Is Rishi Sunak going to bailout Britain? What the Chancellor should save and what he should let go

As the coronavirus health crisis slowly subsides, economic reality has begun to kick in.

Job losses have started to mount – even before furlough is undone – , GDP figures are terrifying, the debt pile is growing and optimism about a V-shaped recovery has gone.

There’s one topic of conversation that has raised its ugly head in recent weeks. Bailouts. The government taking direct equity stakes in British companies.

Viewed as a last resort in this country, voters may be about to find out what Chancellor Rishi Sunak’s true economic beliefs are.

Since the 1980’s the UK, in reverence to our much richer American cousins, has espoused free market capitalism – allowing companies to go bust on the premise that they had it coming.

Only during the financial crisis ten years ago did the country row back on this mantra, when the banks had to be bailed out after years of badly miscalculating risk.

The question now is if the economy is taken to the brink, what is saved and what let go. Sunak’s CBILS loans and the Bank of England’s CCCF scheme have been a lifeblood but debt will be little use to companies if they can’t service it through revenues.

Every sector has its bailout case.

Aviation, automotive, defence and oil industries will top the bill. They employ expert engineers and technicians, skills that if lost would probably never come back. Wage growth is high, as is productivity.

However some argue even these industries may have had it coming.

Car sales have been on a downward trend around the world for the past decade as the general public seek out smaller, more fuel efficient vehicles, while the oil industry has struggled as investors demand cleaner energy.

At the opposite end of the spectrum retailers and restaurants are near the bottom, despite the millions of people these industries employ.

Already a host of household names have gone and shopping centre landlord Intu has disappeared without much protest. Wages tend to be low in these industries with little prospect for growth.

In the middle are companies that used to owned by the taxpayer and provide vital services like delivering the post, electricity and telecoms networks.

BT was listed in 1984 at 130p, its current share price is 115p. Royal Mail floated at 330p in 2013 and now stands at 175p. Arguably the public markets were never a natural home for these companies and one thing is for sure, Sid is not a millionaire.

Nevertheless the bailouts, when they come, will be a tough sell to the British people for Sunak.

Unlike the Europeans, the UK population is rightly sceptical of governments taking stakes.

RBS has been majority owned by the government for over ten years. The bank is little improved and people who work there say it now resembles the civil service.

Already this crisis the Germans have bailed out Lufthansa in a rescue deal worth €9 billion. The taxpayer now has a 20% stake and two board seats until the end of 2023.

While in Hong Kong the government has taken a 6% holding in Cathay Pacific.

In Europe, bailouts are sold to the electorate as part of a wider scale industrial and economic strategy. They promise that companies which are rescued will be greener and much improved once the government has finished with them.

Maybe it is time for Rishi to pen a large scale UK industrial strategy and for our economy to become a little more European post Brexit.