the times | Saturday September 5 2020 1GM 53

Business

In a radically new post-pandemic world,

Britain can’t make same mistakes again

That’s where Thatcher failed.

The nature of the change is already

obvious: offline to online, office to

home, mass business travel to zoom,

central to local, efficiency to

resilience. Those are the transitions

that the economy is making and there

will be consequences. Take retail.

Sales in July were actually 1.4 per cent

higher than last year but, within that,

online’s share increased from 20 per

cent to 30 per cent. That equated to a

£3 billion switch from in-store to

online in one month alone.

Job numbers tell the same story.

High street retailers have shed

thousands in the past few months,

with apocalyptic warnings in the

industry that the tally could reach

150,000. Against that, Amazon this

week announced 10,000 jobs to ramp

up logistics and distribution.

The shape of change can be seen

right there. Retailers will have less

need for city centre stores and

personable service staff, and more

need for sparsely manned, cheap out-

of-town warehouses. Jobs will move,

people probably won’t. Retail assistants

may have to change career or retrain,

a time-consuming process.

Capital will change, too. As retailers

shed stores and employers cut office

costs by asking staff to work from

home, landlords will need to find new

tenants who will probably pay less.

With surplus office space, commercial

real estate projects will be scrapped

and banks will lose on loans. Airlines

won’t be the only ones that will have to

reconfigure as business travel shrinks.

Conference venues, hotels and

restaurants face change as well. All

those marble corridors, dinner plates

and aluminium jets are capital that will

be redundant or redeployed. Like jobs,

the capital adjustment will be time

consuming, too.

None of this assumes that we have

to live with coronavirus. These are

examples of behavioural change that

we’ve realised make sense and can

work. The government can do

nothing about this, nor should it try.

Which is why the furlough scheme

needs to end. At some point, paying

Margaret Thatcher

was right to take on

the mining unions

and close the pits in

the 1980s. Changes

in technology and cheaper foreign

supplies had made much of UK coal

uneconomic. That was the judgment

of the National Coal Board in 1984,

which ran the nationalised industry

but was also responsible for ensuring

Britain had the supplies it needed at

the best price. Its decision to reduce

output by four million tonnes was a

spur to the year of strikes that

followed.

Trying to fight structural economic

change was never going to work,

Thatcher rightly figured. Where she

went wrong was to abandon workers

and communities after the collieries

were closed. The Eighties were the

high water mark for free-market,

trickle-down economics and her

mistake was to assume that those

forces would automatically create

new industries to fill the gap.

It was an error that cost the

Conservative Party its reputation for

One Nation Toryism that Harold

MacMillan had worked so hard to

build and established Thatcher’s

devil-in-a-dress caricature

perpetuated in films about discarded

communities such as Billy Elliot, The

Full Monty and anything by Ken

Loach even though, as Charles Moore

writes in his biography of the former

prime minister, she cared about the

workers. Her enemy was the unions.

Britain is about to go through a

similar, jarring transition and cannot

afford to make the same mistakes

again. Coronavirus is changing the

economy fast. Initially, we thought

the country would simply reopen

after lockdown and life would return

to normal. It would be just like

flicking a switch. How wrong we were.

It is clear now that the pandemic

has accelerated structural changes

already under way and started new

chain reactions. Structural change is

painful. It took New Zealand a decade

to adjust after the end of

Commonwealth trade preferences in

1973 and transitioning from planned

to market economies caused stunting

in children in former communist

states after the Berlin Wall fell. But it

isn’t the government’s job to stand in

the way of change, as the mining

unions wanted in the 1980s. Its job is

to provide safety nets for the victims

and systems to speed the process.

Philip Aldrick

Supply chain

disruption

slows down

construction

Robert Lea Industrial Editor

A hold-up in new work caused by the

Covid-19 lockdown and disruption in

supply chains is hampering work at

building sites.

The latest survey of purchasing

managers in the construction sector by

the Chartered Institute of Procurement

and Supply found activity slowed in

August to an index rating of 54.6, down

from 58.1 in July.

A figure above 50 suggests activity is

rising and the survey is regarded as a

reliable economic barometer.

Anecdotal evidence from survey

respondents found building sites had

been busy in the weeks immediately

after the relaxation of the lockdown as

they finished work from before the

pandemic.

More recently, however, construc-

tion companies found there was less

work to do as fewer commissions were

made during the lockdown and since

then clients have adopted a wait-and-

see approach as economic uncertainty

lingers.

Disruption to the supply chain

during lockdown, including business

failures, has led to stock shortages,

supply imbalances and building prod-

ucts inflation.

The news for August came in a week

when Europe’s biggest infrastructure

project, the £35 billion first phase of

the HS2 high-speed railway, moved

into the next construction phase with

the expected creation of thousands of

jobs.

Tim Moore, economics director at

IHS Markit, which compiles the survey,

said that the August snapshot

“signalled a setback” for the sector with

recovery since the lockdown appearing

to have lost momentum.

“Another month of widespread job

shedding highlighted the difficulties

faced by construction companies with

order books often depleted due to a

slump in demand from sectors of the

economy that have experienced the

greatest impact from the pandemic,” he

added.

Housebuilding remains the most

buoyant sector, securing an index

rating of 60.7. Commercial work stood

at 52.5 but civil engineering projects

recorded only 46.6, indicating a

contraction.

Analysts said it was difficult to call

the underlying health of the sector,

which would be affected by the number

of workers coming off furlough

schemes and by the threat or reality of

local Covid-19 lockdowns.

people to do jobs that no longer exist

is both a waste of public money and

not fair on them. Every study shows

that the longer someone is out of

work the harder it is for them to get

back into employment. They will

need to move jobs or retrain.

And that is where policy can help,

as Thatcher should have realised. The

government is right to move from

furlough to the £2 billion kickstarter

scheme, under which the state will

pay companies to train staff and to

pay trainees’ wages for six months.

But it could be bolder, with bonuses

for companies that hire new staff as

well as the £1,000 per worker bung for

companies who put furloughed staff

back on payroll.

The government could even take a

leaf out of President Kennedy’s book

by beefing up unemployment benefits

for those who have lost their job since

April. In 1962, JFK launched “trade

adjusted assistance” of up to two years

to help workers who lost their jobs to

globalisation adjust to a new career.

The change will not be all bad. It

will create opportunities. Sandwich

bars in city centres may suffer as the

office crowd thins out but local

restaurants will pick up the lost trade.

Local pop-up offices are emerging to

cater for the rising number of people

working from home. Paul Donovan,

chief economist at UBS Wealth

Management, points to data showing

a surge in start-ups since lockdown

ended. The state could even provide

more support for entrepreneurs, some

of whom will feel that opportunity

has been brought closer now the

world is more online, by providing

seed funding, helping capital to

transition as well as jobs.

Change will mean loss but it does

not have to be permanent. Gertjan

Vlieghe, a ratesetter at the Bank of

England, expects the economy to get

stuck at about 5 per cent below

capacity as the adjustment happens.

Keeping interest rates low and

government spending up will support

aggregate demand, which will make it

easier for the economy to evolve

organically. But to speed the pace of

change, the government needs to do

more than get out of

the way by ending

furlough. It needs to

give the transition a

helpful push.

‘‘

’’

Philip Aldrick is Economics Editor of

The Times