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Covid’s full cost to the UK economy is still being counted | Larry Elliott | Business

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This has been a stinker of a year. More than 54,000 people have died from Covid-19, and the latest forecasts, due out on Wednesday, will show the economy on course to shrink by a tenth or more.

The grim news on growth and unemployment will provide the backdrop to Rishi Sunak’s announcement of the Treasury’s spending plans for 2021-22 – and a warning from the chancellor that he will need to take action to bring down the government’s budget deficit next year.

When the pandemic led to the first lockdown in the spring, the thinking was that the UK would have a classic V-shaped recession and activity would be back to its pre-crisis levels by the turn of the year. In the end, the recession has been less deep, but more protracted.

Economic historians don’t compile lists of the 10 worst years for the economy in the way that rock critics list their top Bob Marley songs (No Woman, No Cry, according to our own Alex Petridis) but if they did, 2020 would be right up there.

To be sure, there would be competition for the No 1 spot. Few alive can remember 1919, but in that year, a Britain still shaken by the losses in the first world war suffered more than 200,000 deaths from Spanish flu. The benefit cuts row that broke the minority Labour government and forced the UK off the gold standard meant 1931 was not exactly pleasant either. Life for the poor was even tougher in the days when welfare payments were nugatory and there was no NHS.

Up until now, 1981 would be the choice of many for the worst year of the postwar era, because while the contraction in the economy was much smaller than in 2020 it was concentrated among the towns and cities of Scotland, Wales and northern England. Whole communities were ripped apart, and the scars still show.

The last time the economy collapsed on anything like the scale likely to be seen in 2020 was in 1921, when the inflationary boom that followed the first world war came to grief. It is not possible to shut down whole chunks of the economy without serious consequences, and predictably enough, businesses have gone bust and unemployment has risen sharply. Yet for most people, the reason 2020 has been so miserable has not been the lack of growth; rather it has been not being able to see their elderly parents, being separated from their children, being deprived of the opportunity to go to see their favourite football team or band.

That’s because most of the economic hit has been taken by the government, which has borrowed like never before in peacetime to fight the pandemic and to support the incomes of those furloughed. The willingness of the Treasury to pick up the tab explains why, despite a fall in its approval ratings, the Conservative party still nurtures hopes of winning the next election.

All governments want to get the bad news out of the way early in the electoral cycle, and that has certainly been the case with this one. Politically, there is no good time for a pandemic and a monster recession, but the least bad time is in the first year after an election. There are more than four years to go before the next polling day and plenty can happen in that time.

Once restrictions are lifted, the economy is likely to grow at a rapid pace. Individuals will run down the savings they have accumulated but been unable to spend; businesses will decide to go ahead with investment plans mothballed during the crisis.

Even after growing by 15.5% in the third quarter, the level of gross domestic product was still almost 10% below where it was in the final three months of 2019. The second lockdown in England, combined with tougher restrictions in the rest of the UK, mean there will be an even bigger mountain to climb by the end of 2020.

What that means is that the economy can grow faster than its normal pace for some time before there is any risk of it overheating. It may be two or three years before all the ground lost during 2020 is made up.

Governments do recover from early setbacks. Clement Attlee had a terrible 1947 but clung on to office in 1950. In 1981, there would have been few takers for the proposition that Margaret Thatcher would win a second term with a landslide majority two years later. For the Conservatives, a lot depends on what happens in the next six to nine months, and in part that will be determined by Covid-19 and the response to it.

Were there to be a third and perhaps a fourth wave of Covid-19 that led to the reimposition of restrictions, the economic damage would mount despite any mitigating action the Treasury might take.

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But the chancellor also has a big role to play. If he slams the brakes on too early and sucks demand out of the economy by cutting spending, he will delay and slow the recovery. Throughout the crisis, Sunak has made noises about how the borrowing will have to stop, with the latest declaration of future fiscal restraint coming in a Sunday Times interview in which he joked that he wanted to take the prime minister’s credit card away.

He may have real trouble doing so. The prime minister’s strategy – as witnessed by the big increase in the defence budget announced last week – is to carry on spending big in the hope of a strong economic recovery that will persuade voters that 2020 was an aberration. And there are plenty of economists who think Johnson is right.


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BioNTech’s Covid vaccine is a triumph of innovation and immigration | Hans-Werner Sinn | Business

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The world took note when the German startup BioNTech announced its breakthrough in the development of a new type of vaccine to combat Covid-19. After testing tens of thousands of people, BioNTech’s vaccine has been shown to be 95% effective in providing protection for those who would otherwise have been infected. The company was the first to apply for emergency use authorisation for a coronavirus vaccine in the US and it has announced it will soon take similar steps in Europe.

Antiviral vaccines are usually made with devitalised viral materials fabricated outside the body but BioNTech has pursued a new method of injecting genetically modified RNA into the patient. This prompts the patient’s cells to produce a characteristic protein of the relevant Sars-CoV-2 virus themselves, enabling the body’s immune system to build up an effective response before it encounters the real virus.

The great advantage of this approach is that it allows for the production of more than 1bn vaccine doses within the space of only a few months. It is also highly safe because the modified RNA can survive only at a very low temperature and quickly degrades in the body once it has performed its job. Any subsequent damage to the body is therefore extremely unlikely.

In close cooperation with the US pharmaceutical giant Pfizer, BioNTech’s success augurs a rapid uptake of widespread vaccination in Europe and the US. Indeed, delivery contracts for millions of doses of the vaccine are already in place. And it is encouraging that the US drugmaker Moderna has also announced quantitatively similar results in its trials, using a closely related process involving a slightly more stable RNA variant.

More broadly, many other companies are advancing the frontier of next-generation RNA-based vaccines. Among these is CureVac, a company based in the German town of Tübingen, which has invented a new rapid-programming process for RNA that promises to be widely applicable.

Thanks to these new technologies, the world will likely be freed from the scourge of Covid-19 sometime in 2021 or 2022. Once again, we will be able to eat out and go to the theatre without worries; private weddings and parties will no longer be cause for concern. The airline and travel industries will quickly return to normal, and the global economy will be revitalised after a long period of lockdown-induced paralysis.

A major difference is that we will emerge with a completely new pharmaceutical industry, one that promises to provide extremely effective vaccines against numerous other infectious diseases. Moreover, RNA can, in principle, be programmed in such a way as to produce antibodies against specific types of cancer, promising forms of treatment that are far gentler than chemotherapy.

At BioNTech, the pioneers of the new RNA-based approach to drug development are Uğur Şahin and Özlem Türeci, a couple specialising in oncology and genetic research. Şahin, who holds a chair in experimental oncology at the University of Mainz, is one of the world’s top researchers in the study of personalised vaccines for cancer immunotherapy. Both are German citizens born to Turkish immigrants who came to the country decades ago.

Şahin and Türeci are prime examples of the successful integration of immigrants – including those from Turkey – into German society. They managed not only to gain a foothold in Germany but to thrive, thanks to hard work, an entrepreneurial spirit and strong cultural traditions.

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BioNTech’s story shows that successful immigration is about more than welfare magnetism. Managed properly, immigration is a key source of new blood and fresh ideas for an ageing society.

It is worth recalling that Germany’s pharmaceutical industry was one of the earliest manufacturers of the contraceptive pill, starting in the 1960s. No other country embraced this method of contraception more comprehensively. As a consequence, however, the German fertility rate had fallen sharply by the early 1970s – six years before Italy experienced a similar decline, 10 years before Spain did and 20 years before Poland did.

Germany has been paying the price for this early pharmaceutical success. Its largest population cohort comprises people in their mid-50s, who were born just before the pill-induced drop in birthrates. All of the subsequent generational cohorts have steadily shrunk. Under these demographic conditions, stagnation and decline would be inevitable without immigration. In fact, Germany now needs a continuous inflow of migrants just to fill the population gap that its earlier pharmaceutical successes has caused. Fittingly, Germany’s pharmaceutical industry is achieving international acclaim thanks to the innovative work of two children of immigrants who were lured to the country by the demographic vacuum to which the industry itself contributed. Şahin and Türeci are pioneers in an area of genetic research that now promises to give a new breath of life to the pharmaceutical industry, the European economy and the entire world.

Hans-Werner Sinn, is professor of economics at the University of Munich. He was president of the Ifo Institute for Economic Research and serves on the German economy ministry’s advisory council.

© Project Syndicate


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Shopping on Black Friday? Remember the stranded seafarers who make it possible | Black Friday

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This weekend is one of the planet’s busiest shopping sprees, with an estimated £66bn to be spent in the UK alone over Black Friday and Cyber Monday, much of it online. Yet as shoppers click and wait to collect, there is a crisis at sea among the people whose work brings us these goods.

It is no exaggeration to say that without shipping the global marketplace would collapse. It is responsible for the movement of 90% of all global trade. Even in normal circumstances, more than a million seafarers labour daily on the vessels that make up the world cargo fleet, their work barely noticed by consumers. As Covid-19 has ravaged the world, they have helped keep the global economy functioning, unseen.

As Guardian Seascape has repeatedly reported, however, nearly 400,000 of these seafarers are trapped by the crew change crisis. Most have not been designated key workers during the pandemic, and have remained effectively imprisoned on board their vessels – unable to change crews at ports, and therefore unable to return to their homes and loved ones.

The silence on the plight of these stranded seafarers is widespread: from the governments that have decided shipping crew are not essential workers, to the major retailers that profit from tremendous sales. This failure takes on renewed importance now, as new vaccines against Covid-19 are developed and the conversation turns to who should be inoculated first. The International Maritime Organisation, the UN body for shipping and seafarers, has failed to get countries to uphold standards of care and repatriation for seafarers. They are, in effect, lost at sea.

Many have been so for more than a year, with their physical and mental wellbeing deteriorating rapidly as a result. They work in some of the world’s toughest conditions to satisfy global retail demand, and their struggle has been recognised by Pope Francis and António Guterres, secretary general of the United Nations. As yet, however, we have heard little from those in the retail sector who actually have the power to make a difference.

The majority of shipping seafarers are from the Philippines, China and India, and it is perhaps the case that some in the west see their plight as a problem for the other side of the world. But shipping is a truly global enterprise, and the potential ramifications of continued indifference are just as universal. Not only does the humanitarian crisis at sea worsen every day, but the failing health of our seafarers affects productivity, which in turn hurts the seamless transportation of goods around the world.

As things stand, a few major retailers are poised to profit immensely from the work of seafearers in the rush for goods on Black Friday and Cyber Monday. The International Chamber of Shipping has written an open letter to Jeff Bezos, CEO of Amazon, asking him to use his influence to exert pressure on governments to recognise seafarers as key workers, so that they can change crews, go home and be reunited with their families.

The plight of seafarers is global, and requires a global response. Governments must give seafarers the same rights as other essential workers, and corporate responsibility must extend to seafarers as it does to other employees. Retail profiteering at the hands of trapped men and women must end. Until then, before you click “add to cart,” spare a thought for the seafarers whose work will help deliver the contents of that cart to the comfort of your home, even while they can’t get home themselves.

• Nusrat Ghani is MP for Wealden and a former maritime minister. Guy Platten is secretary general of the International Chamber of Shipping


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Most expensive family feud in history to take the stage at London court | The super-rich

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The most expensive – and acrimonious – family breakdown in history will be laid bare in a London court next week in a divorce battle over a £453m fortune that includes several luxury mansions, a superyacht called Luna, a helicopter, a private jet and an art collection including pieces by Mark Rothko, Andy Warhol and Damien Hirst.

Tatiana Akhmedova will accuse her ex-husband, Farkhad Akhmedov, an oligarch and ally of the Russian president, Vladimir Putin, and their son Temur Akhmedov of hiding hundreds of millions in assets in order to avoid paying the blockbuster settlement awarded to her by the high court in 2016.

Akhmedova alleges that her Azerbaijani-born Russian husband transferred cash and assets to their son in order to avoid paying her the money. They deny the claims and say she was aware of the father-to-son gifts, which included a £30m apartment in One Hyde Park, the exclusive London development, at the time. On Monday she will take her son to the high court accusing him of acting “as his father’s lieutenant” in a scheme to hide the fortune.

In her quest to uncover the award Akhmedova has in the past two weeks won court orders to raid her son’s luxury apartment in the opulent Knightsbridge development to search for evidence, and to force Google to hand over the contents of his emails.

Speaking publicly for the first time her son, Temur, 27, said that no matter what happens in court he would “never be reconciled with her” because “her outrageous, revengeful behaviour” has destroyed their once close relationship.

The search of flat and associated wine cellar led to the seizure of 58 devices, 47 of which were said to belong to Temur. He said the devices included four Xboxes and a PlayStation console.

“Our mother raised us very well, she was a good mother,” he said. “But this claim is because she doesn’t like me because I didn’t stick on her side. I couldn’t imagine in a million years going against my own blood. She is just out for revenge. How can you give birth to your kids and then fight against them in court?”

The exclusive One Hyde Park development in London
One Hyde Park in London. Akhmedova alleges her husband transferred cash and assets, including a £30m flat in the development, to their son to avoid paying her money. Photograph: View Pictures/UIG via Getty Images

Ahead of the trial Temur was served with a worldwide freezing order preventing him from transferring funds or selling any assets. He said the order limited his spending to £3,000 a week. “Now maybe for the average person that seems like a fucking crazy amount but in reality it’s different,” he said in a telephone interview from Dubai.

Temur said of the freezing order: “I sent her [his mother] a text, I said ‘why the fuck are you doing this?’”

He claimed his mother was not entitled to the £453m from his father’s fortune she was awarded by a London court in 2016, because his parents divorced 20 years earlier after his mother had an affair with a younger man.

He said his father offered his mother £100m to formalise the split, but his mother filed for divorce in London and a judge awarded her a 41.5% share of the £1bn family fortune.

“If my mother was on the street I would totally understand,” Temur said. “I would never let that happen, but she lives a very good life. She’s always on holiday always travelling. I see her updates on WhatsApp, she was in Ibiza a few weeks ago and Italy.”

The allegation that they previously divorced was dismissed by the family court in 2016. It was also later reported that this finding was challenged by the father in the Russian courts, which reinforced the English court’s ruling.

Akhmedova has tried since 2016 to enforce the judgment. The settlement remains the highest award in UK history and remains unsatisfied despite consistent enforcement attempts made in various jurisdictions.

A source close to Akhemdova’s legal team said Temur had acted “as his father’s lieutenant” in executing schemes to avoid paying her the divorce settlement. He denies this.

“This trial has come about because, in the four years since Tatiana Akhmedova was awarded the £453m divorce settlement, no money has voluntarily been paid to her,” the source said. “This has led to extensive enforcement efforts against Farkhad Akhmedov’s assets and an investigation of the various methods employed by Farkhad to place assets beyond Tatiana’s reach.

“Tatiana brought claims against her son Temur Akhmedov, alleging that he had received substantial financial sums and assets from Farkhad in order to put them beyond his mother’s reach and in order to frustrate the enforcement of the divorce award. Tatiana contends that Temur played a key role – essentially as his father’s lieutenant – in Farkhad’s strategy of evasion by devising and executing the schemes.”

Temur’s mother’s legal team, which is being funded by litigation financier Burford Capital, had at one stage attempted to seize Akhmedov’s £300m superyacht. The yacht called Luna, which had been built for Chelsea football club owner Roman Abramovich, has 10 VIP cabins and a 20-metre swimming pool.

Farkhad Akhmedov has previously said he will make all efforts to overturn what he has always said was “a misguided and wrong judgment by the English high court”.

• This article was amended on 28 November 2020 to clarify that the text Temur Akhmedov sent his mother was in relation to the freezing order, not the search of his apartment as an earlier version said.


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