Rishi Sunak is not happy with the UK’s economic recovery. It is wise not to | Economic recovery

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There is a scene from Tom Stoppard Arcadia when the intelligent and media-hungry English gift Bernard thinks he has one on his rival by finding out something new about Lord Byron. He plans to publish his findings in a suitably august academic journal, where he promises that the editorial staff will be “absolutely without jubilation.”

Rishi Sunak’s response to the barrage of good news that has emerged about the UK economy in recent weeks has also been without glee. The Treasury Chancellor has expressed modest pleasure at the official figures showing a pickup in activity and a drop in the unemployment rate, but he certainly hasn’t hit the drums for Britain.

It is a wise strategy. Previous occupants of 11 Downing Street have boasted that the economy is reaching a new plateau of success (copyright Nigel Lawson) or ending the Tories boom and collapse (copyright Gordon Brown), only to find that the nemesis came hard on the heels of pride.

Sunak is as careful in private as in public. The Treasury’s response to numbers showing the economy is rebounding strongly after the lockdown for the first three months of 2021 is to say: well, it would, right? If you turn off much of the economy, you’re bound to get a response when you turn them back on. The Great Depression in the United States bottomed out in 1932, so growth looked good in 1933, but that didn’t mean all of the country’s economic woes were over.

Another reason Sunak doesn’t particularly want to gloat is that he and his officials fear the surge in the business will run out over the summer, with things looking a lot less robust in the fall.

Again, caution makes sense. The Chancellor would resist any pressure to put the economy back on lockdown, arguing that the virus is something the country can now live with thanks to the success of the vaccination program. But even though there isn’t a third wave as the nights roll on, that doesn’t mean consumers will continue to spend freely once they satiate their initial appetite for spending money. .

The best news for Sunak since the start of the year is that unemployment has remained so low. Hundreds of thousands of people have lost their jobs, but the damage to the job market has been much less severe than feared. Most experts, including those in the Treasury, would have expected the unemployment rate to be double its current level of 4.8%.

The great imponderable is what happens when government support is withdrawn. Many businesses have little or no working capital; insolvencies have been kept artificially low over the past 15 months; permission ends in September. These things concern the Chancellor as well.

There are two possible paths for the economy. The first is that the speed of the recovery is fast enough to keep long-term scarring to a minimum, but not too fast to produce the kind of upward pressure on inflation that would itself put pressure on the Bank of America. England to start withdrawing the stimulus at her disposal. provided by low interest rates and quantitative easing.

Second, the recovery is strong but brief, either because consumers are becoming more cautious after their spending spree or because inflation is starting to erode living standards. Sunak hopes for the first but is aware that the second remains a real possibility despite the steps taken to avoid it. In Arcadia, as you might expect, everything is terribly wrong for Bernard.

You need nerves of steel to ride the Bitcoin roller coaster

If you stand six feet from your computer screen and only see the fuzzy outline of a price chart, you could almost convince yourself that it was a moderately volatile week for bitcoin.

The price was around $ 45,000 at breakfast time on Monday and $ 40,500 on Friday noon, but who is excited about a 10% drop in a cryptocurrency that is still quadrupling to one year? Even shares of Vodafone, one of the main constituents of the FTSE 100 index, fell 10% last week.

The week after week view, however, fails to capture the drama of Wednesday, when bitcoin plunged 30%, hitting almost $ 32,000, and then recouped most of its losses.

There is no point in trying to predict where the price of bitcoin is heading because, unlike Vodafone, there is nothing tangible to analyze. There is no cash flow to value, for example. But maybe two conclusions can be drawn from the midweek event.

First, it made it even less likely that bitcoin, or any other digital coin, would soon become a mainstream payment system. No sane company would want to write or accept contracts in a currency that can rise or fall by 30% in a matter of hours.

Second, the risk appetite of Bitcoin investor-speculators could be affected. Those who stayed on Wednesday’s roller coaster and held their chips can congratulate themselves on their iron nerves and strong stomachs. Alternatively, they may fear that the next drop will be followed by an immediate recovery.

Investment bubbles rarely appear all at once. The process is usually a series of deflations, and may even include periods of re-inflation. So the next test of fear and greed in the bitcoin market will be fascinating. Late arrivals to the party now know that the price can drop by 30% very quickly. It tends to change psychology.

The goal of the electric car is not good without a roadmap

The 2030 ban on sales of conventional internal combustion engines in the UK is one of the most significant policies this government has introduced, even though rearguard action by automakers has succeeded in delaying it. ‘ban on hybrids (which combine a battery and a fossil fuel engine). until 2035.

Yet since that announcement in November, there has been a growing sense of unease that the government has drafted a press release without a plan. If Downing Street still needs another wake-up call, he’d better heed it Wednesday’s warning by MPs to the public accounts committee that the UK faces a “huge challenge” in achieving 100% electric car sales so quickly.

The main problem does not appear to be consumer enthusiasm: a poll released on Friday by Ofgem, the energy watchdog, found that a quarter of UK households intend to buy an electric car in the next five years. Rather, the deputies’ report highlights the absence of any type of government plan on how to manage this major transition.

Of particular concern is the lack of a plan for recharging infrastructure. The Society of Motor Manufacturers and Traders, the auto industry lobby group, said last week that a “massive and rapid deployment of infrastructure nationwide” was needed.

The private sector is rushing – even charging – to fill the void, especially in the potentially lucrative broadband network. However, at the current rate, the severe disparity in charger availability between regions will continue. This could hold back the poorest regions. A third of UK households with a car park on the street, but there is no comprehensive plan for publicly accessible chargers – whether in affluent London or in small towns across the country.

The 2030 deadline puts the UK at the forefront of the green energy transition, exactly where it should stay as it carves out a new post-Brexit role on the global stage. Yet without a proper plan, the UK risks wasting opportunities to become a world leader.

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