Money Talk: Our discussion on the Budget has been overtaken by world events

We had expected this month to be looking at the Chancellor Rishi Sunak’s first Budget. However, as we’re all aware, the Budget was overtaken by events so rapidly that it had become largely irrelevant almost before the ink was dry. The UK realised that Covid-19 could do as much damage here as it already had in Italy, Spain and further afield.

Now we could use this space to run through some of the government’s announcements and explain how they affect your business but that would be somewhat pointless because events are still moving at such a pace that anything written here is likely to be out of date by the time you read it. So, for up-to-the-minute information on how the government measures can help your business, you really need to go to our website, or follow us on Facebook, LinkedIn, etc.

It may, therefore, be more appropriate to reflect on some of the possible long-term consequences of the current emergency. As happened with the ’credit crisis’ back in 2008, when global corporations fail or need assistance they turn to the lender of last resort: government. The same government that they often deride for ’interference’ in the form of regulation; the same government that many of them actively try to undermine by complex tax-avoidance schemes.

Well, at the present time, there are whole industries which are now shut down and without the guarantees of government support would be effectively bankrupt: think airport operators, airlines and the hospitality industry just for starters. Once the current emergency is over, will they go back to moaning about every piece of legislation for worker, consumer or environmental protection? Probably. But at least they may find that the public, and even some of the media, will be less tolerant of any business that’s just been bailed out by the taxpayer.

And it’s worth pointing out that the financial measures announced across the world represent the most massive state intervention in the economy since World War Two: this isn’t merely ’pump priming’ as after the 2008 crash; this is a case of governments directing economic activity and paying to keep people in work. Extraordinary enough in its own way, but with the possibility that if the crisis deepens they may have to do what some radical economists have long argued for but which would have been politically unthinkable just a month ago: pay everyone a basic ’living allowance’ regardless of their work status simply to ensure that consumers have enough money to keep businesses functioning.

printing money

Of course printing money is fine in an emergency, but eventually the cost will be borne by future taxpayers.

Consider globalisation and so-called ’lean operation’ which have been the mantras parroted by many of the most influential business leaders ever since the 1980s. The idea that no manufacturer (or retailer) should hold more than a couple of days’ supply of anything because it’s more efficient to operate on a ’just-in-time’ model where you can order whatever you need (almost inevitably from China) to arrive just before you want to use or sell it. Although it’s been rapidly forgotten in the last few weeks, some large UK manufacturers were already cutting back or stopping production back at the tail end of January because their supply of components from the Far East had dried up. And on the global scale, given the continuing climate crisis, will manufacturers and retailers simply go back to shipping what are often quite often low-value items more than halfway around the planet, or will we begin to see some attempt at shortening supply chains and sourcing from multiple, perhaps more local suppliers?

The petrol retailing industry here has been less affected by the current crisis than most others (at least at the time of writing). While demand for fuel will inevitably fall as people are encouraged/forced to cut travel, there’s been little panic buying and prices have dropped quite dramatically in some areas. As most fuel retailers are also now local convenience stores and many are off-licences, anecdotal evidence suggests that they’re seeing much more footfall; hopefully those consumers who’ve just realised that they can walk to their local forecourt for daily essentials will not lose the habit when it’s eventually deemed ’safe’ to go out again.

We must stress again that for the latest detailed advice on matters like payroll, VAT and other assistance you should contact us through the website, Facebook or LinkedIn and we’ll be glad to help.