I just published the following op-ed on Russia Television website  concerning the Coronavirus and impact on the UK economy LINK

The full post is also below:

Despite the UK government lobbing billions of pounds at the problem, millions will lose their jobs and thousands of businesses will go bust. And the poor and the young will bear the brunt.

The coronavirus lockdown has had a devastating effect on the economic output of the United Kingdom, with the latest estimate being that it has fallen by over 20% in the month of April and it is likely to have stabilised at around this level in May.
The UK is a heavily trade dependent nation, and April saw export volumes fall by 17.7% and imports volumes decline by 26.5%. To avert an even worse outcome, the UK government has intervened on an unprecedented scale to reduce the adverse effects on the economy, companies and households.

Since the commencement of lockdown on the 23rd of March, the economy has been in freefall with output plunging by 5.8% in March and 20.4% in April. Manufacturing output fell by 24.5% and the service sector by 19.8%, however, due to the speedy emergency measures taken by the government this has not yet been fully reflected in the unemployment figures.

The Job Retention Scheme, the provision of emergency loans and tax deferments for Companies has prevented an even worse outcome. The predictions are dire: a fall in GDP of 11.5% for 2020 and a rise in unemployment from 3.9% in March to in excess of 10% by March 2021.

Some sectors have been decimated by the lockdown and social distancing with April figures showing widespread falls in revenue - accommodation and food services (-88.1%), construction (-40%), arts and entertainment (-39.7%) Education (-33.4%), transportation and storage (-28.8%) wholesale, retail and motor services (-27%). A few other sectors have performed somewhat better, including Information and communication (-13.3%) and Financial and insurance services (-5.3%).

Throwing billions down the drain?

The government response has been swift and significant with the focus being the Furlough scheme which is covering some 9.3 million employees at an estimated net cost of £39 billion, there is a £10 billion support scheme for the self-employed. An additional £16 billion earmarked for essential public services and £15 billion in grants and loans for businesses.

The total cost is estimated to be £103.6 billion, of which is £99.3 billion is in increased government expenditure and £4.3 billion in tax cuts and concessions. The effect on the government finances will be a fiscal deficit of more than 10% of GDP, and the national debt rising from 80% to an eventual 110% of GDP over the next few years.
The government policy interventions will largely be financed by the new Quantitative Easing programme announced by the Bank of England of £100 billion, and while this runs the risk of future inflation and undermines the perceived independence of the Bank, these are largely concerns for the future.

The poor and the young bear the brunt

When it comes to households there have been noticeable differences between the better-off and the worse-off in society. Modelling work reveals that the low-paid and younger workers have been the most affected, since they tend to work in the sectors like hospitality, leisure and retail most impacted by the crisis.

Data shows that the low-paid are still more likely to be furloughed than their higher-paid counterparts. The Resolution Foundation reports that 27% of the lowest fifth in income distribution have been furloughed, while the figure for the top one fifth is only 10%.

Likewise, 8% of the lowest fifth in the income distribution have been made unemployed, while the corresponding figure for the top fifth is 2%. A young versus older worker divide exists, with 30% of 18-24 year olds furloughed and 10% made unemployed, while the figures for 54-59 year olds is estimated at 17% and 3% respectively.

The Foundation also reports that one in four lower income households have increased their use of consumer credit during the pandemic, while the corresponding figure for high income households is one in eight.

As well as taking the biggest income hit, poorer households have substantially less savings and wealth to see them through the crisis. A typical worker in a shut-down sector of the economy and most at risk of unemployment had average savings of just £1,900, compared to £4,700 for those who have been able to work from home during the crisis.

These averages also disguise the plight of a substantial number of people who have no savings at all and already have quite high debt burdens. Three times as many adults in the top fifth of the income distribution have experienced no income hit as compared to the bottom fifth.

Incredibly, because they have not been spending so much on travel out of house activities such as holidays and eating out, over a third of the richest fifth of the population have seen their savings increase during the crisis. This cannot be said of many of those in the bottom part of the income distribution, whose debt burden has increased and who have had to rely on loans and support from family and friends to make ends meet.

The Foundation also reports that employees in the “mixed or other ethnic group” category have suffered largest rate of job losses to date at 12%, together with Asian British at 11%, compared to a national average of 4%, due to the fact these groups disproportionately worked in sectors of the economy most affected by the pandemic.

Interestingly, for the black ethnic group members who predominantly work in essential services, the figure is line with the national average.

In 2018-19, the average income of UK citizens of the black ethnic group was 18% lower than for white people once allowance for benefits and taxes. The pandemic will worsen income inequality.

The ONS reports that 40% of workers in the poorest fifth of households have jobs in sectors of the economy with the highest exposure to the coronavirus and people from poorer income households are less likely to work from home, and are more likely to work in customer-facing roles that increase their risk of exposure to the virus. By comparison, only around 25%  per cent of the richest fifth do such work.

Another group that has been heavily impacted by the crisis have been the 5 million self-employed, almost half have lost work due to the crisis.

The labour market is exhibiting clear signs of severe distress. HMRC payroll data suggest that 600,000 have already been made redundant. Advertised vacancies have fallen from over 800,000 in March to below 400,000 today, while pay growth of average weekly wages which was 2.2% annualised in the first 3 months of the year, was -2.7% in the second quarter. There has been a rise of 2.5 million claiming Universal Credit.

The future looks bleak. Casualization and job insecurity of the workforce will increase significantly, fewer permanent jobs will be available, the gig economy and zero-hour contracts will become more commonplace, and more people will be forced into the vagaries of self-employment.

The public sector will not be immune as the need to balance the books force central government and councils to cut jobs, more public sector jobs will be offered on a short-term and/or zero-hour contract basis.

As the economy gradually reopens from the national lockdown and social distancing measures are eased, there should be a significant recovery during the July to October period. However, job losses will intensify and the hopes of policymakers for a V-shaped recovery are likely to be disappointed.

According to the ONS, companies are in a worse shape today than they were in the run up to the global financial crisis: net private non-financial profits were just above 9 per cent at the end of 2019, compared to around 11 per cent in 2008.
The end of the furlough scheme will mean that as many as 20% of furloughed workers or close to 2 million people will lose their jobs. Firms that don’t immediately go bankrupt will be reluctant to invest or hire, preferring to retain cash flow to enhance their chances of survival.

Consumers will be facing reduced real wages, greater actual or fear of unemployment and increased debt exposure that will heavily constrain consumer expenditure over the next few years.

Fears of a second or third wave of the virus and enduring social distancing measures will ensure that economic activity will remain significantly below the pre-pandemic level well into the latter half of 2023 and possibly beyond.

Problems will be compounded by a government that has clearly demonstrated it lacks competence and will face an urgent need to reduce the unsustainable fiscal deficit it is currently running.

It is also a government intent on a relatively hard form of Brexit that will add further significant damage to an already fragile economy. One can hope for the best, but I fear the worst and most prolonged recession in living memory is the most likely outcome.

On occasion I like to highlight websites that are really good at what they do and on topics that I feel are important. One of the things that concerns many of my students and myself is the growing amount of income and wealth inequality that we are witnessing in many countries and around the world more generally.

The reason why we need to worry about income and wealth inequality is that it leads not only to divided societies and kids being born either "lucky" or "unlucky" but it also distorts democracy. The rich have the free time and money to lobby for what they want, own news media to present their distorted views of the world, enter politics and ingratiate themselves with the powerful elites. While the rest of the population is preoccupied with working hard to provide the basics of life for them and  their families. It is this distorting effect on democracy and policies that I think is a major cause for concern. Just look at the graphic below the top 3 wealth US citizens, Warren Buffet, Bill Gates and Jeff Bezos now have more combined wealth than the bottom 50% of the US population.

There are three really good websites that deal with these issues.

1) Inequality.org which as been tracking inequality-related news and views for nearly two decades It is a project of the Institute for Policy Studies since 2011 and it has many useful insights into inequality and how the issue can be tackled.

2)  WID.World The World Inequality Database is a superb resource for tracking and graphing the evolution of income inequality around the world. You can plot graphs by country over time and also compare countries. You can select the shares of various income groups like the top 1% and the bottom 50%.

3) inequality.stanford.edu Stanford University Center on Poverty and Inequality tracks the growth of inequality in the United States and provides research, policy analysis and some very useful datat relating to the issues of poverty and inequality.

There are many dimensions to inequality, income and wealth, differences between countries, differences within countries, difference between regions of the world, trends over time, differences by category such as men and women, by religion. The causes are equally complex ranging from the degree of capitalism, to political factors such as the extent that countries are controlled by oligarchs. Economics needs to address this issue more fully than it currently does as it influences the extent to which macroeconomic policies work. For example, economic theory suggests that it is better to cut taxes on the poor rather than the rich to stimulate to stimulate aggregate demand in an economy. The argument for progressive taxation is also based partly on the idea that financing public services is better done by taxing the wealthy. When we come to dealing with the large costs of the coronavirus pandemic I have no doubt it will be the rich that will eventually be made to pay for a lot of the costs because the poor and newly unemployed will simply not be able to be taxed to pay for it and indeed they will be the most reliant on that State to help them survive the crisis and beyond. Expect to see a lot more focus on the issue of inequality in the years to come.

Well the coronavirus is in full swing and the most governments short term reaction has been to shutdown large parts of the economy to stop the virus spreading and therefore the possibility of serious coronavirus cases placing unbearable short term demands on their health services.

The humanitarian response and immediate pressure on governments is to try to save as many of their citizens lives as possible. However, the longer the pandemic continues the more data we will have and the more necessary will be a debate about saving lives in the short term versus saving them in the medium to longer term by getting economies back up and functioning to some degree. Even Donald Trump has spotted that the treatment should not be worse than the disease. To be realistic we are going to have to change strategy and realise that we need think about reopening parts of the economy that have been shut down because if we keep them shut down for an extended period of time too many will never re-open again. We know that the longer the blanket shutdown goes on the more the loss of economic output, the more the strain on the public finances and the greater damage to jobs. Make no mistake a global depression will cost many more lives than the coronavirus and many of those lives will be in the younger and middle aged parts of the population.

I believe that after a month or two more of this crisis most  governments will have no choice but to consider reopening parts of their economies in a risk controlled manner. People that have had exposure to the virus can resume work, many of the youngsters are far less at risk and should be allowed to return and many others should be able to return to work so long as precautions concerning social distancing and  other safety measures are put into place. Those that can work effectively from home should be allowed to do so.The current blanket shutdown response is not sustainable and is far too damaging economically and not in the medium or  longer term good for the health of societies. The more data we obtain, the more testing of people we can do and the more isolating of the older and most vulnerable groups to the infection the better will be the results we get from the current crisis.

I doubt anyone from the British government will want my opinion on how to handle the crisis but I am happy to pencil my thoughts !

1) Do not close down the whole economy we have to balance the costs and benefits. Yes keep the elderly at home (70 plus) that is sensible. They are most at risk and will be the biggest drain on the NHS.. Temporary closures of restuarants, concerts, theatres, cinema pubs etc is OK but we cannot close down excessively the amount of economic activity. The virus is not going to disappear just like that, so we need to learn to cope with it over the next 6 - 12 month when the worst will be over.

2) We need a massive one off bond issuance equivalent to 20% of GDP called the CornaVirus bond which have a duration of 20 years.  This will be used to lend to UK firms large and small in my points 3 and 4 below. Investors in this bond will have seniority in UK debt repayments.

3) We need an emergency loan facility from the government to big corporates with loans made in exchange for equity stakes which will be reduced once the loans have been fully repaid at reasonably low rates of interest. Interest payable at 3%

4) We need to help small/medium size companies with an additional government fund with loans to be made in retuirn for an equity stake or security against assets that will again be reduced once the loan is repaid. Interest payable at 3%.

5) People made redundant must be given the basics to live off through the crisis and longer term. We have to be in this together this can be funded by a one off rise in the top rate of personal tax to 60% for the next two years.

6) All bank bonuses to be stopped and all dividends suspended by law so as to conserve bank and corporate cash for the next 12 months with immediate effect. We need to do all we can to conserve corporate cash and the banking sector.

7) We may need to also help corporates survive by allowing a one off cut in wages by 5-10% for 12 months. Better to take a pay cut than lose your job.

8) We may need to convert and restructure corporate debt for example from 5 to 10 years with an oblifgatory one year free of repayment period whilst maintaining the same rate of interest so that bondholders take somne share of the burden.

We have to understand that the coronavirus is a transitory shock but with medium to long tem impacts as well as somewhat dire short term impact. This is why we need to fund it with 20 year bonds so we can repay the costs through higher cirporate and personal taxes down the road.once the crisis has abated and a recovery has begun.

This is the time for radical action "no ifs no buts" !

OK it is time I made some comments about the coronavirus and its economic and financial implications. My view is the virus itself is not such a problem more people will die of flu and influenza by a large margin this year. It will peak in about two months time and then numbers will fall dramatically.

However, there is no doubt that it is a significant  economic and financial problem in large part because the government response being quite draconian driven by the need to be seen to be doing something. Italy is close to virtually closing down its economy for a few weeks. The Chinese economy is also functioning well below capacity and it is the world's second biggest economy. The US markets have been significantly overvalued for some time so the fall in stocks of around 20% from their highs is just a normal correction. What does concern me is that central banks cannot easily solve this problem by printing money and cutting short and long term interest rates as these are already at record lows. Also there is only limited scope for fiscal deficits to address the problem as any fiscal expansion will mainly be swallowed up by increased healthcare expenditure to deal with the crisis.

There is a real risk to many businesses caused by the supply side shock as important  components produced in China may not arrive, food supplies could be disrupted, employees will take time off and school closure will also hit the available workforce. Then there is a demand side shock as people will go out less, shop less and events such as conferences, theatres, cinemas, restaurants, sport events, hotel and travel are all significantly impacted upon.  There will be a big hit to business and consumer confidence.

All this will mean a significant short term hit, perhaps we are looking at a fall in US and UK GDP of  as much as 6% of GDP over the next 6 months. However, the shock is likely to prove transitory and there will be a noticeable rebound once the virus has peaked. However there will be permanent damage to many businesses especially those that are already highly indebted. I expect quite a few businesses will not survive this  kind of shock. This is also bad news for banks that have high exposure to small and medium size businesses. I think it will take a couple of months for markets to bottom perhaps another 15% lower than today. Oil might sink down to $25 due to the fall in demand combined witth the Suadi-Russian split on propping up the price.

Overall, however this is a transitory and not permanent shock to these economies. The hit will be significant and it will take sometime for a meaningful recovery in stocks to take place. There is still scope to increase national debts and run large fiscal deficits for a year to cope with this one-off crisis. Ultimately the virus while a killer has fatality rate of below 1% and is more likely to affect older people. It will however have a profound and significant effect on many people that do not have significant savings to see themselves through this particular crisis. State assistance will be urgently needed to help these people.

Oh the Brexiteers like Farage, Gisela Stuart, Claire Fox, Boris, Gove, Raab, Patel will probably all be celebrating their beloved Brexit. But the reality is they are going to have to deliver on their false promises or some of the people they have duped with their lies and false promises will turn on them. Even if Boris gets some very sub-par Canada style agreement with the EU, the UK economy is going to take a 5% hit, There will be a large increase in bureaucracy, there will be farmers and fishermen that have been promised better times that will quickly find out they were duped. Do not forget the 5% hit is an average ! Many will lose much more than that, maybe their jobs, youngsters will learn more about how their futures and opportunities to work in the EU countries have been undermined by the Brexiteers.

Then there is the huge waste of time and money for businesses and the government dealing with Brexit, money and time wasted to get a worse deal than we had before as a member. It will mean less money for the NHS. investment in infrastructure, schools and for the poor and unfortunate. Sometimes you have to learn the hard way. 

The good news is that Boris and the idiots he has appointed to his government who are responsible for this mess will be the ones who have to deal with it. They are not up to the job, do not expect good results. I have been telling my students to be afraid not only of the consequences of Brexit but also be afraid of what is probably the most talentless and mediocre government in living memory.

One good piece of news is that the UK is in fact a remainer country see LINK, we were denied a second referendum as the Brexiteers knew what the result would be. This means that the Brexit lacks the kind of legitimacy that a second referendum would have given the Brexiteers if they had won it. Boris won the election because a quasi communist, incompetent leader of the opposition Labour Party namely Jeremy Corbyn. Soon Jeremy Corbyn will have gone and the problems created by Brexit will start to emerge big time. The Scots may want to leave the UK, the Northern Irish will not be pleased by what Boris has in stall for them. Many UK citizens will soon realise their jobs are at risk, their cost of living is more expensive and their hospitals and schools are worse funded rather than better funded. That is going to be the reality of Brexit not the fantasy that was sold to them. So Brexiteers enjoy your Brexit but the polls will move against you, as will the population dynamics, the older Brexiteers will die out and be replaced by more pro European youngsters, It won't be too long before we start the process of getting back closer to the EU and eventually rejoining.

Since the resounding "win" for Boris Johnson in the election it is now certain that the UK will leaver the EU on 31 January 2020 . I don't really think it was a win as much as a terrible performance by the Labour Party under Jeremy Corbyn who prove to be a spectacularly unpopular leader of the opposition with a terrible quasi communist manifesto that lacked credibility. Anyhow since the election I have had a number of Brexiteers coming up to me saying "you lost we won" in relation to Brexit. My simple reply has been I did not lose I fought a campaign to try to get a second referendum and failed but I am proud I fought for one. My other point is that no one has "won" in fact the UK and the EU are both losers and I think time will tell me I was right on that.

he only thing that pleases me is those responsible for Brexit are now clearly in charge of the process Boris, Gove, Raab, Leadsome etc and as such will be accountable when the sunset uplands are not delivered. The impact on the UK economy will become much clearer when they do not get their great trade deals with the EU and the US and China. I the meantime there Bloomberg has issued a report suggesting that Brexit has already cost the UK £130 billion of output and there is a another £70 billion projected loss by the end of 2020 LINK  What a cost and that's before we leave the great access we already have to the Single Market and the Customs Union !

I am not going to let Boris and his foolish Brexiteers get me down. I remain optimistic that the youngsters will overturn this decision in the not to distant future. I also remain confident that the history books will look back very unfavourably on the Brexiteers and their foolish mission.

So Boris Johnson has somehow managed to "a deal" with the EU which consists of a new Withdrawal Agreement and an accompanying Political Declaration. In my view the deal is a very crappy deal let me explain why

1) There is going to an expensive monitoring of goods crossing the border between Great Britain and Northern Ireland. Good coming into the UK from the US (perhaps tariff free) could be re-exported to Northern Ireland and face the EU tariff of 10%. If the cars ends up with Northern Ireland resident then they will be able to claim the 10% tariff back. If a Southern Ireland resident buys the car the Southern Ireland will not be able to claim the 10% tariff bank. Well you don't have to be a genius to work out that a Northern Ireland resident might on-sell the car to a southern Ireland Resident and the Northern Ireland resident get the 10% tariff back Effectively the Southern Ireland resident gets the car tariff free. Once in Ireland the car could leak freely into the rest of the EU effectively tariff free. Hence there will need to be costly monitoring to make sure this does not happen.

2) In the absence of a future UK/EU trade deal, the rest of the UK will have to treat the EU (45%) the same as we do the UK, China and Japan and impose tariffs on imported EU good which come into the UK tariff free at present will have to have tariff imposed on them. In addition the EU will have to treat the UK as they do Japan, US and that means impose tariff on our goods that are equivalent to those imposed on the US. China and Japan. That is what departing the Customs Union means. It also means £15 billion in extra costs in the form of bureaucracy for UK companies that they do not currently have. 

3) It is a terrible deal for 66 million UK citizens, as we impose tariff on imported EU goods then this will negatively affect all UK citizen by raising the price of cars, food,clothing, imported inputs into the UK production process  etc.

4) UK will lose access to the single market, we are currently free to sell service across the EU a UK licence is sufficient to do this..Services represent 80% of the UK economy losing our easy access to sell banking, insurance we have a huge surplus on services trade quite a lot of that surplus will disappear.

5)  Losing access to the single market means that 40,000 haulage trucks will have to fight for 4,000 special third country permits after leaving the single market. Devastating for that industry.

6) The UK will become a lot less attractive for both domestic firms (harder to export goods tariff free to the EU) and also as a location for Foreign direct investment. Why put a car factor in Wales or Sunderland to face EU tariffs? Why employ extra people in London if you cannot sell some financial services into Europe that will be done in Dublin, Amsterdam or Paris instead.

7) UK will not be able to recruit so easily from the talent pool both skilled and unskilled that is vital to the health of the UK economy. There is no doubt that the UK has gained greatly from this labour.

In fact most projections show that Boris deal is even worse than Theresa May's deal see Link. Boris deal will worsen GDP by between 2.3% and 7% whereas Theresa May's would worsen GDP by 1.9% to 5.6%. Sure both are better than no deal a fall in GDP of 3.5% to 8.7%. All are very bad outcomes. Many people will be a lot worse off as many fall below the average and others will lose less than the average.

So it now comes down to super saturday. My guess is Boris gets defeated as he does not have the DUP on board Boris Johnson told the DUP in November 2018 

"If we genuinely wanted to do free trade deals, if we wanted to cut tariffs, if we wanted to vary our regulation, then we would have to leave Northern Ireland behind as an economic semi-colony of the EU," he said."And we would be damaging the fabric of the Union with regulatory checks and even customs controls between Great Britain and Northern Ireland, on top of those extra regulatory checks down the Irish Sea that are already envisaged in the Withdrawal Agreement.
"Now I have to tell you, no British Conservative government could or should sign up to any such arrangement

Here is the video 

The guy is basically a liar and a cheat - he is not to be trusted in any way shape or form ! 

The political declaration is not worth the paper that it is written on ! The whole point of Brexit for the Brexiteers is they want to lower standards, remove social protection and they want a hard Brexit ! So I have a simple message do not trust this man or his party on this.

This does not get "Brexit done" it is just the beginning of a very long process of negotiating a new longer term trade deal with the EU and a huge amount of arguing and haggling will continue for years to come.

What will happen. Well it looks like the DUP cannot support this deal, some Labour leave MPs may support it around 5 or 6, some of the 21 he threw out of the Tory party will support it, most of his part including the ERG will now support it. So that means 287 + 7 (labour)  +16 (thrown out Conservatives) + 4 other independents = 315 votes. Not enough he needs 320 votes. That means he will have to ask for an extension till January 31, 2020. My view is the EU will grant an extension and I expect that his deal will get approved if it is subject to a "confirmatory referendum." I have always thought this would end up with a second referendum, 1 million plus will be on the march on super Saturday 19/10/2019 asking for a second referendum or Peoples vote. That is where I believe we will end up sometime next week - time will prove me right or wrong.
 

I encourage you to read then yellowhammer report LINK which the government has been forced to publish last night. It clearly outlines the likely short term impact - massive delays for heavy goods vehicles at Dover-Calais, danger of fuel shortages, a hit to food supplies especially fresh fruit and vegetables, a danger of severe disruption to vital medicines, disruptions to supply chains, danger to animals and the need for a border in Ireland. These are just the short term costs. The longer term costs are far greater in my view, rising unemployment, failed businesses, massive hit to investment and a severe negative impact on GDP. This is what Brexiteers have been trying to hide from the public. This is not the will of the people the last 93 of 95 opinion polls have a majority for remain and only 2 have them equal LINK. These are facts not fiction and by the way the margin for Remain over No Deal is far greater. This government is easily the worst of all time led by the lying cheating Boris Johnson. The only good news is that the criminals Bojo, Gove, Raab, Leadsome, Rees-Mogg are all at the scene of the crime - the Scottish Court yesterday found Bojo's proroguing of Parliament to be unlawful. I am very much looking forward to Bojo following the law of the land and handing in a request for extension of UK membership till 31 January 2020 and I  am looking forward to the election and eventually a second referendum which is in my view the only legitimate way out of this mess.