Roger Williams suggests that UK field sports have the strength to weather the recently announced recession, and are well placed compared to international rivals.

Rishi Sunak’s initiatives appear to be well targeted for the most part (©Flickr: Number 10)

The UK has suffered a 20.4 per cent decline in output during the second quarter of 2020. Headlines and the media deemed this the worst performance in Europe. However, it is a consequence of not only the measures to address the coronavirus pandemic, but also of the structure of the UK’s economy.

This was characterised by the UK Chancellor, Rishi Sunak, when interviewed on the BBC. He said that food, drink, entertainment and socialising contribute a larger portion of the UK economy than the same services do in other European countries.

When such services are shut down, as a matter of course, the UK suffers a bigger hit to its economy than other nations. It doesn’t indicate mismanagement. Rishi Sunak’s measures to try to sustain and revive the UK economy in light of the importance of these sectors seem well-directed and effective.

Little seems to have been made of UK property sales surging to a ten-year high in July when they reached £37 billion. The market has continued to surge ahead in August, with the same source reporting a 60 per cent increase in sales.

As the lockdown eased, the Chancellor’s move to cut stamp duty by raising the threshold to a £500,000 purchase price opened the floodgates of pent-up demand. The desire to move out of urban environments to the countryside pushed prices to record levels in Devon and Cornwall, and saw London prices fall by two per cent.

Typical refurbishment and new building work commissioned by new house owners should help employment of plumbers, painters, electricians and builders, many probably self-employed. Again, Sunak’s measures should provide relief.

Despite the success of Mr Sunak’s initiatives, media headlines have dented confidence in the UK. It is true that the hospitality sector of the economy is bound to be smaller after the pandemic has passed. Also, it is true that the travel sector is decimated already and will be smaller than it was.

But it seems the Chancellor has taken notice of trends set in motion during the pandemic and helped boost demand where he can. This won’t prevent unemployment increasing as furlough payments end. It won’t stop many hotels and airlines going under or restructuring their employment, leaving many out of work, but it is easing the pain in a sensible fashion. 

However countries recover from the damage inflicted upon their economies by the pandemic or measures to control it, the only certainty is that things will not be the same after as they were before as:

  • Deficits, which for many countries that were shrinking, have mushroomed, and their funding requirements have followed suit. 
  • Companies experienced demand for their products either substantially increasing or decreasing to an extent that their funding needs have vastly increased.  
  • The impact on many individuals has been largely a reduction in income and unemployment, if they were working.
  • Ways of working have changed as online sales have surged; cash payments are refused or discouraged; face-to-face communication is behind a screen and/or mask and trying something on and testing fit increases retailers’ handling costs.

On aggregate, countries have been pushed into recession by measures taken to curtail the virus. Part of this has been funding the support of those locked down and cushioning the effects on demand. It has meant large amounts of grants and subsidised loans and stimulus payments to individuals.

In the USA, $1,200 payments to taxpayers to help stimulate the economy have been paid. The President would like to see a second round of these payments, but is currently being thwarted by Congress. Such largess has not come without a price; it has added to the deficit. 

It has led to comments around the world about the US dollar losing its universal acceptance and possible reserve currency status. No one should say ‘never’, but in the foreseeable future, it is structurally impossible. The US dollar is ubiquitous, and it will take more time than most of us have left in life for another currency to replace it.

The volume of circulating currency, the non-resident holdings and the power of the largest economy in the world will need to be replaced by a country with similar characteristics and economic history.

There simply isn’t one around. Some would say China, but even if its economy grew to be larger than the US, it would need many, many years of foreign trade—not just exports, but imports—to get near. 

For other countries than the US that are spending more than they earn, the impact of falling output or unbridled spending cannot be taken quite so easily. Turkey, for example, certainly has its birds coming home to roost.

A major world sporting gun supplier, Turkey’s inability to understand even
the basic tenets of economic theory has instigated the demise of its currency. The fault lies squarely with President Erdogan’s autocratic control of the country, combined with his stated belief that high interest rates result in high inflation.

Following the president’s 2018 re-election, when he appointed his inexperienced and unqualified son as finance minister, interest rates have been kept low, inflation has soared, infrastructure spending has been unbridled, and credit has expanded substantially and very quickly.  

The result? A 40 per cent decline in the value of the lira on international markets from 21 cents to on the day of Erdogan’s inauguration, to 13 cents today. While this means cheaper holidays in Turkey for those going there from Europe or the US, the coronavirus measures have not allowed Turkey to take full advantage of this for a very important segment of its economy.

Where does Turkey go from here? According to Goldman Sachs, the country’s reserves have almost run dry. Low interest rates and pressure on banks to lend have created a credit boom. Many banks have sourced US dollar loans to fund the lending.

No predictions here except to say that the only likely source of a bailout will be the IMF. Any IMF bailout will impose conditions, and higher interest rates are always be in evidence in such situations. Loans will default. Higher taxes should be expected to help recover funds spent.

In summary, be very, very circumspect when dealing with Turkish suppliers: goods first, payment against documents? Check their credit, as some may be on the brink. Also, be careful about which banks are involved in the transfer of funds and your risk in the transaction.

What Turkey goes through in the next few years if it takes IMF medicine may be an extreme example of what some European economies will have to go through. Those in the EU, particularly Italy, but others too, will need to borrow, restructure, write off loans and deal with lots of business failures and unemployment.

Spain was still suffering from 35 per cent youth unemployment before the pandemic. Germany is owed trillions by Italy, and has its own car industry problems.

These three countries all give home to gun trade suppliers, and the financial condition of these businesses should be reviewed if you are doing business with them. Time spent on reconnaissance is seldom wasted.

In the UK, there is massive inactivity in many sectors of the economy; many furloughed, many unemployed, and many unemployable. The government fears this, and will do all it can to avoid it. If this means putting money into people’s pockets, it is good news for the gun trade as people seek to fill their time.

There may not be a Game Fair this year, and country fairs are like unicorns, but country sports can fulfil two government initiatives: social distancing and getting exercise. Field sports and the gun trade can benefit and cushion itself a little from the effects of the pandemic.

More from Roger Williams


Comments are closed