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Still in the pandemic’s clutches

I couldn’t quite put my finger on it. Why did Pret a Manger feel strangely different when I popped in on Monday lunchtime to buy a sandwich? Then it dawned on me. The protective plastic screens separating customers from workers had been removed. Now we could happily breathe all over each other. Except of course, we didn’t. Everyone in Pret was wearing a mask, as the vast majority of people in and around London EC4 are continuing to do. This was Freedom Day, but with Terms & Conditions.

Even the markets were subdued. It’s hard to feel a sense of jubilation when the long-awaited exit from lockdown, and the lifting of all legal curbs on social contact was such a shambles. The pandemic has been joined by the 'pingdemic' as the NHS app means hundreds of thousands of workers are forced to self-isolate. The CBI reckoned that by the end of last week up to 20 per cent of the workforce was self isolating. 

The position on returning to work has been watered down too – the government wants people to return to their workplaces but there’s no rush. It might even become mandatory for nightclubs to ask for proof of vaccination, although that may not be a bad idea. When nightclubs in the Netherlands reopened about a month ago with no restrictions, the daily infection rate was at 400. Now it’s at 10,000 a day.

The need to get the economy firing again, and a prime minister not wanting to lose face, meant that Freedom Day could not be cancelled, despite the predicted rate of infection in the UK potentially hitting up to 200,000 a day within a matter of weeks, far higher than the rate at the height of the second wave. Back then, of course, only a tiny number of us had been vaccinated. Now close to 36m have had both jabs and a further 10m have had their first. So we are in a stronger position but even the double jabbed are falling ill or being forced to isolate, including key figures in the cabinet. 

The key number to watch is the hospitalisation figures – if that remains low then we can relax knowing that a further lockdown will be unnecessary. We won’t know for several weeks though.

But the longer the pandemic lingers, the more problems we are storing up for the future. A 'Long Crisis' if you like. There is the inflation risk – policymakers adhere to the view that the inflationary trend (5.4 per cent in the US and 2.5 per cent in the UK in June) will be short-lived, but not everyone is so sure (see Bearbull) – and then there's the overall drag on economic health. A CFA Institute survey of its members found that 44 per cent of respondents think that economies are likely to face K-shaped recoveries where different industries experience different rates of return to  health. We’ve seen that in the hospitality sector. Overall, the sector’s turnover was 25 per cent lower in May 2021 than in May 2019, but for pubs and nightclubs turnover was down 40 per down.

Landlords, too, remain under pressure as Alex Newman spells out. Worryingly some 45 per cent of the CFA members think equities have recovered too quickly from the March 2020 slump and are due for a market correction within one to three years.

One other consequence of the crisis is the strengthening of big government. The CFA members largely agree (58 per cent) the role of government will broaden as a result of the crisis and that taxes will rise.

Big government has inevitably and increasingly intruded into our daily lives during the pandemic. Can that ever be rolled back?