The economics of a toilet roll shortage

Written by Katie Stanton, Senior Associate

Edited by David Gaffney, Partner

Good morning, As Covid-19 eddies slowly through our towns and cities, terrorising the fragile and troubling the rest, how will it touch those it doesn’t kill? Aside from the obvious – being unwell, knowing someone who is, maybe bagging a couple of weeks off work – the economic implications will be the hardest to swallow for most of the population. Given today is the anniversary of the publication of Adam Smith’s The Wealth of Nations, I wonder what he would he have thought of the coronavirus: opportunity, threat or both? This is my first biggie. I am too young to really remember Sars or Mers. I do remember some animal-based flus, although I don’t recall having any particular cognisance or feeling, other than a distinct awareness that farm animals were being burned, or something. I wasn’t particularly fussed about coronavirus either. That is until our office provider started prescribing handwashing technique by tacking an illustrated play-by-play to the bathroom wall featuring some seriously smug little cartoon know-it-alls, as if it’s something I’ve yet to master. Then yesterday the virus really came a-knocking when we were in desperate want of toilet roll. “No problemo,” I scoffed, “I’ll pop to the shops.” Two hours and much scouring later, I returned cap in hand, red in face, kitchen roll in bag as a wretched substitute. This tells us that people are panicking. It also tells us that they are really quite stupid (see: women brawling in Woolworths). If there wasn’t a shortage of toilet roll before, there certainly is now. So, is panic buying good for the economy? On the one hand, there has been a spike in revenue for supermarkets, with Costco reporting a 13.8% increase on February sales compared to the previous year. This has been reflected in share prices, as investors seek a safe place to weather the stock market storm. Adam Smith was in favour of reduced regulation, arguing that markets should have the flexibility and freedom to withstand natural economic peaks and troughs. Panic buying then is just another opportunity for the market to adapt. On t’other, the global markets are down significantly, supply chains are straining under the pressure, and companies have been forced to dig closer to home for their manufacturing pipeline. Smith was an advocate of a global economy so, on the face of it, reduced freedom to move goods and people would be a real threat to his model. But not if we’re optimistic. Perhaps the coronavirus is an opportunity to rethink globalisation; it’s the incentive that companies need to embrace technology rather than rely on cheap labour. All of a sudden remote working, 3D printing and robotics are much more attractive, markets adapt to our changing world, and we become more resilient as a side effect. I think this optimism is right up Smith’s street, I just hope it materialises without unintended consequences. For now, panic buy to your heart’s content – but prepare to be caught short on the toilet roll.


The prime minister, Boris Johnson, will chair an emergency Cobra meeting later to decide whether to bring in measures to delay the spread of coronavirus in the UK. The meeting is expected to consider whether “social distancing” measures should now be introduced, including banning big events, closing schools and encouraging home working. Alex Salmond, Scotland’s former first minister, will today face 14 charges including attempted rape and sexual and indecent assault, as his trial begins in Edinburgh. Salmond is accused of assaulting 10 women over an eight-year period but has said he is innocent of all charges. Trevor Phillips, the former head of Britain’s equalities watchdog, has been suspended from the Labour party over allegations of Islamophobia. A pioneering anti-racism campaigner, Phillips now faces expulsion from the party for expressing concerns about Pakistani Muslim men sexually abusing children in northern towns such as Rotherham, and the failure by some Muslims to wear poppies for Remembrance Sunday. (£)

Business and economy

Oil prices have crashed in Asia this morning, in what analysts are calling the start of a price war. The slump of around 30% - to four-year lows and the biggest one-day drop since the 1991 Gulf war – comes after top exporter Saudi Arabia slashed its oil prices over the weekend, having failed to convince Russia to back sharp production cuts on Friday. In Wednesday’s budget, new chancellor Rishi Sunak will announce a £1bn deal to end poor phone reception and sluggish broadband in rural areas within five years. More than 280,000 properties and 10,000 miles of roads are expected to benefit from better phone signal, with the biggest improvements likely to be felt in Scotland, Northern Ireland and Wales. The chancellor has also been told to relieve the burden of business rates on the retail sector because it is having a “hidden human cost” in the most economically vulnerable communities. Steve Murrells, chief executive of the Co-op, told Rishi Sunak ahead of Wednesday’s budget that towns with the highest number of vacant shops also have the lowest “community wellbeing” scores. (£)

Columns of note

In yesterday’s Sunday Times, Caroline Criado Perez focuses on why women are 17% more likely to die and 47% more likely to be seriously injured in a car crash. She reminds us that nearly all of the mannequins used for regulated safety tests on vehicles are based on the body measurements of an average American male from the mid-1970s. Under EU rules, a female dummy has to be used in just one test, and only in the passenger seat. (£) In City AM, Andrew Boff argues that the government’s oft-touted ‘levelling up’ needs to happen within London too, considering the clear disparity in transport links north and south of the river. In fact, there are more tube stations outside of the city in north London than there are in all the south London boroughs combined. The pressure is now on for mayor Sadiq Khan to reduce the vast transport deficit and start prioritising equality, mobility and opportunity across the city.

Source: New Yorker


The week ahead

The coronavirus will cast a cloud over the busy week ahead. On Wednesday, UK chancellor Rishi Sunak is expected to introduce measures to free up funding to tackle the spread of the virus, as he announces the UK budget. This is the first big financial statement of Boris Johnson’s government, which is seeking to implement large scale stimulus and introduce a new set of fiscal rules. The following day, the European Central Bank will meet to address the increasing pressure they face to take action after the US Federal Reserve cut interest rates last week in the face of the coronavirus. In the US, the race to lead the Democratic party into the presidential election against Donald Trump moves on to the next wave of primaries on Tuesday. Joe Biden and Bernie Sanders will battle it out for Michigan, Washington, Missouri, Mississippi and Idaho, as well as caucuses in North Dakota. Meanwhile, it will be a relatively quiet week for earnings, though UK investors will be keen to see how Prudential and M&G have fared since their split last year. Investors will also have their eyes on China’s inflation data, out on Tuesday, which is expected to give the latest indication of the state of China’s economy.

What's happening today?

Finals Clarkson Foresight Solar Network Intl Phoenix Group Holdings

Source: FTSE 100, Financial Times

Did you know?

A bed bug infestation in a hotel room costs, on average, £4891.

Parliamentary highlights

House of Commons Oral questions Work and pensions (including topical questions) Legislation Birmingham Commonwealth Games Bill [Lords]: Second Reading General debate The Commonwealth in 2020 Adjournment Improving rainwater attenuation and reservoirs to prevent flooding – Matt Western House of Lords Oral questions Addressing the gender pay gap – Baroness Jenkin of Kennington Introduction of a Domestic Abuse Bill – Baroness Sanderson of Welton Impact of Sport England’s “This Girl Can” campaign on activity levels of females of all ages – Baroness Sater Ensuring the government will have “the most ambitious environmental programme of any country on Earth”, as stated in the 2019 Conservative Party Manifesto, in time for COP26 – Baroness Jones of Moulsecoomb Legislation Fisheries Bill [HL] – Committee stage (day 3) – Lord Gardiner of Kimble Motion Agreement establishing an Association between the United Kingdom of Great Britain and Northern Ireland and the Republic of Morocco – Motion to regret – Lord Stevenson of Balmacara.