World stock markets appear to be sanguine regarding economic recovery post the initial shock of Covid-19. Of course, the latter hasn’t gone away and as the experience of Leicester illustrates, the release of lockdown can easily be reversed. Numerous cities around the world have taken similar action as the return to normality, inevitably, provides a rise in the rate of infection. If Bournemouth beach a couple of weeks ago is anything to go by, Leicester won’t be the last to reinstate local quarantine measures.
The Chancellor’s mini-Budget illustrated starkly the burden Coronavirus has inflicted upon government finances. So far, it is approaching £200bn. The fact that borrowing costs are negligible everywhere has enabled him to spend but that might not be a privilege that lasts. At some stage, principal will need to be repaid and that means taxes will rise. Keeping the show on the road when the wheels of a consumption based economy have well and truly fallen off, will be a difficult trick to pull off.
The problems faced by the UK are little different to those affecting just about everywhere else. Can the global economy be jump started within a timescale that prevents withering reductions of economic activity? Only time will tell but our focus remains on the purchase and retention of high calibre enterprises at prices we can live with because as Warren Buffett said many years ago “a great business doesn’t always make a good investment but it’s a good place to start looking for one”.
