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Julian Jessop

23 Dec, 14 tweets, 8 min read

📢 thread: 12 reasons to be cheerful about the UK #economy in 2021🎄

I know 2021 will be another tough year for many people and businesses, but I’m aiming here to provide some counterbalance to the more negative commentary you can easily find elsewhere...

1. The household sector (in aggregate) has built up substantial #savings during the pandemic that could be used to fuel a strong recovery in #consumer spending. Obviously, the distribution is uneven and much still depends on confidence. But…

2. Consumer ##confidence jumped by the most in eight years in December on the good news on the #vaccine. Even in November, households were the least pessimistic about #job security since March, despite the grim headlines...

3. The #unemployment rate has risen but (thanks largely to furlough) remains relatively low and is roughly half where some feared it might be, reducing the risk of long-term scarring. The number of people made redundant in the past three months did at least peak in September…

4. …while various measures of hiring have continued to recover, including online #job ads and surveys of #employment. Once the Covid restrictions are lifted, people will still want to go to pubs, restaurants, cinemas and theatres - perhaps more than ever.

5. One way or the other, #Brexit uncertainty will ease very soon (probably with a deal). Businesses will finally know the new arrangements for UK-EU trade (whatever they may be), and policy-makers can refocus on other priorities.

6. The lifting of both Brexit and Covid uncertainty should also help to drive a surge in business #investment. Many surveys show that the UK's long-term attractiveness remains high, and that projects have typically been postponed rather than cancelled.

7. Consistent with this, London has cemented its dominance as Europe’s top financial centre, with far fewer City jobs relocating to the EU than had been predicted (and even some of these may come back). Indeed, Edinburgh ranks higher (for competitiveness) than Frankfurt or Paris.

8. Despite the jump in public debt, UK government borrowing costs remain very low (further weakening the case for any form of austerity, including tax hikes). Very loose monetary policy is helping to provide cheap finance for households and companies too.

9. Equity markets have held on to almost all their gains since 9th November, when it was first revealed that the Pfizer–BioNTech #Covidvaccine could be 90% effective. (Even if you don’t hold equities yourself, this is good for the economy)...

10. In the meantime, the economic hit from the second #lockdown in November was smaller than feared, and far smaller than the first. Markets, consumers, and businesses (at least those that can) have adapted well. (But hospitality in particular will need more support.)

11. The #vshapedrecovery in retail sales is reassuring. This has been flattered a little by the diversion of spending from other sectors, and is vulnerable to further #lockdowns. But the recovery in total sales also illustrates the adaptability of the economy, especially online.

12. The global backdrop is improving too. The EU may lag behind the rest of the world, due in part to a slower rollout of the Covid vaccine and the straitjacket of the #euro. But the US and China are recovering strongly.

I wish everyone a very happy Christmas and better times ahead. Stay safe and take care. J

🎄🎅🤞

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More from @julianHjessop

Julian Jessop

@julianHjessop

3 Dec

FWIW, I’m relatively relaxed about the fiscal costs of #Covid: borrowing will drop sharply as the economy recovers, the #debt burden is manageable, and there’s no need for #austerity to pay for it.

But this isn’t a green light to abandon fiscal responsibility altogether… (1/12)

For a start, the long-term outlook is more worrying.

The #OBR’s Fiscal Sustainability Report (July) includes scenarios where unchecked increases in public spending on health, adult social care and pensions could see debt balloon to more than 400% of GDP in 2070... (2/12)

In the meantime, even if the government doesn’t face the same financial constraints as a household, high public spending and borrowing still has other costs, including the poor allocation of resources and the risk of runaway #inflation… (3/12)

Read 12 tweets

Julian Jessop

@julianHjessop

28 Nov

I’ve read some utter tosh on the state of the UK public finances in the last few days. Here's an attempt to correct some of the biggest misunderstandings.

Most importantly, government debt does not have to be ‘repaid’, only serviced... (1/19)

#SR20 #SpendingReview #RishiSunak

As long as the government can meet the interest payments (I’ll discuss the risks here later), maturing debt can simply be rolled over. (2/19)

This is what usually happens. The last time the UK ran a budget surplus was in 2000-01, since when public debt has increased by more than £1,700 billion. (3/19)

Read 19 tweets

Julian Jessop

@julianHjessop

27 Nov

FWIW, I’ve been comparing my UK economic forecasts with those of the #OBR. There is a much more positive story than the Chancellor told in Wednesday’s #SpendingReview #SR20 📢

Let’s start with the near-term outlook… (1/8)

The #OBR assumes that the economic impact of #lockdown2 will be ‘three-fifths’ that seen during the first lockdown, when #GDP fell by 25% in March and April. This means that lockdown2 would take the level of #GDP back to 15% below its pre-Covid peak… (2/8)

Given that #GDP was 8.2% lower in September than February, and assuming little change in October, this is consistent with a fall of around 7% m/m in November, which is what’s in the #OBR’s ‘central forecast’. This seems about right to me... (3/8)

Read 8 tweets

Julian Jessop

@julianHjessop

14 Mar

I see some are arguing that the economic hit from #coronavirus means we should now extend the #brexit transition period (or even #rejoinEU 🙄). They typically make up to four points – but none of them seem at all convincing… (1/6)

First, that it's now much harder for UK and EU negotiators to travel and meet in person. But so what? This is the age of video conferencing and the internet, and we can surely work around this... (2/6)

Second, that government energy spent on #Brexit negotiations would be better spent on dealing with #coronavirus. I have a little more sympathy with this point, but don’t we still have enough ministers, civil servants etc to do more than one thing at a time? (3/6)

Read 7 tweets

Julian Jessop

@julianHjessop

11 Dec 19

If Jeremy #Corbyn becomes PM on Friday 13th, here's my rundown of 13 of #Labour’s worst policies which will hurt many, not just the few.

PS. I could have chosen a completely different 13, and these are in no particular order… (thread)

#GeneralElection19

1. Expropriating up to 10% of the value of corporate equity. Employee share ownership is usually a good thing, but dictating the terms would deter job creation and investment, and encourage firms to relocate overseas. More explanation here... capx.co/the-10-share-p…

2. Rent controls. Almost all economists agree that these are a bad idea and, like many of Labour’s policies, would actually end up hurting the very people they are supposed to help. And before replying ‘well, it works in Germany', read this… iea.org.uk/blog/qtwtain-h…

Read 14 tweets

Julian Jessop

@julianHjessop

2 Dec 19

The main users of railways are commuters, who are relatively well-off and most likely live or work in London and the South East. So cutting #railfares by 1/3 would increase both income #inequality and regional inequality.

(snips from factsheets here: gov.uk/government/sta…)

To be fair, distributional impact also depends on how lower #rail fares are funded. Higher taxes on car ownership and/or use might even the impact out a little, and could be better for the environment, but plenty of poorer people rely on cars too.

Finally, remember any environmental benefits rely on more people travelling on trains which are already overcrowded. Much better to use the money to improve infrastructure than cut #railfares, especially as users themselves will benefit from this too.

Read 4 tweets

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