Our Economy: The vaccine, Brexit and the new multifunctional normal

The long-awaited vaccine was approved in the UK on December 2nd, ahead of both the US and the EU, becoming the first nation in the west to allow for mass administration of the Pfizer/BioNTech vaccine. With the quick development, we have to consider what the effects would be on our economy, what a post-COVID future holds and how Brexit would have a compounding effect on this.


Sustainability


The economy seems to be approaching a turning point as a quick recovery of markets and a major boost is expected. Although the idea of post-COVID brings hope of ‘going back to normal’, what does this mean in practice and what we can do in order to rebuild our economy better than before?


What arose with the rebuilding of the economy was the topic of sustainability and how we can improve the economy for the greater good. The focus of the government, corporations and even households has arguably turned away from the longer-term implications of climate change, governance, financial stability to the immediate health need and implications the virus has presented. The opportunity that the post-COVID economy presents provides policymakers, organisations and humanity with an opportunity to reflect on the inefficiencies within the economy prior to COVID and to thus move towards long-term environmental solutions.

With regards to the supply chain and trade industry, there is a need to further implement technology in order to make processes more fluid. One of the potential solutions here would be the use of blockchain, a system that allows for easy access by a private network within the chain, and provides real-time updates, allowing for better transparency.


Another aspect to improve in this sector is to avoid single-source suppliers to diversify the risk of an over-reliance on specific manufacturers and countries and mitigate overexposure. At the outset of the COVID outbreak, it became much harder to acquire goods and materials from countries specifically within Asia, due to strict regulations.


South-East Asia, namely Thailand, in particular, accounts for 93-97% of the world’s rubber production, with the cultivation of raw material amounting to 4.85 million metric tons, as of 2019. This is due to the unique combination of the climate that supports the growth of crops and the infrastructure of the area. This pandemic has highlighted the concentration of both raw material producers and manufacturers in this region of these types of products, raising the concern that it may be time for other countries to source materials and produce their own products domestically. This in turn should smooth out long term output across the globe and help to mitigate against any future event where PPE products are so highly demanded and consumed.


The Economy


With regards to the better outlook for the vaccine, the OECD stated in their recent Economic Outlook;


"The recovery would be stronger if vaccines are rolled out fast, boosting confidence and lowering uncertainty,"

Although the UK plans to have the vaccine distributed throughout the country by April 2021, the recovery may need more than this effort alone. As an effect of COVID, the small scale hospitality and retail businesses, in particular, have taken a hard hit, taking in more debt to stay afloat. This has also impacted the employment sector quite heavily, with the number of redundancies increasing to 181,000 from July to September alone as the furlough scheme had ended.


In particular, the UK economy would be expected to face one of the deepest economic slumps, with The possibility of a no-deal Brexit would mean that trade between the UK and the EU would be subjected to higher tariffs and trade, most likely under World Trade Organisation standards.


Brexit


Whether this quick acquisition and approval of the vaccine was due to Brexit has been a point of debate. In an interview on 2nd December 2020, the Health Secretary, Matt Hancock, asserted that the reason for this was due to Brexit;


“Because of Brexit we’ve been able to make a decision [to approve the Pfizer vaccine] based on the UK regulator, a world class regulator, and not go at the pace of the Europeans who are moving a little bit more slowly. We do all the same safety checks and the same processes, but we’ve been able to speed up how they’re done because of Brexit.”

Although we did acquire the vaccine quicker than EU states, with Germany administering it nationwide in January, the claim that the decision was because of Brexit was quickly rebutted by regulators. Looking at EU treaties in more depth, it seems that approval and delivery of the vaccine were not due to Brexit at all.


The Joint Procurement Scheme was created by the EU with the intent of improving the states’ access and security to the supply of the vaccine. The role of the EU here would only be supporting and supplementing the states’ in doing so, as they do not possess the means to be enforcing this scheme onto the states. With this in mind, it would not have stopped the UK from procuring their own supply of the vaccine. However, with the threat of a no-deal Brexit, this would bring about a concern of how a steady supply of the vaccine would remain and the logistics in delivering them. James Cleverly, the Minister of State, had previously stated that he had;


‘No doubt that the EU would help facilitate their travel, we've got our own independent transportation plans to ensure that vaccine supply’

This was not further confirmed by the EU, however, the UK plans to have the vaccines flown-in in the case where the EU would not assist, and in other cases by sea through the use of direct ferries.


Ministers state that they do not expect congestion to be an issue with the delivery of the vaccines and that they would need special transportation, due to their requirement of the Pfizer vaccine, as an example, to be stored and distributed at minus 70 degrees Celsius.


OCI’s View

“OCI is supporting businesses globally, in the end-to-end procurement of personal protective equipment. The PPE that is being deployed is clearly designed to enable individuals within the economy to continue to operate and contribute in a safe manner across a range of contexts and sectors.
In turn, this should enable, for example, those in the labour force and key workers to continue to operate as much as possible, whilst controlling the virus. Consequently, the UK economy will continue to have some level of activity and support wider economic performance.
Although the vaccination program is designed to be the long term solution, OCI expects to see a sustained demand for PPE products at least into the medium-term future and we will continue to support our clients in the procurement of these products.”

Oliver Chapman, CEO.