Do you remember when you bought that 65” tv and toyed with Curry’s finance, sticking it on your credit card or cashing in your Premium Bonds? Decisions, decisions. Well, 00 Sunak is in a similar position this morning (Thursday 16 July). He has been the poster boy during the Covid-19 pandemic and many a houseperson has pinned his image to the back of their retina to avoid looking at their husbands during lockdown. However, now he has ruled out state bailouts of companies struggling with debt incurred during the Coronavirus crisis and has already pushed Virgin Atlantic towards external financing arrangements (see the NTI news report of 16 July).
It is reported that up to three million British jobs are at risk unless the Government swoops in and helps to support as much as £35m of unsustainable debt. This morning TheCityUK group are reporting that about 780,000 small- and medium-sized businesses are at risk. That is a LOT of potential insolvencies, so don’t book that cottage in Cornwall for a break any time soon, you will be needed in the office until, well … forever. Just two days ago the Office for Budget Responsibility said that a further £33bn would be needed to write off the value of state-backed loans in the worst-case scenario should the Government later come a’knocking and there was no-one at home.
That other unlikely shining-armoured knight, Andrew Bailey, has been reported as saying that the high level of corporate debt stands a good chance of undermining any economic recovery and economists are shockingly changing their stance on a possible ‘V’-shaped recovery to a ‘U’. Bearing in mind they previously were predicting an ’L’ Tracee in the office has a theory that economists are secretly sending a coded message of ‘LUV’ to the nation to cheer us all up in loveless times.
Rishi Sunak has signalled his determination to get public finances on a stronger footing following the crisis, but some of the eye-watering numbers being bandied about suggest that annual tax rises of £60bn every decade would be necessary to balance the books. Putting this in perspective, a one pence rise in income tax raises about £7bn in taxes, so it looks like we will all be putting in a shift for the rest of our grandchildren’s lives to sort this.
The message from China is a bit different. It is the only nation to publish growth figures over the past three months, posting an increase of 3.2 per cent in the second quarter (following the country’s first contraction since the mid-70s in the previous three months). However, this rebound is based largely upon an interventionist state, and financial regulators are warning of a flood of new bad loans and a surge in unregulated shadow banking as Beijing opens the credit floodgates to get the economy moving again.
At least we can celebrate with a cheap burger and a trip to Center Parcs, but wait; no. It is reported that restaurant chains such as Pizza Hut and Burger King (to name and shame) did not cut their prices, despite 007 lowering VAT from 20 to 5 per cent. Mickey Ds passed on some of the cut and good old Greggs and Costa Coffee have lowered their prices by the full amount.
Center Parcs didn’t pass on the cut and Merlin Entertainments (which runs Alton Towers, Thorpe Parc and Warwick Castle) were also just a bit miserable and only passed on some of the cut. We are just sayin’, here at NTI. You pick your burger and holiday providers as you choose, but … you know.