As I See It: Terry Murden
Forest fires, floods, plagues of locusts…it’s looking pretty Biblical out there. At the turn of the year I cautiously predicted a year of nil growth, or even a decline in output – some of it deliberate – as the world adjusted to the threat of climate change. It was bound to raise eyebrows among those who have come to expect the global economy to always go on rising or bouncing back. Well, nil growth is now what they’re forecasting in China this quarter with the likelihood that it will fall this year.
And that’s because the coronavirus – something none of us had heard of just a few weeks ago – is spreading faster than an Australian bush fire and having an even more rapid impact than rising temperatures and melting icebergs.
Number crunchers the world over are having to re-adjust their expectations. A new survey from EY Item Club predicting a narrowing of the growth gap between Scotland and the UK looks susceptible to more than the usual margins of error given the extent of the unknowns.
The coronavirus is bringing industries and economists quickly down to earth. Shares in airlines are among the biggest fallers as holidays and business travel plans are cancelled and investors weigh up how much worse it will get.
In the short term the prediction that 2020 will be a boom year for tourism in the UK must now be subject to revision. Prince Harry has urged travellers to consider what damage they may be doing before they head off to popular destinations.
Companies are reporting shortages of supplies. Apple, Aston Martin, Diageo and Microsoft are among those saying sales and profits will take a hit. Supermarket shelves have been cleared by panicking residents in China and Italy. Outgoing Bank of England governor Mark Carney says Britain should prepare itself for an economic growth downgrade.
What a difference from early February when Wall Street was enjoying record highs. The sharp reversal has been painful for investors. On 27 February the Dow Jones index tumbled by almost 1,200 points – the biggest one-day drop in its history, while £152 billion has been wiped from the value of companies in the FTSE100 index this week.
Global stock markets suffered their worst week since the darkest days of the financial crisis 12 years ago.
Does this mean we should all be selling and putting what cash we have left under the mattress? Long-term money managers will advise against panic measures, and urge investors to ride the storm – even one as rough as this. The markets may be down sharply, but have a habit of quickly recovering once the crisis has passed.
Even so, we have to learn some lessons from what Mother Nature is telling us. Behavioural change to tackle the climate crisis is already in evidence, but the virus has presented an even more immediate threat. The chief medical officer in England says travel bans are not the right way to contain it, but this has not stopped governments around the world, from Iran to Australia halting the flow of visitors from China.
The aviation industry is at the brunt of this double whammy of disease and climate change. And it just gets worse. The Court of Appeal has told Heathrow it cannot go ahead with the third runway because the government’s approval did not take account of crucial Paris climate commitments on cutting carbon emissions.
The ruling has far-reaching implications for other infrastructure plans which are how expected to pass the climate change test before getting approved.
It should make us all think about how we move around and whether we really need that weekend in Barcelona or must attend a conference in Madrid. Business groups are bleating about the damaging impact of the Heathrow decision on growth. They should be looking at the bigger picture. There is too much travel, too many people expecting multiple foreign holidays, too many too eager to jump on planes to do business that could be managed remotely.
Unless there is a willingness to do things differently then we’ll go on adding to the problem.