many CBI members, the cliff edge is in view and possible casualties far reaching.
As a former Special Adviser, I know the days following the Budget will have been one of the rare occasions to see an outbreak of consensus from the political team in Downing Street. Indeed, the statement made last night by the Chancellor would have been ‘gridded’ ahead of Budget day a week ago. They knew they would have to do more. And more they have.
To announce access to funding equivalent to 15% of GDP is the nuclear option – with a “whatever it takes” approach, we will see more levers being pulled if deemed necessary.
Will it be enough? No economist can say with any certainty. But be in no doubt that the key now is execution, the announcement is the easy part.
The financial support needs to be jet hosed into the real economy to protect good businesses from going to the wall. The sobering fact is that revenue lost through this crisis is gone forever for many companies. That is the calculation many CBI members will be making today when the detail of government support becomes clear. For many sectors, in particular hospitality and retail, despite the buoyant economic numbers the winds of change were already swirling. It is now a force ten gale.
Hill+Knowlton Strategies, with a dedicated risk and reputation team in London, has been supporting clients across industry sectors to manage and mitigate the numerous issues impacting industries. At a time of crisis in a globalized economy, no company without a crisis plan can expect to survive unscathed.
Despite the action taken, the Prime Minister and Chancellor are still in an invidious position as the scale of the crisis escalates. Why? Because government levers can help on the supply side, but CBI members rely on economic demand. The difficult task to address over the coming months is to ensure that demand exists in the UK economy. Without it, the ‘bridge’ announced yesterday will lead to nowhere. That stakes could not be higher on a political and economic level.
That said, there could be positive developments on the other side of coronavirus. Such a unique situation will turbo charge change in our economy. Many members will have strong views on the pernicious impact of business rates. It will be politically impossible to not look properly at whether or not business rates are fit for purpose. Quite simply, it is a broken system that has hindered business growth for decades. The productivity conundrum that has held our economy back since the financial crisis could also be addressed by the new normal of remote working and technological advances. There could be other developments yet to be witnessed that could now become part and parcel of our working lives and support UK plc.
This is a human touch all crisis, marking it out as distinctive to the financial crash of 2008. Prime Ministers and Chancellors are defined by events, injecting financial support is the lever that had to be pulled. Will it be enough? The thought of it not working is not worth contemplating at this stage.