Macroeconomics: UK economy, IB Economics

This Larry Elliott article highlights the external costs of the pandemic, arguing that these weren't factored in to assessments of the costs of the 2020 coronavirus pandemic.

He focuses in particular on the effects of the pandemic on the young, linking it to a rise in mental health problems and having an adverse effect on labour supply, with adverse macroeconomic consequences.

It seems as though the global cost of living crisis allowed some of the world's largest MNCs to profit at consumers' expense, with research from thinktanks the IPPR and Common Wealth discovering that business profits rose by 30%, largely as a result of the actions of 11% of firms, among them energy firms, mining companies and commodity traders. 

This has led, rightly, to accusations of so-called greedflation - and, the thinktanks argue, has seen them gain at the expense of the ordinary consumer.  

Larry Elliott writes in the Guardian about the current bout of inflation and, rightly in my view, turns the tables on the Bank of England. Instead of asking for workers to show restraint in their pay bargaining, he wonders about the extent to which the Bank has to accept the blame for inflation as a result of the conduct of monetary policy during the pandemic. 

He suggests that the adoption of QE and the printing of money were inevitably going to stoke inflation at some point in time, and instead of concentrating its ire externally, there should be more soul searching closer to home. 

This Guardian editorial looks at the fallout from the coronavirus pandemic and goes as far as to suggest that we are all "disaster survivors now."

From a economic point of view, there's some interesting angles to consider: the slow speed at which the UK economy has 'recovered', the impact on the labour market and the health service and the possibility that there are long-term scarring effects on other aspects of the economy that are going to stay with us for a generation or more. 

A Christmas gift from the ONS; the UK economy shrank by more than first thought with both of the last two quarters' growth figures rounded down. As a result, the economy is still 0.8% smaller than it was at the start of the pandemic, and the UK is very clearly on the point of falling into recession after the next quarter's growth figures.

And if you look at OBR forecasts for 2023, the news gets no better, with the economy expected to shrink by 1.4% in 2023 and house prices also believed to be on the point of falling sharply. Merry Christmas all!

An interesting little footnote to the pandemic: with resources being shifted to COVID-support teams. the amount of tax evasion that occurred during the pandemic leapt by nearly £10bn, according to the National Audit Office. 

A brief round-up of the latest economic activity as the economy 'recovers' post-pandemic...

This BBC piece details the effect of the pandemic on the restaurants sector, highlighting the fact that 1 in 10 of the nation's restaurants have shut as a result of the pandemic, and noting that for those that remain changed operating conditions are likely to impact profitability. 

My initial response: no surprise - the UK economy shrank in the Q1 by 1.5%, although there was a strong rebound in March, with the economy growing by over 2% in that month alone.

The net position? The economy is still 8.7% smaller than it was at the start of the pandemic. 

Another sector that's sruggling to recover is retail - with the British Retail Consortium Reporting that one in seven shops lie currently empty, with the problem worst in the North of England. 

So much for recovery, so much for levelling up, although does this reflect a lack of consumer spending or a change in its composition? And if that's the case how will the market adjust.

One final thought - I suspect that a number of financial services and insurance companies will have invested in property - what are the implications of this? 

Evidence of the unusual effects of the pandemic, with book sales rising by 7% last year during the pandemic, earning the sector over £2bn. 

Proof of the uneven distributional effects of the pandemic.

An interesting look at inequality, with TUC research suggesting that workers in insecure jobs have been twice as likely to die of Covid.

However, you might ask a number of questions about the headline figures - can you necessarily imply causality from this figure? What other factors might feed into it? 

The bottom line though, is that it almost certainly is the case that those on low incomes are more likely to have contracted Covid than those with higher incomes. 

The Guardian is focused on the 'return to retail' on Monday - with non-essential stores re-opening, and reflects on what the pandemic has meant for the sector as a whole. 

Proof of the unequal distributional effects of the pandemic, with the NIESR reporting that the poorest won't see their living standards recover to pre-pandemic levels until 2027. 

It's a remarkable indictment of government policy that this should be true of the the world's sixth largest economy. The author of this report, notes that given the unexpected 'strength' of the public finances, it would be pretty awful if the government decided to offer tax cuts rather than tackle this issue. 

There's been a massive revision of GDP figures at the end of 2021, with the Office for National Statistics now suggesting that instead of being 1.2% smaller than the pre-pandemic economy at the end of 2021, the UK economy was 0.6% bigger. 

It's also suggested that the size of the pandemic collapse and subsequent recovery have been smaller, and faster, respectively. That said, the UK's performance still is at the lower end of G7 nations, and nothing to write home about. 

Evidence of government failure? Or merely wasteful public spending? Either way the former head of the Serious Fraud Office is of the view that the ability of the government to keep track of public spending and counter fraud is being decreased by a number of factors, not least a lack of organisational capacity. It's very much in keeping with the theme of my current reading, Marianna Mazzucato and Rosie Collington's "The Big Con".

Larry Elliott saying what has to be said: we are the only G7 economy still to reach pre-pandemic levels of income, with the UK still 0.8% below those levels and going to fall further still in 2023. 

Recession. Good luck with that.

Another call for a wealth tax, with the Equality Trust noting that the number of billionaires in the UK has increased by 20% since the start of the coronavirus pandemic, as a result of government intervention to support the economy. 

There are calls for a package of measures, not least the abolition of non-dom status, and a concerted attempt to reduce inequalities of income and wealth.

It seems that the pandemic has greatly increased in-work poverty, with 1.3m workers on Universal Credit that before coronavirus struck according to the TUC. 

It highlights the extent of the cost of living crisis, and that's without inflation peaking or the introduction of the increase in National Insurance. 

The National Audit Office is keeping tabs on the cost of the pandemic: a mere £372bn, apparently. 

The bulk of this sum is for the Job Retention Scheme, the remainder for bounce back loans, but it's quite some opportunity cost.

To what extent is the phrase "Global Britain" as meaningful as "Build Back Better", "Levelling Up" and so on. This article argues that cuts to research funding are another example of actions speaking louder than words, and indicative of Britain losing international status and competitiveness, rather than enhancing them.

I was wondering when this was going to happen - there's going to be a review of infrastructure spending in the light of the pandemic. If working habits have changed and there are going to be fewer commuters, then the economic case for road and rail projects will also have changed, and it's appropriate for there to be a rethink of the various costs and benefits associated with such schemes.

However, I think that this could have been announced six months ago, to be fair.

A tale of woe. And Brexit. And the pandemic.

It seems that the hospitality sector is going to face labour shortages as 10% of its workforce have left the sector. Can you think of other areas of the economy likely to experience the same phenomenon? 

Another one for the costs of Brexit file. 

Another article looking at the distributional effects of the pandemic; it seems that older workers, as well as young workers, are also being hit disproportionately hard by the pandemic, with a marked rise in the number of jobless older workers. 

And the cost to the sector? An estimated £22bn according to the British Retail Consortium...