Covid: Rishi Sunak needs to spend big now to avoid tsunami of unemployment – John McLellan

Chancellor Rishi Sunak needs to act to help businesses as the coronavirus lockdown is tightened, but we will all be paying the price for years, writes John McLellan.

Rishi Sunak has a big decision to make over state support for the economy as Covid crisis continues (Picture: Daniel Leal-Olivas/PA Wire)

The quarterly Edinburgh Economy Watch is usually packed with graphs and charts showing how well the city is faring for jobs, business growth and wealth generation, but if the latest bulletin makes for grim reading, in the light of new pandemic restrictions it is chilling.

At immediate stake is the future of around 10,000 Edinburgh businesses and close to 100,000 jobs, and if this doesn’t blast away any last vestiges of complacency about the city’s resilience, nothing will. It reports the city’s monthly unemployment claimant count is up 162 per cent since March. For women it’s 172 per cent and young people 192 per cent. An extra 26,000 Edinburgh people submitted Universal Credit claims in August, up from 9,363 a year ago, many of them people in work.

But there is a tsunami of unemployment waiting to break unless something is done to replace the UK Government’s Job Retention Scheme, due to close at the end of next month. Some 90,000 Edinburgh workers were furloughed by the end of July and they are now more vulnerable to redundancy with the strong likelihood that the green light for a return to normal working will not be given until a vaccine is found, whenever that is.

For all First Minister Nicola Sturgeon’s presentational plaudits, her goal of eliminating the virus in the first lockdown has proved unrealistic and working at home where possible will mean a deserted Edinburgh cty centre throughout winter. Restaurants, bars and cafes will have little lunchtime trade and shops will see more of what trade they had go online. With pubs shutting at 10, the Scottish Hospitality Group says turnovers could drop by a quarter and the sector is “staring into an abyss” and 90,000 jobs in this sector alone are at risk.

Without the summer tourism boost, many city centre businesses will find themselves among the 40.9 per cent of UK businesses who do not have enough cash to last six months, and by the end of August half were not confident they would survive the crisis. Economy Watch estimates that includes around 10,000 Edinburgh enterprises. So even before Tuesday’s bleak announcements, it was believed that 10,000 Edinburgh companies were not confident they would see out the pandemic, so who knows what that figure might be now. Other figures show the numbers of companies registered for VAT and PAYE decreased in the first two quarters of the year, with economic output down by over a fifth in the second quarter.

Both UK and Scottish Governments are keen to emphasise they are not returning to the severe lockdown of the spring, and indeed schools and universities remain open, non-essential retailers can still trade and bars can serve until 10pm. But for a big city economy the lockdown might as well be total for the impact the new restrictions could have on the viability of so many enterprises desperate for customers.

Everyone wants an answer, but there seems little alternative to more government support through more government bond sales, and as much as some might like to deny it, this is not free money. The effect of not shaking the money tree will be the shutters coming down on those 10,000 Edinburgh enterprises, and the majority of those 90,000 Edinburgh workers joining the ranks of the unemployed so, with welcome encouragement from Bank of England governor Andrew Bailey, shake the money tree Chancellor Rishi Sunak must. Meanwhile, the Scottish Government should commit to extending emergency rates relief.

We are fortunate inflation has kept so low, but ultimately governments can only spend tax-payers’ money; we will all be paying the price for years.

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