Cast your mind back to early 2020. Brexit had been hauled over the finishing line with a “sort of“ deal with the EU and at least half the nation was happy. There was a tiny speck of cloud on the horizon that seemed to be growing but the experts were largely dismissive.
On 6 March 2020, I attended an economics forum where a panel of distinguished experts gave their forecasts on a range of subjects. Interest rates? “Edging up”. In fact, they nose-dived to 0.1% and have stayed there. Inflation? “steady at just under 2%”. Currently, the rate is 4.2% and rising fast. Covid? “All over by May”. Unfortunately, that expert failed to say which year.
The Post Covid Landscape
Since that day, we have stumbled from one crisis to another.
Putting aside the health aspects, it has wrecked the High Street, the hospitality and foreign travel sectors and spawned a “working from home” culture with unknown long-term consequences.
Additional Government (or taxpayer, if you prefer) debt has hit £400 billion and is rising. That’s an awful lot of debt to bequeath to the next generation.
This seems to be in a permanent state of crisis and hurling more £billions at its bureaucrats will not help.
No one saw that coming. One of the most abundant gases on the planet and we run out of it with numerous adverse knock-on effects. A modest £60m “subsidy” to the manufacturers soon fixed that one.
The latest crisis is largely media generated. Just five BP filling stations run dry and one much-hyped story later, the nation’s drivers rush to fill their tanks to the brim.
The shelves are getting thinner and thinner. No amount of space-filling with random products (cleaning products nestling up to the baked beans) can disguise the fact. And we are still 10 weeks from Christmas.
This always was a fragile market, populated by micro-suppliers chasing market share without the infrastructure to support a long term business. One blip in the market and their absence of reserves (cash or product) is immediately exposed.
And the next six months?
Strap in for a bumpy ride. Any of the following are possible.
The virus is in every country in the World and new variants emerge constantly. So far, the science has kept pace, but for how long?
Winter is coming
Drought, floods, heatwave sooner or later it will be the turn of snow. A couple of inches brings the UK to a halt. What would a couple of feet of snow do?
A significant proportion of our gas and electricity comes from pipes/cables within Europe. A fire has put one of the electricity interconnectors offline for 3 months. What if another fails? Or if EU politicians (or Putin) use this as a bargaining chip to get their own way on something else?
Nuclear or Wind Power
A quiet winter with little wind or a nuclear power station having a technical problem – the safety margin on supplies is very thin.
Despite running at well over twice the 2% target level, politicians and economists are rushing to assure us that this is caused by temporary factors (Brexit is always a convenient excuse) and all will be well by early 2022. The trouble is that there are no more economic levers left to pull. We have printed almost £1 trillion (or “quantitative easing” as it is mysteriously termed) and the market’s appetite for any more is limited. Allowing interest rates to increase from near 0% even to a modest 1% will wreck millions of overindebted household budgets. And more importantly, the Government’s finances.
Of all the global supply chains, this is the biggest. There have been numerous hacks that have produced localised damage. What if the state-sponsored hackers of China, Russia etc get lucky and you can’t order your food from the supermarket, play fantasy football or gamble online. If Facebook can suffer a 6hr outage anyone can. Truly, the barbarians will be at the gates.
The next shortage?
Milk. Try stocking up on that one.
Events, dear boy, events
In many ways, we are re-living the 1960s, but without the Beatles. We are living beyond our means on a never-ending surge of consumerism. There is a “wind of change” blowing through global politics – the inexorable rise of China in our case. And for a variety of reasons, productivity (the only cure for rampant inflation) remains flat.
There is some dispute as to the origins of the quote of the Prime Minister of the time (Harold Macmillan) in answer to the question of what kept him awake at night – his reply was “Events, dear boy, events” – but there is no disputing that we are as powerless to predict (and cope with) crises then, as we are now.
Director, SMH Jolliffe Cork