As I have previously said the economy can be broken down into five parts: the essential economy, the bounce back economy, the areas that can flourish with support, areas that require consumer confidence and the areas where recovery will be difficult some of which will need medium term Westminster government assistance.
Firstly, the essential economy has kept on going through the pandemic and will continue post pandemic. Secondly the bounce back economy has already shown a quick recovery and queues. Whilst all the money lost will not all be made up they will return after an initial rush to the pre pandemic normal.
Thirdly Key sectors that will need support
This includes, theatres and other performing arts venues, and professional sport. These sectors are key parts of the economy and important employers and will require support to recover. The amount of money needed to keep these going with no paying customers is within the Welsh Government’s capacity to support. We need a sectoral approach in Wales, to support those industries we have the financial capacity to support and to ensure that these sectors survive. When customers can return to pre pandemic numbers they will return to their financial state pre pandemic.
Fourthly areas which will require consumer confidence
These are areas beyond substantial Government help, whilst they can reduce taxes such as VAT and Land Transaction Tax (Stamp duty) and reduce regulation it comes down to consumer confidence in safety and continuity of income.
These include pubs, restaurants, local tourist attractions, hotels, and clubs. These will require both confidence that they are safe and people having surplus income to be able to afford these items. I remain unconvinced that opening them will get people returning in pre pandemic numbers to use them.
The other areas that depend on consumer belief in their economic well- being is the purchase of houses, new cars or invest in home improvements. These require confidence in the economy and people being prepared to take on medium and long term debt.
With people fearing redundancy and reduced income as the economy suffers from the pandemic then new houses and cars may be put off by some until later.
Fifthly where recovery will be difficult
Will people and companies have changed how they work? We have seen many people working from home with productivity no worse and sometimes better than in offices. Will this continue because if it does then roads will be quieter, but it will influence public transport use, city centre coffee and sandwich bars, office furniture sales, demand for office space plus car park income. Have people changed their retail habits permanently, as more items are being bought online, and if they have what is the future of the high street.
Then there is foreign travel which will affect travel agents, aircraft manufacturers, airports and support services for planes and airports plus component and raw material producers for aircraft manufacture. This area needs support in both the short and medium term from the Westminster government to ensure it can once again thrive and prosper.
Then there are the large manufacturers which in Wales are TATA steel and Airbus. These are industries that require Westminster government support, the benefit of the union is the ability to support such industries. The Welsh government does not have the financial strength to support these industries and an independent Wales would not. We saw that Iceland was unable to save the Icelandic banks during the financial crisis. Iceland’s banks went bankrupt. The government was unable to bail them out because it didn’t have the money. Instead of being too big to fail, they were too big to save. As a result, these banks’ financial collapse brought down the country’s economy.
Universities are the key employer in many areas. The Westminster Government has already committed to protect the welfare of current students; supporting the role HE providers play in regional and local economies through the provision of high-quality courses aligned with economic and societal need and preserving the sector’s internationally outstanding science base (noting specific support is being made available for research activities).
Whilst none of us can see into the future, the new normal may be very different to the pre pandemic normal.
Mike Hedges is the Member of the Senedd for Swansea East.
