As we come closer to the end of lockdown 2.0, the new Covid vaccine on the horizon seems to be a promising concept. However, the virus has already caused damage to the economy, some, such as Bank of England’s governor Andrew Bailey, state that it may change its structure completely. Hopefully, the fall and regeneration in the economy is not as bad as those of the past, but this new structure may be our new normal.
Andrew Bailey has stated that factors such as the global pandemic, climate change, and the effects of Brexit, may act towards ending low investment and eventually spur productivity growth. It is undoubtable that the shock of the Covid-19 crisis has caused lasting changes to the UK economy, including the changes to investment and productivity growth, as stated by Bailey in The Guardian (17th November 2020).
He expressed at The City UK conference in London that the uncertainty caused by Brexit and the virus meant that decisions for investment had come to a halt. However, he suggested that the new vaccine announcements were a “light at the end of the tunnel” (The Guardian, 17th November 2020). Although the pandemic has changed the way we now work and shop for the foreseeable future, the governor doesn’t seem to think that the economy will suffer as much as it did during the 1980s to early 1990s when the shift from manufacturing to services took place. Even though we are not sure how long these changes will continue, Bailey said that his “best guess” was that they will last for the foreseeable. However, he stated that he does not believe that the economy will experience similar struggles of the 1980s and 1990s.
Bailey expressed that we should now, “focus and push ahead hard with the changes necessary to support changing the direction of our climate…this will require investment on a much larger scale than we have seen in recent years, and that investment will need to be financed” (The Guardian, 17th November 2020). Ultimately, the recent hesitations to invest was due to companies being unsure about the future as both Brexit and then Covid-19 increased uncertainty. However, the new vaccine brings a new sense of hope to the future.
In The Guardian’s article from 17th November, Baily expressed that the news from Pfizer and Moderna had been “encouraging” in terms of their newly developed vaccines. He stated that this is a “big step forward” and will help to “lower the levels of uncertainty”. Bailey continued, “We need to focus more on important questions about how our economies will look in the future, how we want them to look, what will be the legacy of Covid, and what we can do to support and prioritise any necessary more structural changes” (The Guardian, 17th November 2020).
In City AM’s article from 17th November, Andrew Bailey’s speech was cited where he stated that business investments had been “unusually weak” since the financial crisis, weighing on the country’s productivity. Nevertheless, Bailey spoke positively about the newly developed vaccines developed by companies Moderna, Pfizer, and Biontech, as they appear to be up to 95% effective. Yet, he stated that there was likely to be some “scarring” effects on the economy with the considerations of both Covid and Brexit, such as some longer-term struggles as the economy adjusts to its new structures. He stated that it is highly likely that changes from Coronavirus will arise in the services sector. This is already visible with greater focus on digital services over face-to-face work.
Bailey implied that the pandemic “might open up the possibilities of new business models, products and ways of working”. However, the Bank of England governor stressed that companies will most likely face big cash flow issues. City AM’s article states that in August of this year, the Bank’s report said that firms could face these cash flow problems in the current financial year of up to around £200 billion. Although, he said that companies had been successfully tapping financial markets and lenders for money. Bailey stated that a decade on from the financial crisis, “the financial system is supporting the economy, not the other way around, and that is how it should be” (City AM, 17th November 2020).
Overall, the newly developed vaccine seems to be our “light at the end of the tunnel”, according to the Bank of England’s governor Andrew Bailey, and the future is therefore looking hopeful. Despite a slight fall in finances and investment, we will hopefully land back on our feet, and the vaccine may be a huge part of this return. Then, we can try and get back to our new sort of normal and put back into the UK’s economy.