Opinion: The bleak mid-winter

As false dawns go, the summer of 2020 will take some beating. Coronavirus cases stabilised, economic output improved beyond expectations, some people even managed to get a summer holiday in. But as the clocks go back and the UK is plunged into darkness, the realities of the public health catastrophe have resurfaced. Richard Dawson looks ahead to a tough winter 

There’s something unsettling about daylight savings. Turning back the clocks has a kind of abruptness to it, one where we are robbed of a whole hour of daylight and suddenly the wind feels colder, and the sun seems further away.

While we might relish that extra hour in bed on Sunday morning, the overwhelming feeling is that winter has arrived.

And so it is with the coronavirus pandemic. After a brief reprieve over the summer months from the realities of the public health catastrophe, October has brought us crashing back down to earth.

The number of infections is ten times what it was in September, large parts of the country are in local lockdowns of varying severity and the economic recovery looks to be running out of steam.

But the worst thing is the dread of what’s to come.

When the clocks go back, we feel short-changed to see the night arriving before we have finished work. But in the back of our minds, we know that by Christmas, it’ll be dark at 3.30pm.

The same goes for the coronavirus crisis.

On the public health side, we feel frustrated that, after months of following the rules and not seeing family and friends, the pandemic is getting out of control again.

But we know that things could still get a lot worse, with images of packed out critical care units and the morbid Downing Street announcements that followed back in April still fresh in our minds.

For businesses, it must be frustrating to learn that, after using up all cash reserves and taking out loans to continue operations, the economic recovery appears to be stalling.

For workers who have taken on extra responsibilities and pay cuts, it must be agonising to learn that the job you’ve expended all your energies trying to protect may yet disappear.

Alas, this is the situation we find ourselves in. To borrow another phrase from the daylight savings metaphor, could it be that the night is darkest just before the dawn?

Is winter 2020/21 the final trial we have to face before vaccines and medical treatments for COVID-19 come on stream next year, allowing economies to shake off their chains and recover properly?

Recent data on the current trajectory of the UK economy seems to make it so.

Over the summer months, UK output recovered faster than expected, clawing back a good proportion of the GDP losses sustained in the spring.

However, COVID-19’s second wave has the potential not only to disrupt the return to growth, but to see this become a double-dip recession where output could actually fall again over the winter.

The latest UK Composite Output Index for October confirms that growth is already slowing. A reading of 52.9 was the lowest in fourth months, down from a robust 56.5 in September.

The slowdown was particularly pronounced in the services sector, where tighter restrictions for the hospitality sector and the impact of local lockdowns on consumer spending were felt.

Chris Williamson, chief business economist at IHS Markit, which compiles the index each month, says that the October data was the weakest since the recovery from the first wave of coronavirus began.

He explains: “The slower growth of output, the renewed fall in demand and further deterioration in the labour market suggest the economy started the fourth quarter on a weakened footing.

“While the fourth quarter still looks likely to see the economy expand, the rate of growth looks to have slowed sharply and the risk of a renewed downturn has risen.”

This downside sentiment is reflected in the financial markets this week, where the FTSE100 hit a six-month low on Wednesday (October 28).

The UK’s top index is still 25 per cent lower than it was before the pandemic.

European indices also look increasingly volatile, as countries across the continent plan new coronavirus restrictions, which could push their economies back into recession.

The outlook on Wall Street is similarly troubling, as investors in the world’s largest markets grappled with sharp rises in coronavirus case numbers and the uncertainty that typically rears its head around election time.

Wall Street’s fear gauge has risen to its highest level in nearly two months.

When the economic implications of COVID-19 were first muted in the spring, few forecasters were even prepared to entertain what the damage of a second wave of infections would be, given how bad the first had been.

Now that work is accelerating at pace, with the Office for Budget Responsibility (OBR) preparing to publish fresh estimates for the economy and the public finances next month.

If the recession does indeed take a second dip, equivalent to a W-shaped recovery, then while it will not be as bad as the first contraction, it will be starting from a much lower base.

Downside risks hang over the economy like heavy clouds on these dark October days.

But it’s important to remember that the sun will come out again – it always does.