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Supporting Economic Recovery: Targeted Interventions or Macro-Economic Stimuli?

By Dr Sergio Pellegrinelli

The Covid-19 pandemic has prompted the UK Government to provide businesses with unprecedented support through the furlough scheme, business loans scheme, business rates relief and deferred payment of VAT receipts.

Given no immediate prospect of an effective cure or vaccine, economic recovery is expected to be slow. There is pressure on the Government to introduce a stimulus package to compensate for missing demand, thus ‘pump priming’ economic recovery.

The risk is that the stimulus will create additional financial burdens without generating the economic growth to pay for it. This whitepaper argues that targeted Government interventions may produce better results and fewer undesirable side effects.

Stimulus measures to supplement the current support to businesses are likely to be predominantly fiscal in nature. With interest rates at historic lows and quantitative easing from the financial recession in 2008/9 still not unwound, the scope for (further) monetary stimulus seems limited – presuming an aversion to negative nominal interest rates and a reluctance to purchase significantly more long term securities.

 

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This is one of four articles written by Sergio surrounding certain issues faced in light of the Covid-19 pandemic, read also: 

Seizing Opportunities: Unconventional Responses for Unprecedented Situations
Dealing with Risks: Shortfalls in Responses
Embrace the Future or Restore the Past? 

 


About the Author

Dr Sergio Pellegrinelli is a visiting fellow at Cranfield School of Management and is an experienced consultant and lecturer specialising in strategy and programme management. Sergio has over 20 years' experience as a management consultant, and his current and recent clients include Atkins, Biffa Waste Services, British Nuclear Group, Ericsson, ING, Lloyds TSB, Oracle Corporation, Quintiles and Royal and Sun Alliance. His consulting work ranges from traditional analytical consulting interventions to tailored management development aimed at embedding new skills and/or effecting change within organisations. Sergio facilitates strategy formulation processes, contributing both ideas and the strategy frameworks, and helps managers to design and undertake strategy implementation programmes, M&A integrations and complex organisational change initiatives.

Tags: leadership, article, economics