The Stay-at-Home Recovery Could Outlast the Pandemic: Lionel Laurent

The U.K.’s “Freedom Day” has been declared a damp squib by taxi firm Addison Lee, and it’s hard to disagree. Even with hospitalizations and deaths low — and cases falling — mobility is plateauing and below pre-pandemic levels in some areas. Brits are exercising their freedom to mingle selectively. We are a long way from the celebratory orgies reported by historians after the Black Death. The economic implications will matter for all governments trying to work out where society goes after Covid.

It’s the unevenness of Brits’ movement after an end to Covid curbs, rather than the overall level, that’s glaring. According to Office for National Statistics data public transport usage is only at 84%, despite road traffic being totally back to normal. Retail footfall is only at 75% of standard levels — suffering perhaps from a lack of office workers milling around in their lunchtimes. Credit and debit card spending is still 8% below February 2020 levels. Consumers are still hoarding: The savings ratio is at 20%, nearly three times the pre-pandemic level. Breaking that frugal habit will keep Treasury officials awake at night.

The lack of oomph here is already raising doubts over the narrative of a “Roaring Twenties” recovery in the U.K. and beyond. Recent economic data from the U.K. and U.S. have been disappointing. The last mile of pandemic restrictions is proving the hardest from which to profit.

Some parts of this underwhelming activity may recover in time. If the cause is human psychology, and linked to lingering fear, then sound pandemic management — and the continuing success of vaccination drives — should lift confidence in the end. The same goes for the disruption of self-isolations due to contact tracing — the “pingdemic” — which should fall over time.

But we should also take seriously the idea that something fundamental has shifted in the economy. Lockdowns have become habit-forming — especially the second and third rounds of economic closures in the U.K. and Europe, which showed businesses and consumers increasingly able to adapt to social distancing with smartphones, videoconferencing and e-commerce. For many people, the adjustment was so pleasant that they decided to drop everything to live elsewhere.