Britain’s remarkable recovery from Covid – and the lesson of Dante’s Paradiso


It is noteworthy that the UK saw a record £25.5bn last year of technology start-up funding from venture capital, more than in Germany and France combined. This has lifted the number of British ‘unicorns’ to 75, mostly in areas such as artificial intelligence, digital tech, biotech, and blockchain. People see what they want to see in Brexit, according to their ideological bias. This infects analysis.

Italy has not done too badly thanks to Mario Draghi’s Bidenesque New Deal spending but the Italian economy probably ended last year 1pc below pre-Covid levels nevertheless. Spain is still almost 5pc lower. Yet the rise in public debt across the Club Med bloc is vertiginous, and remember that these states are sub-sovereign borrowers without a currency and central bank of their own – ie, they cannot unilaterally print their way out of trouble in extremis.

All told, the euro area is unlikely to recoup lost output until early 2022. “I think it is fair to say that eurozone GDP was probably still just short of its pre-pandemic level in the fourth quarter,” said Andrew Kenningham, chief Europe economist at Capital Economics.

Caution is in order. The UK has in a sense pulled forward its recovery and flattered the picture. Rishi Sunak’s ‘super deduction’ cut the effective marginal rate of corporation tax to zero, enticing companies to invest their bloated corporate savings, which reached £100bn during the pandemic, 50pc above normal levels.  

The Bank of England has been running an extremely loose monetary policy with the lowest real rates in the rich world, and perhaps the lowest in peace-time history. It is rocket fuel for overheating. The current account deficit is running at 4pc of GDP.  

But there again, a bad recovery is better than no recovery. As for the sequence of events, one is reminded of Canto XIII in Dante’s Paradiso:

“Nor yet shall people be too confident
In judging, even as he is who doth count

The corn in the field ere it be ripe.

For I have seen all winter long the hawthorne
First show itself dried and sterile,
And then bring forth its flower in the Spring;

And I have seen a ship direct and swift
Run o’er the sea throughout its course entire,
To perish at the harbour’s mouth at last.

For one may rise, and fall the other may.”


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