London could face £2bn ($2.6bn) annual costs if curfew measures, due to a rise in coronavirus cases, are implemented in the capital, according to the Centre for Economics and Business Research (CEBR).
London mayor, Sadiq Khan and health secretary Matt Hancock have both touted the idea of an imminent second London lockdown, amid a surge in COVID-19 cases.
Khan previously said London is only “two or three days behind” coronavirus hotspots in the north west and north east of England. Meanwhile, Hancock told Times Radio that he “wouldn’t rule out” London employees being asked to work from home from next week.
In its study, CEBR looks at whether a second coronavirus wave and consequential lockdown would stop the UK’s economic revival in its tracks.
While it is hopeful that more measures to keep the economy moving forward will be implemented, it says that tens of thousands of companies are “hanging on by a thread” and will likely run out of cash.
CEBR also warned of the risk of major job losses when the government’s job subsidy furlough scheme comes to an end in October.
Currently, more than 10 million people in the UK are living with tougher restrictions, to halt the spread of the virus as the number of COVID-19 cases creep up across the country.
Measures such as a ban on different households mixing at home or in the garden and 10pm curfews for businesses in the hospitality sector such as pubs and restaurants, have already been introduced in areas of Scotland, Wales, the north east of England, Lancashire, Merseyside, parts of the West Midlands and West Yorkshire.
A CEBR report for Irwin Mitchell, showed that at its peak, the lockdown in north east England was running at a cost of £70m a day — or 34% of gross value added (GVA) — an economic measure of the contribution to GDP made by an individual producer, industry or sector, minus the costs of input and raw materials directly associated with that production.
It predicts a second full lockdown would inflict similar costs on the region.
But, CEBR is more optimistic when it comes to a partial lockdown saying it that the latest data on hospital admissions, intensive care unit admissions and fatalities that the “latest bout is less virulent” than the former, possibly due to demographics, as the latest cases show a rise in the virus in young people.
While, it thinks demographics could curb the need for a second full lockdown, CEBR says that partial lockdowns could still reduce GVA, although not to the same extend as the peak impact in April and May.
In terms of GDP, it warns that it could be 3% to 5% lower in the fourth quarter, compared to Q3 — when the UK entered its deepest recession following a record 20.4% contraction in the second quarter.
It estimates such a drop, based on two conditions:
The return to going out, so successfully promoted by Eat Out to Help out, is reversed
The return to work which coincided with the reopening of schools is reversed by increasing fears of a second wave
If the above scenarios were to happen, it would cost the UK economy about £250m, CEBR estimates this is roughly a tenth of the impact of the lockdown at its peak in April.
Despite everything, CEBR expects that a second lockdown will not knock consumer and business confidence in an economic recovery.
A private sector forecasts compiled by the UK Treasury showed that the outlook for the UK economy has improved marginally over the last month. An average of 18 new forecasts made by banks and think tanks since the start of September found improving expectations for GDP growth, unemployment, inflation, public sector borrowing, and the current account deficit.
The average forecast for UK GDP growth in 2020 is now -10%, compared to -10.1% in August. Unemployment is now expected to peak at 8% by the end of the year, compared to a forecast of 8.3% last month.