After Rishi’s summer statement, the public borrowing has now reached £350bn. Everyone knows a recession is here and redundancies are unfortunately going to be high. The key question is “how deep and how many?” v-shaped recovery? V-Shaped Recovery.
How the Chief Economist of the Bank of England, Andrew Haldane can say “Britain is on track for a V-shaped recovery”, beggars’ belief.
Our graphic above is something that was doing the rounds last week. The key factors here are:
- How deep will the ‘V’ be?
- The last part of any recovery – it will be the hardest, i.e. the range 90-100% shown above.
We believe that we could face, a 10% drop in GDP here i.e. only return to 90% of pre-Covid-19 levels and early figures indicate this could well be the level of the severity of a recession.
When we see the effect that the Covid-19 is having on the mature, stable, and flourishing businesses, we all know what is coming for those that were already struggling.
For example, Pret A Manger in the Financial Times commented that, if they do not get back to 50-60% of their pre-Covid-19 turnover levels, then they would have to look at ‘major restructuring’. That was after they closed 30 stores permanently with the loss of 1,000+ jobs for starters.
Rather than the ‘happy-clappy’ V-shaped recovery talked about; most people in the know envisage a ‘swoosh’ recovery.
The ‘swoosh’ suggests a very quick fall and then a gradual clawback.
I may be a cynic, but I would suggest the clawback will be at about its peak.around and about the time of the next General Election!
Rishi has done a good job so far in applying the handbrake to the recessionary fall and it gives me no joy to talk on this subject, in this time and manner, but Mr. Haldane, is with respect, talking out of his fundamental orifice.
