Economic pain from coronavirus could be “deep rooted” and “long lasting”
University of Brighton finance expert Dr Rob Hayward has warned the road to economic recovery will be bumpy, ahead of lockdown easing this Saturday.
With pubs, cafes, restaurants, cinemas and museums among the establishments permitted to reopen (with restrictions) on 4 July, there is a chance for businesses to attempt to get back on track following the lockdown measures imposed due to Covid-19.
Dr Hayward, course leader for our Finance Masters courses and Senior Lecturer in the Brighton Business School, told the University of Brighton podcast much of the damage has been done and there are concerns that many businesses will continue to struggle.
He said: “Shops have been quite innovative in the way that they’ve responded to the crisis. I think in most cases, shops are dealing with quite low profit margins and so they haven’t got much scope to last for a number of months without getting any revenue from shopping.
“They have fixed costs in many cases, although some of those might have been deferred. Certainly, the taxes have, but they always have some expenditure. So, I think the longer it goes on, the more retail and hospitality establishments will go bankrupt. And so, the quicker the government can get things moving again, the more likely it is we can save some of these small businesses.”
On the big picture, Dr Hayward also has his concerns: “I think it’s is a bit unclear how rapid the emergence from the lockdown will be, but I think there’s a risk that it’s going to be quite painful over the next six months and that the end of the furlough scheme will mean that businesses will start to lay people off. The fact that we have more people becoming unemployed will be a bit of a shock.
“It’s not, I don’t think, going to be a smooth bounce back to where we were before. It’s going to take a long time to get there, if we ever do. It’s probably going to be quite a painful adjustment process to move the economy back to even the level of output and employment which we had back in January and February.”
It’s not all doom and gloom, though, with Dr Hayward believing the pandemic is an opportunity to work on green projects in order to reach a carbon neutral economy.
He said: “If the government borrows money and embarks on these projects, building infrastructure – which is going to help the economy, building green energy resources, introducing public transport which is better for the environment and changing the insulation of homes, all of these need to be done anyway.
The government can employ people who have been made unemployed, get them spending and give them more confidence and skills”.