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Lockdown is blow to hopes of UK recovery

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If anyone was still harbouring hopes that the UK economy was on a steady path to recovery, this weekend’s announcement of a further month of national lockdown will have been a bitter blow.

A month ago, Andy Haldane, the Bank of England’s chief economist, urged people not to sink into a “contagious pessimism” that would do unnecessary damage to the economy. But now, all three of the risks he acknowledged at the time — a worsening of the virus and the consequent restrictions, rising unemployment and a disorderly Brexit — appear to be crystallising.

When the monetary policy committee meets later this week, its new forecasts are likely to show that the summer’s rebound in growth was weaker than the BoE expected in August; that output will at best barely grow in the fourth quarter; and that the scars left on the economy by the pandemic will be deeper and longer-lasting than hoped.

The new stay-at-home order will reinforce the case for the MPC to launch a fresh round of quantitative easing on Thursday — with analysts predicting it could add a further £50bn to £150bn to its target stock of asset purchases. But economists say this will do very little to boost growth at present — although it may ease the government’s issuance of gilts to fund further fiscal stimulus.

“Anything the MPC does now will do little to prevent a renewed recession if virus cases continue to rise and the government ramps up restrictions,” said Ruth Gregory, at the consultancy Capital Economics, while adding that monetary easing would still help keep companies afloat and limit job losses.

“For many firms, national lockdown marks the start of a bleak midwinter,” Carolyn Fairbairn, the outgoing CBI director-general, said in a tweet after the government announced the renewed national closure of hospitality, leisure and non-essential retail businesses.

The timing will be especially punishing for retailers, coming at the height of the crucial pre-Christmas season. Helen Dickinson, chief executive of the British Retail Consortium, said the spring lockdown had cost non-essential retailers £1.6bn a week in lost sales, but that the new closure would cause “untold damage”, since in the run-up to Christmas, “these losses are certain to be much bigger”.

Andrew Goodacre, chief executive of the British Independent Retailers Association, said the timing could not be worse for small shops, since “Christmas shopping was already starting and will now end up being carried out online”.

But while the impact on some sectors will be acute, the overall hit to GDP will not be as severe as in the first national lockdown, with education set to continue, and the government making it clear that manufacturing and construction sites should remain open.

Kristalina Georgieva, the IMF’s managing director, said last week she did not expect a second wave of the virus to lead to the “dramatic drop” in output seen in March, because “most of the negative impact on contact-dependent industries has already happened”, other sectors had adapted to doing everything virtually where possible, and policymakers had taken extraordinary steps to “put a floor under the economy”.

But the IMF’s latest forecasts for the UK — issued after tiered regional measures were introduced, but before the new national lockdown — are still bleak: the fund expects UK output to have shrunk 10.4 per cent over the course of 2020, far worse than the BoE forecast in August, and to remain between 3 and 6 per cent below pre-pandemic levels in the medium term. 

Julian Jessop, former chief economist and head of the Brexit unit at the Institute for Economic Affairs, has been more upbeat than many about the prospects for the UK labour market, but still struggled to find sources of optimism after the new lockdown. With schools open, businesses better prepared and a clearer exit strategy, the economic hit should be less severe than in the spring, he said — but even if it were only a fifth as bad, this would still mean a hit to GDP of at least 5 per cent.

And if the new restrictions on activity are less stringent than those imposed in March, so too is the extent of government support on offer for businesses and workers.

Chancellor Rishi Sunak has been forced to reinstate the UK’s furlough scheme, just days after its expiry, subsidising 80 per cent of wages for any hours that employees do not work (much to the outrage of observers in the north of England, where local leaders’ demands for this increase in generosity were ignored two weeks ago).

He has also announced new grants for businesses that are required to close; provided a further £1.1bn for local authorities to offer one-off support to businesses; and extended mortgage holidays that had been set to expire at the weekend.

However, there is no new help for the self-employed — who will receive a lower level of help than furloughed employees even if they qualify for grants under the government’s Self-Employed Income Support Scheme. Many are not eligible for this scheme and are already reliant on benefits — and some could see these cut later in November, unless the government extends its suspension of the so-called minimum income floor, which limits payments to self-employed people with low earnings.

Nor is there any additional help yet for renters, who are more likely than homeowners to have run up arrears with their landlord, or fallen behind on other debts, since the start of the pandemic.

“The government should have acted decisively much sooner and now families face a grim winter,” said Frances O’Grady, general secretary of the TUC. “Ministers must do more to protect jobs and prevent poverty.”



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Analysis

Can plant-based milk beat conventional dairy?

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Plant-based milk brands are churning up the global dairy business, with a surge in sales, investment, and new products coming to market. The plant derived dairy trade is now worth an estimated $17bn worldwide.

Growing consumer demand has boosted investment. According to data firm Dealroom, venture capital funding across the plant-based dairy and egg sector has skyrocketed, from $64m in 2015 to $1.6bn in 2020.

The world’s biggest food company, Nestle, recently launched its first international plant-based dairy brand, a cow’s milk substitute made from yellow peas. Wonder will come in a variety of flavours, competing with established brands like Oatly oat-based milk. Founded in Sweden in the 1990s, that company is now valued at around $15bn. Demand for alternatives to soya, which once dominated the dairy free market, continues to escalate.

In the west, sales for other plant-based milks, including oat, cashew, coconut, hemp, and other seeds overtook soya back in 2014. Since then, they’ve raced ahead to be worth almost three times as much as soya products, with a combined projected value of more than $5bn in sales by 2022.

Advocates argue that plant-based production emits less greenhouse gas than cattle, making it the way forward to help feed the world and curb global warming. But dairy groups are fighting back with their own sustainability campaigns. And cow’s milk is hard to beat when it comes to naturally occurring nutrients, like protein, vitamins and minerals.

The average 100 millilitre glass of cow’s milk contains three grammes of protein, compared to 2.2 grammes in pea milk and just one gramme in oat-based substitutes.

Dairy producers have also won a legal bid, preventing vegan competitors in the EU from calling their products milk and yoghurt. Despite their growing popularity, plant-based brands are a long way from displacing conventional milk products. Their current $17bn turnover is still a drop in the pail, compared with the traditional cattle-based dairy trade, which is worth an estimated $650bn worldwide.



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'It’s more than sport – every day we are fighting for our rights to be equal’

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French pro basketball player and podcaster Diandra Tchatchouang on her role beyond the court



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Emily Dean on how allyship amplifies the female experience on film

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When I was six years old, I decided to be an artist. When I was 12, I decided to be a filmmaker. And instead of saying no, you can’t do that, or it’s not possible, my mum bought me a video camera.

After several years of working in the industry, I’m working with a female director for the first time. And it’s been such a gratifying experience. Women express leadership in different ways. Maybe you don’t have to be the loudest person in the room. But you can have great ideas.

And the best thing about being mentored by women and being a mentor to women is that make friends with women.

There’s something so powerful the women coming alongside other women, especially in a group setting. Because it means that you can and back each other up. You can support each other’s decisions, and you can amplify each other’s voices.

It’s about seeing yourself in your work. Seeing some part of yourself reflected is really gratifying. It’s also important that we speak up for female characters. I want to see girls and women on screen who have the whole cacophony of experience of what it’s like to be female.

I want to see their flaws. I want to feel their struggles. I want to see their joy. That is so important to making a character feel real. And it took me a little while to settle into myself and realise, if the characters I like to come up with are not your everyday run of the mill characters you see in animation, that’s fine. Because this is who I am.

When you walk into a story room, when you’re working on a film, you have to leave your ego at the door. I think that can be interpreted like keep your ego out of the work. But I’d also say for women who are maybe more shy that leaving your ego at the door means you walk in. And your job is to focus on what’s best for the story and for the film.

The story needs you. The film needs you, and it needs your best ideas. It won’t thrive unless you speak up.



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