CBI @10am: Economic outlook: a year in review

Speakers:

• Rain Newton-Smith, Chief Economist, CBI
• Mel Stride MP, Chair, Treasury Select Committee
• Lizi Hills, Commercial Finance Director, Burger King
• Ceri Thomas, Editor and Partner, Tortoise Media (Chair)

Overview:

Rain Newton-Smith:

• The vaccine is hugely welcome news, but unfortunately, we will be living with the virus for a while longer yet
• There are also challenges around Brexit, with uncertainty around the negotiations
• In terms of the economy, the worst is behind us in terms of the fall in output. The impact of the second lockdown is likely to be less severe, the economy is more open, and we have adapted to living with the virus. Some sectors have adapted and are seeing growth, but many others are still at the eye of the storm
• Business investment, however, is lagging. There’s also concern around consumer confidence and access to finance, which need to be resolved for business investment to really bounce back
• Finally, there’s a challenge around rising unemployment. The furlough scheme has been extremely effective but there’s concern over what happens when the scheme ends. The UK needs to focus on reskilling and adult retraining over the next year.

Mel Stride:

• The challenges for the economy are three-fold:
  • Where is the progress on getting on top of the virus? A vaccine is good news but how will the UK be at distributing it? And how effective will the vaccine be?
  • Behavioural changes – how do people feel about going out and will they feel safe? It’s likely that people will be more relaxed, but long-term behavioural changes need to be taken into account. The scarring impacts from COVID-19 means the economy may be persistently smaller than it otherwise would have been. We also need to consider the impact of working from home and how business travel changes in the future
  • How do we transition people from those jobs that will be gone, to the growing parts of the economy?
• The government has done a lot right in their approach to the pandemic. Never before have we had a furlough scheme, for example. But it’s not been perfect, and many have fallen through the gap
• There is a point where the government will need to look at paying everything back. We don’t want to start the conversation too early as this may hurt consumer confidence, but when those decisions are made, it’s important to incentivise business through the tax system.

Lizi Hills:

• It’s been a mixed bag for Burger King over the last year. We’re very grateful for the government support and wouldn’t have survived without it. But it’s been challenging shutting and re-opening often at short notice
• However once the business understood that they could operate safely, after being shut during lockdown sales were up 300%, mostly through takeaway services. This gives us confidence in the recovery as demand seems to be there
• Although home working has been an option, a lot of younger workers don’t want to do it long term, as they miss going into the office and seeing friends
• Burger King expect to be at pre-pandemic levels around Q2 2021 or at least H2 2021. The biggest variable is confidence and getting people back to high streets. Home delivery sales have more than doubled, but are not sustainable long-term
• We could see permanent shifts in consumer behaviour to online sales. Burger King expect to open more sites, but in different locations.