The media seems to take pleasure in telling us that our economy is doomed, and we are in for many years of depression.
I don’t see it that way, I believe that once Covid-19 is kicked out, the economy will restart quickly.
In lockdown, we have learnt to buy online, place orders, pay by credit card or bank transfer, the goods are then delivered, all this happens remotely. Cash flows into these businesses almost immediately, and as we buy, at the same time they have to buy these goods from their suppliers, they receive orders, in turn they then need to procure components from their sub-contractors. Consequently, all through lockdown business has been happening, orders are being placed and goods are being made.
Then, once the economy opens up, our high street shops will start getting paid immediately, through either cash or credit card, and once more their cash will start flowing.
In the meantime, they should have furloughed their staff, deferred their business rates and taken a rent holiday, allowing them to quickly start generating cash as soon as they open up. Obviously, it isn’t as easy as that, for example, stock has to be bought and paid for, but, again, the bounce back loan should help them cover this.
For all these reasons I think the high street will return be much quicker than the media can even imagine. I realise that city centres, where currently no one’s working, will take time to recover, but eventually we will go back. We are social beings, and we crave company.
However, it is important to remember that this is not an economic crisis like that of 2008. This time people have money to spend, as the attached chart shows. The Household Saving Rate in the United Kingdom has grown to 28.10 percent in the second quarter of 2020 from 9.10 percent in the first quarter of 2020. Obviously, while at home we haven’t been spending, it is why I think that when we come out of this, we will go mad and spend. Think of those holidays we have all been dreaming of and now we have the money to spend?
No, it’s not like before, this it is not an economic crisis it is a medical one, which means that once we beat it, cash will start moving through the economy much quicker than we imagine, that’s Think Cash!