Tree options

After yet another disrupted year with Covid on the rampage once again many people are determined to celebrate this Christmas in a bid to inject some normality into their lives, if only for a few days. And who can blame them? Spare a thought for the hospitality sector, however, which depends heavily on the Christmas party season to generate a large proportion of its annual takings but which has suffered a rash of cancelled bookings and a general collapse in activity. Spare a thought, too, for those working over a period when most people are taking a well-earned break, notably those in the medical profession.

The history of the Christmas tree

One of the most common sights at Christmas are decorated trees which brighten up the gloom at a time of year when most European cities struggle to get more than 8 hours of daylight per day, with Stockholm and Reykjavik managing just 6 and 4 hours respectively. Although decorated trees today symbolise Christmas, they in fact predate Christianity. In Ancient Rome, trees were decorated with small pieces of metal during Saturnalia, the winter festival honouring Saturn, who among other things was the god of agriculture. It has been speculated that the early Christian church adopted 25 December as the celebration of Christ’s birthday in order to tie it to a festival that was already known and accepted by wider society.

Whatever the ancient origins, the concept of an evergreen tree symbolising life in the middle of winter became a well-established European tradition in the centuries that followed, with the modern idea of a Christmas tree originating in the Alsace region on the Franco-German border in the sixteenth century. Tinsel with which to decorate trees was invented in Germany in 1610 (although France became the world’s leading producer by the start of twentieth century). Trees started to catch on in the English-speaking world following the publication in 1846 of a picture in the Illustrated London News showing Queen Victoria, her German husband Prince Albert and their children around a Christmas Tree. In 1850, Charles Dickens’ short story A Christmas Tree described it as “that pretty German toy.” At a time when the UK has a rather convoluted relationship with the EU, it is ironic that many of the trappings of a traditional English/American Christmas in fact originate from Germany. The Germans were ahead of the game once more with the invention of the artificial tree in the 1880s in order to alleviate pressure on natural resources.

Demand has since continued to grow and no self-respecting European or North American head of state’s residence would be seen without a sumptuously decorated Christmas tree. In the United States alone, around 35 million natural trees are now sold each year; the corresponding figure for Europe is around 50 million of which the UK accounts for 8 million. Statistics suggest that two-thirds of UK households opt for an artificial tree with roughly 40% of US households doing the same.

The economics are interesting too

The economics of tree production are particularly fascinating. It takes between six and ten years to produce a natural tree around 6 feet (180cm) tall, so the tree standing in your living room today was probably planted no later than 2015. Producers therefore have to gauge the market up to ten years in advance and also cope with climatic effects which can have a significant impact on the crop. 

In terms of market trends, one of the big issues that tree farmers face is to judge the balance of demand between real and artificial trees. A decade ago artificial trees made up just 10% of the number of trees sold annually in the US – that share has since quadrupled – although in fact the number of live trees sold has remained static whilst the growth in the overall market has been driven by a surge in artificial tree sales. Another factor to look out for are changes in demand for particular variants of tree. In the 1990s, UK demand for Nordmann firs suddenly surged due to the fact that this particular variant is less prone to shedding its needles than the previously dominant Norway spruce. This was a particular problem for growers who were banking on the market remaining unchanged on a six-year horizon. However, those who spent weeks and months after Christmas looking out for pine needles trodden into the carpet now give silent thanks for the introduction of the Nordmann.

As with any agricultural product, unexpected climatic and meteorological events are the things that all growers must beware. Farmers in Oregon, the main production centre in the US, suffered a heatwave this summer which killed off a lot of seedlings in the early stages of development. Fortunately this has not done too much damage to the tree market this year since demand was met from inventory, but a shortfall could occur in 8-10 years’ time if farmers cannot make up for the hit to 2021 production levels. The result has been a modest rise in Christmas tree inflation, according to industry sources, adding to the upward pressure on prices which saw US CPI inflation hit 6.8% last month. Artificial tree producers have also had their problems this year. The bulk of production takes place in China and the rise in global transport costs in the wake of the pandemic has produced a rise of around 25% in US artificial tree prices. Chris Butler, CEO of National Tree Company, reported that “last year we paid $2,000 to $3,000 for containers and this year we’re paying in the region of $20,000.”

Of course, the big question is whether you should go natural and buy a single-use tree or invest in a multi-use artificial variant. Purists argue that there is nothing to beat the smell of fresh pine in the living room although the fact that large numbers opt for the artificial option suggests that for many the downside of jamming the vacuum cleaner with fallen needles outweighs the benefits. The huge piles of discarded trees littering collection points in early January would appear on the surface to suggest that natural trees are very environmentally inefficient. But the balance is a lot more tricky to determine.

According to the Carbon Trust, a 6 foot artificial tree is responsible for about 40kg of greenhouse gas emissions, suggesting that it has to be used anywhere between 7 and 20 times (depending on the weight and the materials in the tree) in order to match the carbon footprint of a natural tree. There again if you are sourcing your natural tree from a long distance away, the carbon footprint of the transport costs will quickly mount up. However, if ownership of a real tree is too much responsibility, you can always rent one for the Christmas period which will then be returned and replanted. Whether this is ecologically sound is a moot point but at least you can feel smug about not contributing to the huge piles of discarded trees that build up at the start of the year.

Whatever kind of tree you choose – or even if you choose not to display a tree at all – it only remains for me to wish a safe and Merry Christmas to you and yours.

Start listening

Two years ago Boris Johnson won a thumping majority at a general election which produced the Conservatives’ best result since 1987. It has since been anything but plain sailing. Whilst Covid has changed both the political and economic landscape, the government has made a series of unforced errors which has called its authority into question. Effective leadership in the UK has been conspicuous by its absence of late and the issues are now beginning to cut through with the electorate. The Conservatives’ heavy defeat at the North Shropshire by-election, which until this week had returned a Tory MP to Westminster at every plebiscite since 1832, is an indication that all is not well.

It is ironic that the by-election did not need to happen at all – it was only triggered by the resignation of Owen Paterson who, if he had accepted the 30-day suspension imposed by the parliamentary Standards Committee, would still be an MP. The fact that the government tried to bend the rules to keep Paterson in place has opened up a whole can of worms, with last month’s corruption stories being supplanted by a media furore over parties in Downing Street last Christmas in breach of the social distancing regulations in place at the time. This comes on the back of the Dominic Cummings affair, when one of the PM’s senior advisers was able to flout lockdown rules. It is not just the actions of politicians which are causing the public to be restive. The police refusal to investigate the issues are straining the electorate’s credulity and patience, especially when people faced criminal charges for holding gatherings at the same time as the Downing Street event took place (this video sums up the popular view).

A government in trouble but let's not get carried away

Although the double-digit vaccine-driven Tory lead in the opinion polls at mid-year had narrowed somewhat, even in early-October they enjoyed a comfortable six point lead. This has evaporated very quickly with Labour now enjoying a six point lead. Although we should be wary of reading too much into mid-term opinion polls – all governments experience a sharp drop in support at some point – the speed of the collapse has set alarm bells ringing in government. So long as Johnson was perceived to be a political asset, his party was willing to turn a blind eye to his shortcomings. But Johnson’s public approval ratings are flagging. If press reports are to be believed, dissatisfaction with Johnson’s style of leadership is mounting in Westminster and challengers are jockeying for position in the event that a leadership contest is called in 2022. But don’t hold your breath.

For all the excitable commentary suggesting that the prime minister is in big trouble we should not allow ourselves to get too carried away. For one thing, experience suggests that prime ministers can hang on for quite some time after MPs begin to question their leadership. This was true for Theresa May and perhaps even more so for Margaret Thatcher, whose authority leached away over a prolonged period. This is perhaps even more relevant to today’s situation since she, like Johnson, was the personification of the government. My guess is that Johnson is unlikely is to be going anywhere anytime soon. A second problem is that the Tories do not have anyone with the star quality to fill Johnson’s shoes, despite the claims being made for the Chancellor Rishi Sunak. In addition, there is also a risk that the electorate may start to weary of a party that has developed an unfortunate habit of ditching its leaders – both of his predecessors either jumped or were pushed – particularly one with Johnson’s brand recognition.

Is Johnson a cause or a symptom?

In any case, there is an argument that Johnson is merely a symptom, rather than the cause, of the political malaise. Perhaps it is his party rather than just the prime minister which is increasingly out of tune with the electorate. As former Conservative minister Chris Patten recently suggested in a radio interview, “I’m not sure that this is a Conservative government. I think this is a sort of all over the place, rather chaotic English nationalist government.”

Having recently reread John Major’s autobiography I was struck by many of the parallels between the situation facing the current Conservative government and the travails of Major’s government between 1992 and 1997. Back in the 1990s, Major was undermined at almost every turn by a determined coterie of Eurosceptics which gave rise to a situation in which, to use the words of former Chancellor Norman Lamont, “we give the impression of being in office but not in power.” Although dissident Conservative MPs believed they were tapping into the well of public opinion, in reality their  obsession with anti-EU ideology was out of proportion to its importance to the general public and they paid the price at the ballot box in 1997.

The situation today is not quite the same. After all, in the last five years the Eurosceptics appear to have won their “war” with the EU but only at great cost to the institutional fabric. But they seem unable to accept the economic consequences of their actions and continue to lash out at the EU rather than coming to an accommodation as the public appears to want. The government often seems helpless in the face of Covid. Large numbers of MPs increasingly have a problem with lockdown measures to try and halt the spread of the disease, citing the primacy of personal freedom over the strictures of what one MP called the “public health socialist state.” Indeed, in a parliamentary vote earlier this week, 99 Conservative MPs voted against legislation making it a requirement to wear masks in indoor venues and it was only passed thanks to the support of the opposition. This flies in the face of evidence suggesting that the public is in favour of measures to combat the spread of the Omicron variant.

At a time when most people are trying to get on with their lives in the face of Covid, they do not have time to care about political machinations. But when they are regularly assailed with stories of failure to apply the rules consistently, they start to become restive. One of the principles of a modern democracy is that no one is above the law. Everyone has to abide by the same rules and the sheer volume of evidence to the contrary was one of the reasons for the North Shropshire result.

It may be that this is merely a short-term issue that will eventually blow over. Perhaps if the pandemic recedes in 2022 much of the anger felt today will dissipate. This makes it even more important that the government properly handles the latest wave of the pandemic. Tory MPs may object to a lockdown but public opinion suggests that there is not the same degree of opposition. As it is, large parts of the hospitality sector are already complaining that pre-Christmas trade has collapsed. The government may be forced to resurrect the furlough scheme in some form in order to provide a backstop for those whose incomes are being hit. Without some form of financial support, the Red Wall seats which the Conservatives won in 2019 may revert back to Labour. Either way, it is time for the government to start listening to those in whose name they govern, for the public do not like what they are currently seeing and hearing.

The Covid curse strikes again

If 2020 was the year from hell, 2021 is turning out to be more like purgatory – a temporary version of hell which we hope will end sometime but don’t know when. As the end of 2021 moves into view, it is beginning to feel very much like a year ago: After a summer during which infection rates fell, a new Covid variant has popped up and case numbers are sharply on the rise as we head into winter. The surge in case numbers is especially big in Europe (perhaps less the case in the UK where case numbers have been elevated for the past three months) and the discovery of the Omicron strain has raised a lot more questions than the scientific community currently has answers. New restrictions on social gatherings are being put in place and forecasters are beginning to edge down their economic growth projections for the winter months, which is bad news for those institutions that have already produced their year-ahead outlooks and spent the past few weeks marketing them to clients.

Global case numbers suggesting there have so far been 268 million Covid infections can be taken with a huge grain of salt, especially when they indicate that China has reported less than 100,000 positive cases versus 10.6 million in the UK – a country with a population just 5% of the size. European data are likely to be more accurate given the rigorous testing procedures in place across the continent: they point to almost 86 million cases since February 2020 with a quadrupling in the last 12 months.

Germany has led the way in tightening restrictions, with significant curbs on the unvaccinated who will have to contend with curtailed access to restaurants, cinemas, leisure facilities and many shops. This was described by outgoing Chancellor Angela Merkel an act of “national solidarity.” The new Chancellor Olaf Scholz backs a policy of mandatory vaccinations, although this has yet to go through parliament. Indeed, it is notable that the proportion of the German population vaccinated against Covid currently stands at a relatively low 71%, versus 75% in the UK; 77% in France and Italy and 82% in Spain. In response to the threat posed by Omicron, the British government earlier this week implemented what it called ‘Plan B’, carefully avoiding the word lockdown. This entails reintroduction of working from home guidance; the use of facemasks in “most public indoor venues” and a requirement to show a Covid pass in a number of venues, depending on the number of people present and whether it takes place indoors or outdoors.

The Covid policy tracker, published by the Blavatnik School of Government at Oxford University, shows that the restrictions index jumped sharply in Germany and is now back to levels last seen in January (chart). Such a sharp jump has not yet been seen in the UK, although it is likely to edge up over the next few days as the Plan B measures take full effect. A comparison of the political response in the UK and Germany shows considerable differences in approach. Germany has acted quickly and the political consensus is in favour of action to restrict the spread of Covid. But there is mounting political resistance in the UK to further restrictions, driven in part by the defiant libertarian streak which is present in the governing Conservative Party. The Plan B legislation may indeed only pass through parliament thanks to the political opposition which has said it will support the measures.

This is not to say that there are not legitimate concerns about the damage that lockdowns do to the economy. Of course, we do not yet know what the full impact of the Omicron variant will be but the evidence suggests that it is the most transmissible variant to date. Case numbers look set to rise sharply across Europe and the government responses are unlikely to leave the economy unscathed. Even before the latest concerns about the Omicron variant, the UK economy had lost considerable momentum. GDP in October rose by just 0.1% m/m taking the annualised 3-month growth rate down to 3.2%. Ironically, such growth as there was in October came from output in human health activities, which grew by 3.5% m/m due mainly to a continued rise in face-to-face appointments at GP surgeries. It is a pretty strange sort of economy where growth is being driven by numbers of sick people going to see their doctor. It is still possible that output will get back to pre-Covid levels by Q1 2022, as the BoE projected in November, although this will depend on the extent of any anti-Covid measures.

Omicron has muddied the likely monetary policy response ahead of the BoE’s final MPC meeting of the year on Thursday. After considerable criticism that the BoE had led analysts up the garden path by not raising interest rates last month, it was widely believed that it would do so in December. That expectation has faded and rates are tipped to remain on hold next week. Given the uncertainty surrounding the economic situation, that would seem to be a prudent move. The consensus GDP growth projection for 2022 has slipped from 5.6% in August to 5.1% last month and the likelihood is that it will dip further (for the record, my own projection looks for a growth rate in the range 4% to 4.5%). There are many who believe that high inflation warrants monetary tightening. However this is to miss the cause of the recent inflation spike which is the result of supply chain difficulties. Tighter monetary policy today will do nothing to tackle this problem although once some of the Covid-related uncertainty passes there is a case for modest policy tightening.

Markets appear to be taking the view that the Omicron variant will slow economic activity rates and thus cool some of the inflationary pressures. That is not what happened a year ago when the emergence of the Delta variant made these problems worse rather than better. This is a reminder that one of the bigger dangers we face is complacency. The Omicron variant represents a new strain rather than a new disease, so the threat is perceived to be lower than it was in March 2020. That may be true but it may turn out to be wrong if the transmissibility rate is so much higher and the virus mutates yet again. Public health experts are thus warning that we once again need to deploy the toolbox developed in 2020, which entails significant economic disruption.

Quite how long we can go on doing this depends on the duration of the Covid pandemic. Based on the evidence derived from this paper, the average duration of global pandemics over history is around 6 years. It is not an edifying thought that we are barely two years into the Covid outbreak.