Transcript: Episode 15
How do we kick-start the economy?
ucl, people, social enterprises, companies, economy, government, crisis, innovate uk, sectors, pandemic, uk, learnt, thinking, firms, big, support, economic activity, savings, university
Wendy Carlin, Celia Caulcott, Vivienne Parry
Vivienne Parry 00:01
Hello and welcome to Coronavirus the whole story, the podcast that brings you the latest news and stories on Coronavirus from the UCL community. I'm Vivienne Perry, a writer, broadcaster, UCL alumna and your host on this very special project, which I'm delighted to say it has been honoured with an award, but it's you our loyal listeners that have made it popular. So consider yourself duly congratulated. Thank you. And you can listen to all of our previous episodes right from our very first one which is all about intensive care on the UCL Minds website.
This week, well, it's all about the economy. I'm joined by an economist and intriguingly a microbiologist to discuss how we might get the economy moving again, as locked down eases. So first up Professor Wendy Carlin, a professor of economics here at UCL and a research fellow of the Centre for Economic Policy Research. Wendy stows macroeconomic and amongst many other things, the economics of change and serves, I think this is terribly grown up, on the expert advisory panel of the UK office for budget responsibility, a big responsibility. My second guest is Dr. Celia Caulcott, who is UCL Vice Provost in innovation and enterprise. This means that she leads on UCL’s innovation and enterprise strategy, which is designed to foster innovation, enterprise and entrepreneurship at UCL. Celia’s got a research background in microbiology, and she's worked in many different sectors from academia, to pharmaceuticals, to government. So, Wendy, can you give us an idea of the economic impact of Coronavirus on the UK apart from, it's big?
Wendy Carlin 01:48
It's big. Yeah. So it's caused an unprecedented decline in economic activity sort of three more than three times as big as the global financial crisis. ISIS bigger than anything, you know if to go back to the 1920s to find this kind of fall in activity. But of course, what's so striking about it is that it has been caused by deliberate government action to stop economic activity in order to get control of the virus. So that makes it a very particular kind of economic contraction or economic interruption.
Vivienne Parry 02:30
We keep hearing about V shaped recoveries, that seems something that's now disappeared into the past. But how long are we talking about when we're talking about impact, I mean, it is impact decades in some senses, but in other senses, it's more short term.
Wendy Carlin 02:49
It's decades. You couldn't just think back to the financial crisis. We'd only just got back to the kind of living standards of 2008, just before COVID struck, so it even that much smaller crisis had a very long overhang. And it looked as though the economy was actually growing more slowly in the longer term than it had in the run up to the financial crisis. So, these things can have very long lived effects. Because this is a different kind of crisis we expected to work out in a different way from the financial crisis. And as far as these letters go, you know, v w. Some people call it a some people like saying a swoosh, like a Nike swoosh. And the best one I've heard the other day was that if you've learnt shorthand, and you've, you've learned the symbol for bank, that's what it looks like. So you can check it out. And what it basically means is that you have a kind of view, and then the the trajectory is fairly flat heading back towards where the economy might have been in the absence of the crisis. So this is suggesting that the sort of really rapid V shape which Andy Haldane of the Bank of England even been talking about, quite recently, I think most observers think is very unlikely.
Vivienne Parry 04:31
And it's been very uneven in impact, hasn’t it? Some sectors are completely devastated. You know, aviation, for example, or hospitality, but others are not. And the issue is that we in the UK are very much a service economy.
Wendy Carlin 04:50
Yeah, so that's exactly right. And to think about what, you know, which sectors have been affected, you know, again, that the answer to the question comes from The virus and it was those you know networks economic networks, where we get gains from trade from interaction that were those involved face to face interactions, they're the ones that had to be shut down. So that's a kind of just a simple way of getting the, the pattern, the sectoral pattern of, of what's been affected. And indeed the UK has has been very badly affected, as you say the UK is is a predominantly service economy. So you think of the creative service, creative sector and so on which plays a part as well as things like aviation, tourism and so on. So all of that has shut down and is having the the what we call a multiplier effects on the economy because people in those sectors who are not working, are most of them are getting some support. But we see everywhere that savings for those who can still save savings has gone up. So a really depressed level of economic activity and, and, and slow rebound even when restrictions have been lifted. And that I think, is a really interesting lesson that we've had from from this crisis, which is that you really have to understand people's behaviour and particularly the role of confidence, so that if people don't feel safe, then even if they're allowed to, for example, go and eat in restaurants, they'll choose not to do so. So this makes it very hard to predict the pace at which those activities come back.
Vivienne Parry 06:57
So the people that
Vivienne Parry 06:59
actually during knocked on have saved quite a lot of money because of probably about a third of the population actually saved money while they were in lockdown. What they're doing with their savings is, is, you know, putting them away for for a rainy day and not going to spend on, you know, going out for a meal for instance.
Wendy Carlin 07:18
Yeah, that's right. And that really highlights the the role of government in a crisis like this. So the government first of all steps in as the insurer of last resort, and provides income to people who who don't who don't have income. So the furlough scheme was a was a good idea as a way of maintaining continuity in relationships between workers and firms during the during this very strange period. So you have to think about what the government can do the government can mobilise savings at times like this And keep economic activity ticking over. So that's sort of in the crisis period. But the other side of that is that mobilisation of savings is that the government debt goes up. And I think sometimes people move rather too swiftly to worrying about the debt. And and not thinking so much about the constructive role. We need the savings to be mobilised in a crisis. And as we think about moving out of the, the immediate phase of the crisis, then again, the big problem is how do we how do we get firms to start investing when confidence is so low, and that's a that's another situation where the government can step in mobilise savings, and not just keep the economy ticking over. But also charter way to hopefully the so called Building back better.
Vivienne Parry 09:05
So the things like if there were VAT off home improvements, for instance, that's the kind of thing that would help people go out and, and spend, and I wonder how hopeful we should be now that the shops are starting to reopen?
Wendy Carlin 09:23
I think it's not enough. So I think the government has to create a really clear, forward looking strategy around very clearly oriented towards net zero netzero carbon. So the great thing we need is certainty about what the rules are going to be out into the future. And that's how lots of us are going to make decisions. So just as your example there about, for example, Home Home installation, retrofitting homes to make them more comfortable and more energy efficient. We need those kind of things to be incentivized, and we need for for all of the actors in the economy firms and households, to be thinking out to start thinking out into the future making plans and helping to get the economy moving in that direction. So we need really firm intervention by the government through through incentives of the kind that you're suggesting through regulation, through being really clear about the strategy going forward.
Vivienne Parry 10:32
One of the things that we're seeing with Coronavirus is the seismic nature of change, so things that would have taken years to to affect have taken weeks. I mean, whether it's, you know, online consultations for the NHS, and I wondered just to be positive about the future a moment. You know, which sectors you thought would be benefited by Coronavirus, and I don't just mean it the likes of Zoom and and home delivery.
Wendy Carlin 11:04
No, I think you're absolutely right. I think that it's been a period of accelerated learning. And that can translate into productivity growth of the kind that you've suggested. And it creates all kinds of new opportunities. So it's a really, if the sort of confidence factor can be, can be instilled. If firms, entrepreneurs, potential entrepreneurs can kind of get over their timidity, then what's been revealed by the crisis and the changes in behaviour that we've seen, opens up all kinds of opportunities for new businesses, for new for new activities. So I think it can be very positive. You know, I think we've learnt lots of really interesting things about about not just about how to how to do our jobs, but about what people are like and about who the essential workers are no all sorts of elements of a more positive view of how the economy can work better. So I think there's lots of reasons for optimism but it won't happen just by itself.
Vivienne Parry 12:09
Now, you mentioned entrepreneurship. So let me now turn to Celia to get your perspective on the role of UCL in the UK’s economic recovery. How can UCL and UCL Research Help at the frontline to mobilise the economy?
Celia Caulcott 12:24
I think within there's lots of ways in which we can. I've been listening to Wendy with real interest in thinking about some of the things within the economy, one of the things that UCL can do is to actually understand some of the consequences of what's been this incredibly dramatic change to how we live and work and how we will not return to that. So one of the things we've been doing is looking at what's happening in different sectors and how you sell research can really engage with this. Wendy, you mentioned, for example, the creative industries. And there's a whole piece there about the loss of life performance, which interestingly is something universities have lost to some extent through the loss of lecturing at least for now. What we can do is to figure out what we will do what research we can do to it Stanford that loss of lightness means. So there are interesting, exciting research that we can do. But there's a very important piece that UCL and many universities around the UK are actually involved in, which is the creation of companies, and the supporting of the growth of companies. We do that partly because there are fantastic ideas coming out of universities, partly because there are fantastic people who have those ideas, or simply want the opportunity to create enterprises. And actually, that's that role of universities and the creation of companies and then supporting small companies, whether they've come out of the university or not, is a genuinely important part of what a university like UCL does. We have in UCL and across the sector, the most amazingly entrepreneurial students. We have amazing technologies that are going into new companies or being licenced into existing companies. All of these contribute in a generic under specific way to the economy and its reflation.
Vivienne Parry 14:09
And that's been a real feature of UCL over the years. I remember because I once upon a time was on the UCL council when entrepreneurship started to be part of the options that undergraduates and postgraduates could turn to scoffing about it, you know, why would people want to do that, but actually, entrepreneurship has really taken off like a train, hasn't it?
Celia Caulcott 14:34
It has very much. And we with a university, we've looked at this from the perspective of encouraging anybody and everybody to develop an entrepreneurial mindset. And then we've been really focusing on really looking at the quality of some of those incredibly exciting ideas. And these are leading to within the profession we'd call startups, companies University creating that have come from this Students generally not coming out of UCL supported technologies. And use has got a collection of companies that are coming out of our student body and our student programmes example such as protecting vulnerable people managing their finances. Virtual museum experiences with museum eco social enterprises, for example, helping people who, from less advantaged backgrounds understanding what university is about and research in particular, but really importantly, alongside that entrepreneurship programme that develops the entrepreneurial mindset in our students, UCL seeing a string of outstanding technologies coming out of our research body, our academics are making their way into existing companies or new spin out companies, particularly in the area which is called Advanced therapeutics. And some of these spin out companies are amazingly successful. And it takes us to a very interesting piece about the consequences of COVID-19 pandemic and actually about Being a microbiologist as well, in that van therapeutics are being absorbed into the pharmaceutical industry, which is a sector that will be transformed and challenged by the pandemic, I think we're going to see some really interesting pivots within the sector as it absorbs the new technologies that have been coming out of university like UCL, and going into companies such as orchard and autists, which are both spinouts from UCL, and also going into companies like bio Marin, GSK, and others. So something we sit UCL is that we've got this approach to the entrepreneurial mindset that we've encouraged to our student programme and it's leading to a strong flow of startups. That whole approach is being reflected in our staff, and the flow of spin outs and other commercialization activities taking technologies into real world application.
Vivienne Parry 16:32
I'd mentioned DeepMind at this point, which of course came from UCL
Celia Caulcott 16:36
DeepMind is a very good example of what is effectively a startup that has a very clear link to UCL not bringing new technologies but it's one of our recognised with great successes, but then you may have spotted the advertising of the rower sessions not not the seniors at the moment, of course, for Bio Bean the coffee loss company, which is recycling coffee grounds. We've got a an into coffee logs for burning on your wood burning several your coffee ground burning stuff. And that's been going very well. We've got some more, a company called Kalgera genuinely looking at how to help people who are vulnerable and their finances. You raised an interesting question about where would there be growth in economy or growth sectors that will benefit and very interesting discussion about food. We could have a really important discussion about government regulation, driving the green economy, is incredibly important. But I think one of the areas that we still have a vote in which is FinTech is going to get an interesting boost around online security.
Vivienne Parry 17:53
So just remind people what we mean by FinTech,
Celia Caulcott 17:56
basically companies that are looking at technologies that will manage elements of our finances, in a whole host of different ways. And there's a great body of these companies and the the interest that everybody has in them comes from the opportunities to speed up the way we do financial transactions. Suppose we look at PayPal as being a FinTech company. There is a very interesting small ones, including ones coming out of UCL developed by the student, our students, which are thinking about how we do manage our finances, how we shop online or shop remotely and safe and secure ways. There's lots of thinking going on and new startups coming through from UCL mushy pay, that enables instal purchasing using offer As a Mobile Checkout, no terminal needed is a good example culture I've already referred to is another good example. And there are others as well.
Vivienne Parry 18:47
But one of the things that is very, very difficult and we we saw, Innovate UK have to come up with some funding specially for this but a lot of SMEs have really gotten to trouble because of the economic downturn. So companies that might be indeed very successful. So how can UCL help those companies to weather this particular when I was about this storm, but it's more like a hurricane, isn't it?
Celia Caulcott 19:15
It's a hurricane that's going to go on for a very long time. I'm with Wendy on the duration, it will be a long time. One of the key ways in which UCL is engaged with this is that we have a specialist team that provides support. Last year it provided support to about 180, SMEs, London based SMEs that have been brought to us by innovate UK innovate UK Part of the government's funding and investment in research and innovation in the UK, innovate UK looks at these companies and it looks for companies that are able to scale new companies that are genuinely growing. And UCL innovation enterprise has a specialist team that supports these companies with advice, guidance, business mentoring, help finding grants, we don't give them money. Crucially, we also bring them to an understanding of some of the some of the technologies and opportunities from UCL. So this specialist team is helping this company develop a relationship with some of the UCL academics, and we help innovate UK in various ways. Well, for example, we were helping innovate UK with trade missions, those obviously on hold, but there's lots of exploration about how you do a virtual trade mission going on, which will be very interesting. We've also got some interesting stats coming through because of the calls we've taken in the last few weeks from the cohort. company's innovate UK is passed on to us, we found about half of the companies are in distress, fundamentally, with a cash flow problem. Occasionally some of the companies in distress have been caught in the we were about to go and raise money problem, which has just stuck in the system at the moment. But about half the companies we're talking to consider an opportunity. they've spotted something exciting that they can do it might mean a pivot, but it might not. But whatever it is, it's something exciting, which will undoubtedly help reflate the economy. And that in turn is really exciting for us. So we're offering help on one side and guidance on the other. And in this context, this team and UCL itself is regarded by innovate UK as being a really key player, absolutely key player in this area of business support for small and scaling companies. We lead for them for London.
Vivienne Parry 21:21
One final thing I wanted to ask you, Celia was about the global citizenship programme, because this is very much about social enterprises. And I think we're seeing a shift in our thinking about business. And if you talk to younger people, social enterprises are far more attractive to them than big business. And I'm maybe also because Wendy's comment on this, but what do you think is the role for social enterprises at the moment?
Celia Caulcott 21:57
I think social enterprises are essential. We see quite a few being created to our entrepreneurship programmes in society UK is a very good example. But I think social enterprise is so important that I've worked with UCL b UCL b as you sales technology, translation and commercialization company, the company which protects our IP and licences it into existing companies as well. is creating new UCL spinouts, where there isn't an absorptive capacity to take on our technologies. I've worked for UCL B, I'm the chief executive to make sure that we create a fund for social enterprises. Absolutely see sessions, prizes core. I think its core in several ways. It's core, actually, the concept of social enterprise is core to the DNA of UCL. That's really important, why we believe it's core to how we're going to see the changes in society. One of the things we've seen in the pandemic and lockdown is people have set out to support each other. We've had to actually and it's been really constructive. Social Enterprise is surely going to be one of the tools by which young people and the whole of society, develop enterprises and develop ideas. That's certainly where I'm coming from.
Vivienne Parry 23:12
Wendy, is that your view as well? Do you think we'll see more social enterprises? And where will big business go after this? I mean, what's, what's it, its route forward?
Wendy Carlin 23:26
Well, I think that exactly what Celia said that we've really learnt something what something's really come to the fore in in this crisis. And that's the we can't really think about government policy as just sitting along one dimensional access between government at one side and market that the other side and in other words that people have really do have different motivations than material incentives which is at the market end or company clients, which is the government end. And people are motivated by other things like altruism by duty, as we've seen by reciprocity, also, of course, by identity. And once we recognise these much, this much rich set of motivations, then we realise that we have to think of policy. The way I think of it is in a sort of inverted triangle and we've got we've got this this third pole which is which which we can think of as something like civil society, and, and where social enterprise fits is is really plumb in in the middle there because it's making use of, of some material incentives and some of competition and so on at the market, but also government regulations and opportunities provided by government, but it's also mobilising these, these civic motivations. And they are very present among our students. And I think that they are much more widely present and that we can kind of see coming out of this crisis. Maybe this is we're being very optimistic now. But maybe the emergence of of a new economic policy paradigm to replace neo liberalism. And I think that that really should give us a sense of hope, moving forward, and that it places the university very much at the centre of mobilising, mobilising, if you like, among, among our students, these civic motivations.
Vivienne Parry 25:44
It is an extraordinary moment of pivot and change. I mean, it's, I see so many opportunities. It's also terrible hardship, but there are so many opportunities to change the way that Society and the economy functions. And I want to ask each of you if briefly, you could say, how do you think we can build an economy that's more sustainable and inclusive? Because Wendy I, I guess that actually, there'll be a great temptation when we see this kind of bloodbath of jobs to actually think that you you can't you have to go for job creation, and not the things that might make society more helpful.
Wendy Carlin 26:36
Well, I think we, you know, we definitely mean job creation. But the question is, what kind of jobs and one of the great again, a great insight from from the pandemic has been this, this notion of who are the essential workers, what do we mean by essential work? And I think that the whole nature of work is something that the We do now have a chance to think think about and how do we value the kinds of jobs that have been defined in that way, you know, you can see them on a government website who the essential workers are. And many of them are very poorly paid, paid without career structures. And, again, I think that's a that's a role for the university in helping to think about the trajectory to a fairer and more sustainable economy in which that kind of work is really valued.
Vivienne Parry 27:34
So briefly from you Celia, what would you do, how would you build an economy that's more sustainable, inclusive? I mean, you've mentioned social enterprise or anything else?
Celia Caulcott 27:44
Well, I think I would absolutely recognise what Wendy said that we've seen inequality that has said that people are essential, but we don't recognise or reward that. So as we move forwards, it's trying to bring a balance between what society needs and what it desires, which are not the same things. I think in that context, we've also got to think really clearly about the things we've learned about the environment from COVID-19. I would absolutely, and this is a role for government. Look to how government thinks about regulatory leavers is that it can pull to encourage and redress some of these imbalances. But if we don't learn the lessons of the inequalities that have been exposed in the last few months, well, well, I think learning the lessons is the key to building the economy forward. So I will Do
Vivienne Parry 28:43
I often at the end of these podcasts, I very generously hand out a magic wand and I'm going to give you my magic wand, and I want you to think of the one change that you think That you would make with your magic wand to move our economy forward. Wendy, how about you? What would you do given your magic wand?
Wendy Carlin 29:10
My magic wand? Well, I think you'll think it's a strange thing. But I think if we could use the magic wand to enable people to keep well clear of an obsession with government debt, and to view the what we need now as government, mobilising savings, and helping the economy to pivot towards long run strategic goals centred on fairness and a netzero transition, then we would achieve a lot
Vivienne Parry 29:41
so for Wendy sort of ear defenders from those saying debts really bad thing
How about you Celia?
Celia Caulcott 29:51
Well, I think I would use my magic wand to address the way in which we've allowed work become the defining achievement that people tend to have, which is something pandemic has exposed. But I might say I'm cheating. And this might be more exciting - to use it to try and address the way in which we have not thought through the relationship between Work Health, diet and living circumstances.
Vivienne Parry 30:22
That is going to be a very magic ones to do that. But it's very powerful. I have a very powerful magic wand. Fascinating from both of you that such a good discussion there could be so so much more, but I'm afraid we've come to the end of our time. So you've been listening to Coronavirus The Whole Story. This episode was presented by myself Vivian Perry, produced by UCL with support from the UCL Health of the Public and UCL Grand Challenges and edited by the splendid Cerys Bradley, our guests today, and thank you to both of you were Professor Wendy Carlos And Dr. Celia Caulcott. If you'd like to hear more of these podcasts, of course you would. From UCL Minds. Subscribe wherever you download your podcasts or visit ucl.ac.uk forward slash Coronavirus. And whilst you're there, fill out our survey. This podcast is brought to you by UCL Minds, bringing together UCL knowledge, insights and expertise through events, digital content and activities open to everyone. Hope to be with you again soon. Bye for now.
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