The truth is that questions of European financial solidarity will mainly come in the post-crisis period, which I shall now address. 2.2 Initial strategic thinking on the post-crisis environment Beyond the present emergency and consensus, we must start to consider “postcrisis”. It raises some very open questions, some of which are premature. Let me begin, very simply, with what we know and what we do not know:  Page 5 of 8  We know that growth will be strongly negative in 2020, then positive in 2021. However, we do not know the numbers involved: they depend on the peak lockdown period – 1.5% of GDP is lost with every two weeks –, our ability to bounce back afterwards, and the chain of events with regard to public health and the economy in the rest of the world.  We now know that despite our initial hopes, we will not suddenly go from the current phase of general lockdown to a final phase of complete freedom of movement. Between, there will be a phase 2 of relative lockdown, which will gradually be wound down, potentially over a long period of time. However, we do not yet know how: this is where the interaction between the battle for public health and the battle for the economy will have to be optimised, and where public debate will have to bring together doctors and economists. Their opinions may converge more easily than we believe.
If the 15  government succeeds in negotiating a “new, comprehensive, bold and ambitious free trade agreement ” with the EU, and in opening up trade with non-European countries, the UK’s overall degree of openness may not worsen and it could improve. If so, and all else equal, the currency should in time rebound. But this makes longer-term investment in the tradable sector a somewhat tricky decision. Either the currency market is too pessimistic, in which case sterling’s depreciation is likely to be reversed over time. Or it’s not, in which case the costs of exporting will eventually go up. Barring some other source of exchange rate weakness, such as a sharp rise in the household saving rate (which would have its own implications for the economy), the sweet spot is unlikely to last indefinitely. So while investments with shorter-term payoffs make commercial sense, especially for those already running up against capacity constraints, the uncertainties involved in longer-term decisions could temper the usually positive response of business spending to depreciations in the exchange rate. Indeed they’re probably already doing so somewhat. In its latest forecasts the MPC expects this caution to persist. That’s why, in the central projection in the February Inflation Report, growth slows slightly this year, from 2.0% at the end of last year to 1.7% by 2017Q4.