By unhappy coincidence, the anniversary of the most rapturous day in British history – victory in the war against Nazi evil – comes amid a dismal historic message from the Bank of England.
The Covid-19 pandemic, and the lockdown it has caused, is going to take the economy on a white-knuckle ride not seen for three centuries.
The numbers truly are startling. A slump of 25 per cent in the current quarter driven by a 30 per cent drop in household consumption, a 45 per cent plunge in the sales of companies and a halving of business investment. The housing market is moribund.
Grim figures: The Bank of England announced a 30 per cent drop in household consumption, a 45 per cent plunge in the sales of companies and a halving of business investment
The Bank is sticking with the idea of a ‘V’ shaped return to normality with output starting to repair itself in the second half of the year. But not enough to prevent a loss of 14 per cent of GDP over the whole of 2020.
The bounce back is projected for 2021 with 15 per cent growth. That is a roller-coaster beyond comprehension.
The key to the Bank’s scenario being anything close to reality will depend on coming out of the freezer of lockdown without too much spoiling.
Indications are that this simply can’t happen. Social distancing will mean ruin for much of the travel and hospitality industries, from airlines to pubs and the finest restaurants. Real incomes have already been slashed by furlough and sections of the workforce moving onto frugal benefits.
The Bank’s forecast of 9 per cent joblessness, or an extra 2m on the dole, will pose a long-term fiscal economic and social challenge unimaginable at the start of this bleak year.
If there is any optimism to be drawn it is that the Bank stands ready to print more money beyond the extra £200billion already in train. The banking system, at least for the moment, is not in danger of collapse. Credit, which clogged the arteries of the economy in 2008-09, should flow.
But like the rest of the Old Lady’s forecasts, this too should be treated with a degree of scepticism.
BT chief executive Philip Jansen deserves recognition for prioritising the speedy roll-out of fibre and 5G signals in the midst of a global pandemic, in which modern communications have helped shield the economy from the worst.
Cancelling BT’s final dividend and next year’s pay out, releasing £3.5billion of cash, will hurt pension funds and BT’s big cadre of private investors.
In times of crisis, everyone has to put their shoulder to the wheel.
Setting targets can be a fool’s game, as Matt Hancock learned to his cost with coronavirus testing. Nevertheless, BT’s goal of accelerating fibre to the premises to 20m from the current 2.6m by midway through this decade is laudable.
BT is at its heart an infrastructure company. As popular as its investment in sports broadcasting may be, it is a diversion from core goals, and an expendable marketing tool.
If anything Covid-19 and the UK’s departure from the European Union requires even more ambitious fibre goals. If this year’s soccer season should fall apart, the resources should be diverted immediately to 5G and broadband.
Past broadband delays and wrong turns have meant that other advanced economies, notably South Korea, Japan and Spain, have left BT at the starting gate.
Indeed, BT’s past obstructive behaviour as the access provider to exchanges and all the rest has held back an important national infrastructure rather than nurtured it.
Jansen, who has a background in deal making, is surprisingly sanguine about the biggest transaction of the Covid-19 era, the proposed £31.4billion merger between Liberty Global’s Virgin Media and Telefonica’s O2.
No one should assume that this is a done deal. In a period when debt has become a burden, adding a further £6billion to the £11billion or so on Virgin’s books is not sensible.
And we should be in no doubt that cost-cutting targets mean more redundancies at a dangerous moment for the UK economy.
Competition authorities also will want their say.
Don’t hang out the bunting quite yet.
Hope springs eternal
The most moving iconology of VE-Day is the sheer joyousness across the land, from London’s grand squares to the back streets of the great industrial cities.
The big hope must be that when the current hidden enemy is vanquished, there can be a VC-Day to commemorate the moment that Covid-19 is dispatched. Hip-hip…