the times | Wednesday February 23 2022 39

CommentBusiness

The government’s

pandemic support had

to end at some point

Removing Covid restrictions won’t

be a game changer for the economy

B

efore Michael Gove

published his levelling up

white paper three weeks

ago, critics denounced the

policy as a vacuous slogan.

When it was published, they

accepted that it contained plenty of

detail but suggested it was light on

specific policies.

However, there is evidence, in

some parts of Britain, that what

might be described as levelling up is

already happening.

A key element in Gove’s proposals

is regenerating 72 towns and high

streets to restore “a sense of

community, local pride and

belonging”. That is precisely what is

taking place, for example, in

Prescot. The Merseyside town, once

the heart of the UK watch-making

sector and later wire and cable

manufacturing, is undergoing a

£3.1 million regeneration

programme funded by the

government, Knowsley council and

supported by Historic England.

Central to it is Prescot’s cultural

heritage as the only place in

England, outside of London, to have

had a purpose-built indoor theatre

in Elizabethan times. The

Shakespeare North Playhouse —

the Bard visited the town and

received patronage from local

aristocrats — is due to open this

summer; many bars and restaurants

have already done so in anticipation.

Locals say the town feels more alive

than it has for decades.

Thirty miles to the north, Preston

is also undertaking a regeneration

scheme, backed by the government

and Preston city council. At its heart

will be a new cinema and leisure

development on the former site of

an indoor market and multistorey

car park. Crucially, plans are also

afoot for more quality office space in

a city that has never had a central

business district, a shortcoming that

previously discouraged businesses

from moving there.

The pair have in common a

recognition that they were

previously over-reliant on retail.

This begs the question as to

whether, as some argue, Britain’s

town centres genuinely are doomed.

As one investor puts it: “These

town centres can all thrive again in

the future. They nearly always have,

so why should the future be

different? The short-term issue is

that they fixed on a particular

model, attempting to be cookie-

cutter versions of each other, all

with the same set of retailers. People

found that dull.

“They’ll eventually come up with

other uses and people will want to

be in town centres again. It’ll take

time but, when it happens, these

places will be way more interesting

and inclusive.”

Regeneration is not only driven by

national and local government. It

also needs private enterprise to

work its wonders. A good example

here is Rochdale, where the public

and private sectors have

collaborated to create the Riverside

leisure and retail complex, and

where both are supporting an

Advanced Machinery and

Productivity Institute, building on

the town’s traditional manufacturing

heft to meet market demand for

services such as supply chain, skills

and product development.

The latter also highlights another

key ingredient in levelling up: it is

backed by the universities of

Manchester, Salford and

Huddersfield. The revival of many

town and city centres — Preston is a

good example — has gone hand-in-

hand with the expansion of a

university. More students means

increased demand for quality

residential accommodation and

this, in turn, is helping to bring

private capital to areas it previously

did not touch.

Capital is also working in other

ways. The property cycle looks to

have turned and institutions are

buying shopping centres,

particularly retail parks, again. This

year has seen, among others, the

Central Six Retail Park in Coventry,

Bingley’s 5 Rise Shopping Centre

and Washington’s Galleries shopping

centre changing hands, while on

Monday the Swiss investor Redical

Holdings was confirmed as being in

talks to buy the Victoria Gate and

Victoria Quarter shopping centres

in Leeds from Hammerson.

All look highly likely to be

redeveloped to offer more space

devoted to leisure, eating out and

civic amenities, and less to retail.

In time, they may even be

regarded as places where levelling

up got going.

David Smith

Ian King

Though it was soon

overtaken by the

crisis in Ukraine

and Moscow’s

deliberately obtuse

interpretation of what counts as an

invasion, this week’s removal of all

remaining Covid legal restrictions in

England is a big moment. Whether it

was a political game changer remains

to be seen, though Boris Johnson has

enjoyed the support of many Tory

MPs who were unhappy with his

leadership until very recently. At the

very least, it will stop him breaking

any more Covid laws, because there

will be no more to be broken.

The removal of restrictions and the

ending of free tests for most people

has a clear economic dimension. The

story of the recession and recovery of

the past two years has been one of

restrictions and behavioural changes.

The first lockdown, which started in

March 2020, had the biggest negative

impact on GDP on record, with a

quarterly fall of almost 20 per cent,

nearly eight times the previous

largest, as restrictions combined with

deep fears.

The removal of restrictions in mid-

2020 and the perception that the

worst was over, wrongly as it turned

out, saw GDP recover much of its

second-quarter fall, rising by 17.6 per

cent. Subsequent lockdowns, in

November 2020 and at the start of

2021, as well as the limited

restrictions introduced in response to

the Omicron variant, also had

negative impacts on economic

activity, though a tiny fraction of

those in the spring of 2020.

The lifting of restrictions has also

shown itself to have a powerful

economic impact, most notably in the

April-June period of last year, when

GDP rose by 5.6 per cent on the

quarter but, more importantly,

by 24.6 per cent on its

depressed level a year

earlier, baking in a

strong 2021 growth

performance.

What about this

time? Will removing

restrictions work

their magic again?

As it happens, the

announcement has

coincided with more

people I know having tested positive

for Covid than at any time during the

pandemic. I am not including the

Queen in this, who I only know from

a considerable distance.

The continued prevalence of Covid,

with the latest Office for National

Statistics survey suggesting that one

in 20 people in England had it in the

week to February 12, will mean that

the all-important behavioural

response to the coronavirus is likely

to remain risk averse. That survey,

which thankfully will continue,

suggested Covid prevalence in Wales

and Scotland, where the devolved

administrations are adopting a more

cautious approach, was lower at one

in 25. In Northern Ireland it was a

high one in 13.

Not only that, but the significant

relaxation of restrictions is behind us,

and you cannot get two bites at the

same cherry. As it is, surveys suggest

the economy looks to have enjoyed a

bounce this month from the fading of

the Omicron wave. The replacement

now of a legal requirement for people

with Covid to self-isolate for five days

with official advice to do so will not

make much practical difference and is

a dilemma for businesses, which have

reacted lukewarmly to the

announcement. About 2 per cent of

people are absent from work because

of Covid self-isolation, with higher

proportions in teaching and social

care. This will not change much, at

least as long as free testing is

available, which is until April.

In the early stages of the pandemic

there was hope that things would

return swiftly to normal. But two

years of coronavirus is a long time,

and people are unsure about whether

the worst is over, as is the

government.

Permanent changes include a rise

in online shopping, which

last month accounted for

more than 25 per cent

of retail sales, lower

than the pandemic

peak, but higher

than the pre-

pandemic level of

less than 20 per

cent. Retail

footfall is about a

seventh lower

than it was before

the pandemic.

Working from home

has also become

embedded. Roughly a third of

people work from home for at least

part of the week, and most of them do

so exclusively. Analysts at Indeed UK,

the jobs website, point out that most

jobs specifying remote working now

say that it will be permanent.

Removing restrictions could even

reinforce this if people are nervous

about working with or commuting

alongside those with Covid who are

no longer legally required to self-

isolate.

The other economic dimension to

the removal of restrictions, perhaps

the dominant element, is the

chancellor’s desire to bring pandemic

support to a close. I was quite late to

testing but not now. This, according

to the ONS, is not unusual. Its

surveys show that 49 per cent of

adults were using lateral flow tests

regularly earlier this month. Though

the latest figures show an

improvement in the public finances,

there was more than £138 billion of

government borrowing in the first ten

months of the fiscal year, the second

highest on record, and Rishi Sunak’s

response was that there is still work to

be done repairing the public finances.

It has been unusual, indeed

astonishing, to see the government

providing so much free stuff over the

past couple of years. Boxes of lateral

flow tests were being handed out like

confetti in a local high street, even to

people who had no obvious desire or

need for them. That had to stop

sooner or later. The trouble with free

stuff, however, is that people notice

when you take it away. Most of the 49

per cent who test now will not pay for

lateral flow tests when the cost goes

up from nothing to perhaps £5 for a

single test and £20 for a box of seven.

Many employers, faced with rising

cost pressures, will not pick up the bill

either.

Over time, “living with Covid” will

mean that people will learn to

distinguish between the coronavirus,

even mild variants, and colds and flu.

For a while, however, even a mild

sniffle will provide an excuse to follow

government guidance and stay at

home. It is not clear, as far as the

economy is

concerned, that

this plan was

properly thought

through.

‘‘

’’

David Smith is Economics Editor of

The Sunday Times

[email protected]

Ian King is business presenter for Sky

News. Ian King Live is broadcast at

6.30pm from Monday to Thursday

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