One year since lockdown began and it’s an opportunity to look back at this historic period of economic, environmental and societal shifts.
As the nation impatiently awaits June 21st, the scheduled date to end social distancing and fully re-open the economy, many are still unsure what a post-COVID Britain will look like. Chancellor Rishi Sunak has promised continued support in his recent budget announcement. This includes plans to extend both the Furlough Scheme and to keep the £20 boost to weekly Universal Credit payments for another six months. A new £5bn Restart Grant Scheme also promises grants of up to £18,000 per premise for hospitality, leisure and no-retail firms hit hardest by the pandemic1.
A comparison with the 2008 financial crisis
Overall, The Office for Budget Responsibility has estimated that total government borrowing in the last year equals £355bn (which is expected to fall to £234bn in the coming year), an amount greater than any peak in government borrowing since the 2008 financial crisis2.
Should we be concerned by these figures? On immediate glance they might raise fears of future austerity measures, with the government needing to pay back what has been borrowed. On second glance, they can be considered a necessity to sustain the economy and livelihoods of the nation.
Inflation has declined by just over one percentage point since the start of the pandemic, much of which can be attributed to temporary COVID-related factors subduing economic activity3. For example, energy prices fell, due to travel restrictions dampening demand4. The Bank of England responded by reducing the Bank Rate by 65 basis points to 0.1 percent, where it is intended to stay5. There are hopes that keeping the Bank Rate low will boost economic activity, alongside the natural ‘bounce back’ expected following pent-up demand, as the nation is predicted to spend excess savings from the lockdown period as pubs, shops and other leisure facilities re-open6.
Whilst comparisons can be made between the pandemic and the 2008 financial crisis, there is reason to be optimistic looking forward. The 2008 financial crisis was fuelled by a weak financial system, however COVID is a one-off shock to the economy7. Because the problem stems from outside the current financial system, appropriate fiscal, monetary and wider policy responses have and can continue to help absorb this shock. There is still debate about precisely when the UK economy will return to its pre-pandemic peak, with hope that it could be as soon as mid-20228.
It has been five months since the Pfizer/BioNTech vaccine was announced as the first vaccine to offer 90% protection against COVID9 and the UK has vaccinated almost 28 million people – over half the UK adult population. Everyone over 50 years old and the most vulnerable under 50s (who together account for 99% of COVID deaths10) have been offered a vaccine. This is one of the fastest vaccine rollouts of all time – a huge feat for the UK.
Globally, both Israel and UAE are successfully rolling out the vaccine at record speed, with the UK trying to close the gap11. Many large European countries, such as France, Germany and Italy, are adopting a slow and steady approach, following the suspension of the AstraZeneca vaccine amid fears of increased risk of blood clots12. The WHO was quick to encourage uptake again, with the outlook of these countries remaining bleak for some time, as many of them tightened their lockdown restrictions13.
Further tensions between the EU and the UK have grown. The EU is to decide on stricter restrictions on export of the vaccine next week, to secure more doses for use within the EU14. This has the potential to delay the UK’s supply of the vaccine, however, it will not stop vaccine companies supplying doses already promised to the UK. Prime Minister Boris Johnson has stated that he will continue to work with the EU to deliver the vaccine rollout, as we look towards a future of vaccine-sharing15.
It is often easy to forget that vaccinations are a two-step process, and the looming 12-week deadline for the second dose must be considered. There was debate over the change from the scientists’ advised three-week gap between doses to the government decision of a 12-week gap, with the British Medical Association stating it was “difficult to justify”16. Despite these fears, there is conclusive evidence that in the short-term the first vaccination of the Pfizer/BioNTech and AstraZeneca vaccine are 90% and 70% effective, with the second dose providing long-term durable protection17, supporting the prioritisation of the rollout of the first dose.
Finally, the idea of vaccine passports has been debated over the last couple of weeks, as we look towards the opening of the economy and the easing of restrictions. On the one hand, this does sound like a practical solution to help the nation get back on its feet. However, it does pose many ethical, social and political discussions, as ethnic minority groups, migrants, the young and the poor could be excluded18. Additionally, it must be considered whether we want our freedoms dictated by a vaccine passport, as many believe that is not the kind of society they wish to live in19.
Vaccine passports may be in our future, but our travel passports have been gathering dust. A year ago, airline fleets were grounded and we were all required to stay at home. The world glimpsed significant, albeit short-term, improvements in air, water and noise pollution. This brought into focus the impact of our pre-pandemic life. Data from the World Health Organisation states that air pollution kills an estimated seven million people worldwide each year, with nine out of 10 people breathing air the exceeds guideline limits for high levels of pollutants20.
Additionally, despite the estimated six percent decline in global energy-related carbon dioxide emissions (the largest drop since the Second World War)21, the very products that kept us safe have also taken a toll on the environment. The urgent mass production of PPE derailed efforts to move towards a more sustainable and circular plastic system, whilst waste recycling was halted to reduce virus transmission.
Worryingly, our actions prior to the pandemic may have increased the rate at which the disease spread. COVID is a zoonotic pathogen – transferred from animals to humans, and exacerbated by environmental degradation, biodiversity loss and intensive food systems, which increase the likelihood of transmission22. It is suggested that the future risk of epidemics and pandemics may hinge not only on our movement towards a more sustainable future, but on our ability to reverse damage already done23.
The re-commitment of the largest economy in the world, the US24, to the Paris Climate Agreement25 offers renewed hope for a united effort amongst global leaders to tackle climate change. Green measures are becoming a staple in political party manifestos, leading to significant infrastructure plans to align longer-term economic goals with sustainable outcomes. Yet despite headline grabbing sustainable pledges, green measures are still outweighed by funding for non-green measures, with G20 countries’ commitments providing 44% of support to fossil fuels compared to 39% to clean energy26.
Global emissions in December 2020 surpassed those of December 2019, as economic activity rebounded. Many economies are now seeing emissions climbing above pre-crisis levels, highlighting the focus on economic revival with only lacklustre efforts to place sustainability at the forefront of the recovery27. Hope remains that emissions will decline in the future, with global leaders, such as South Korea28 and New Zealand29, integrating green development at the core of their economic recovery strategies.
As populations begin to return to pre-pandemic habits and norms, we find ourselves ‘atop a precipice’, whereby 2020 may one day be seen either as a global ecological turning point – or simply written into history as an anomaly.
Economic winners and losers
As COVID-19 spread across the globe last year at a ferocious rate, nothing could escape the economic wrath that swiftly ensued. The fallout across all sectors inevitably created winners and losers. But who were they, and how will industries evolve?
Industries such as the service sectors have weathered badly due to national lockdowns and social distancing measures30. However, some manufacturers have seen a surge in sales as households spent less on experiences and more on day to day non-consumables and consumables31.
Performance across the markets was very divided in 2020. Companies who generate most of their revenue online not only survived but ultimately thrived as consumers flocked in their droves to e-commerce. Enjoying a substantial increase in sales online, other sectors have also begun to flourish, such as fintech (financial technology) as well as delivery and mobility platforms32.
With several vaccines now available, it is no surprise that the pharmaceutical sector has been of great interest for many investors. Their role in how we move back to ‘normal life’ will likely be massive and we will follow it closely.
With social distancing, working from home and national lockdowns, transport services such as the trains, buses and airlines have taken a substantial blow. Globally, airlines have suggested that the bill for not flying is roughly £170bn, with the fall out of not agreeing a deal leading to 90% employee layoffs33, and leaving many sub sectors in difficulty. Tourism has also fared badly, due to international and local travel being prohibited or drastically restricted34.
At a time of severe financial turmoil amongst many industries, it is no surprise that commodities and alternative assets have once again become a safe haven amongst investors. This resulted in gold being bought, pushing up the price in the early part of last year, as markets took a tumble35.
The far reach of devastation caused by COVID-19 has hit all industries. The unique nature of the disease has ultimately led to an ‘adapt and survive’ environment and mentality, shown by many small businesses and start-ups moving business online during the global pandemic.
As we reflect on the past year, it is fair to say that a lot was learnt… yet there is even more still to learn.
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