Some thoughts on extension to Oct of UK #FurloughScheme - now covering 7.5m jobs. Most clearly extension will save jobs by giving employers time to adjust to social distancing requirements & give health interventions time to reduce infections & change behaviour. @RishiSunak /1

There is however a challenge that aggregate demand will shift in 2 phases. First, policy may seek to deliberately surpress activity during recovery (pre-vaccine) - so support may have to be withdrawn incrementally to avoid scarring. Record of economic micromanagement is poor /2

Second, once demand can be unconstrained its composition will likely have altered. Overhang of stranded assets (human & physical) will be drag on the recovery. Who owns these write-downs will be fierce debate that risks being a distributive battle between sectors & generations /3

As such there will be clamour for enhanced job matching services, troubled-asset funds & re-training to facilitate the supply side adjustment. Fortunately we know what works on labour market activation so bigger challenge will be channeling private capital to create these jobs /4

This lends itself to UK Industrial Strategy being unusually prescriptic. In normal times this would look like picking winners - but investment hurdle rates will be unusually high following series of macro shocks. Clear vision & commitment important in getting rates back down /END