Which sectors could gain as the UK enters a tiered set of rules post 2 Dec?

Summary

• The country will have a new tightened tier system once the second national lockdown is over on 2 December
• The second wave of infections have been reasonably curbed since the lockdown was imposed on 5 November, but the risk of a sudden spike still exists
• The UK is the worst impacted in G7 Group in terms of the death toll

The UK government has decided to go in for a strict region-wise set of rules after the second lockdown gets over on 2 December. Though the decision is being opposed by the Opposition, health authorities are stressing upon it to avoid any spike before a nationwide inoculation drive is launched. 

The UK is the most affected nation in Europe because of the pandemic and can hardly afford yet another resurgence as it would affect the economy further. Other countries like the US, Germany, and France have adopted similar measures. 

The risk of the winter flareup had been warned by global health authorities based on the experience with SARS and MERS pandemics earlier.  In fact, parts of Europe and North America did see a rise in reported infections, leading governments to impose renewed safety restrictions. 

Need for a tiered system

The lockdowns have taught that shutting down the country can severely damage the economy. Thus, a focused approach where business activity is systematically allowed will keep the industry thriving as much as is possible in a controlled environment.

A regional approach would ensure that the areas that have controlled the number of cases are not penalized.  So, despite the concerns, imposing a tiered system now is preferred over fully opening up the economy and risking a third wave later, government officials said. 

Sectors that could benefit

Hospitality and retail will gain the maximum from a tiered set of rules in December. Small businesses like restaurants and pubs that are dependent on their cash registers would be facing a shorter closure period. This would protect them from going bankrupt, the industry experts feel. 

The entertainment chains like Broadway shows and cinemas have been badly impacted by the lockdowns. A regional set of tiered restrictions will help them run a part of their business and keep themselves afloat. 

The biggest beneficiary from the tiered system is expected to be the aviation industry. The spring lockdown saw grounding of aircrafts for a long time, impacting the sector’s bottom lines.  A less restrictive system would ensure that these companies can redeploy their aircraft within the country and to keep their businesses moving.

Response in Germany and France

Both Germany and France are currently undergoing partial lockdown.  These countries witnessed a flare- up in coronavirus cases earlier and placed enhanced safety regulations. Their economies contracted in the last few months. At the same time, unlike the UK, both haven’t witnessed much economic disruptions or virus-related deaths. 

State of the UK economy

The country’s economy is in a dire state with the public debt at an all-time high. The government was forced to extend the furloughing scheme, one of the most expensive stimulus packages ever, after the pandemic exploded. 

Industries that started to recover after the spring lockdown, are facing a risk of being pulled down yet again in November. 

The rising unemployment rate can trigger social unrest and is a sign of shrinking business activity. Economists are fearing a double dip recession and it could leave the economy with permanent structural changes. The biggest threat to the economy, however, is from a no-deal Brexit, the transition period of which expires on 31 December. 

The arrival of vaccine 

The early arrival of the coronavirus vaccine and the beginning of the mass inoculation process will lead to lowering of restrictions. The economic growth will see an upsurge accordingly. 

The tiered regional set of restrictions would help in a quicker implementation of the inoculation, as and when it is initiated.