New Three-Step Plan of UK Government to Phase Out Lockdown

On May 12, 2020, the British Prime Minister Boris Johnson announced a three-phase plan to lift the restrictions to the economy in a gradual manner. Now its seven arduous weeks of the corona lockdown for the UK economy, and even though the full recovery will take a long time, but the way easing of lockdown has been planned out by the Government, this economic recovery is expected to be steady. It is to be kept in mind that this plan will be conditional, provided the infection rate continues to remain low. It also needs to be kept in mind that Britain’s coronavirus death toll has surpassed 40,000, as per the official statistics. It is the largest death toll amongst all the European nations.

At the same time, it is noteworthy that UK’s other nations namely Wales, Scotland and Northern Ireland are being more cautious and are continuing with the same old plan of lockdown, without any major changes so far.

The UK’s plan is outlined as follows:

Step 1 measures (Beginning May 13, 2020)

• People should wear a face-covering in enclosed spaces where social distancing is not possible to reduce the risk of transmission.
• People who can work from home should continue to do so. People who cannot work from home should travel to work using personal transport, preferably.
• People can go out and exercise daily from May 13, 2020. Earlier it was allowed on a once a week basis. Playing sports behind closed doors, going out to public places is also being allowed. Use of personal transport to reach a public place such as a park or beach is being allowed. Golf courses and tennis courts are also being permitted to open again.
• Usage of public transport is being discouraged, and personal transport is encouraged to be preferred for the time being.
• People arriving by air will be quarantined to prevent infections from abroad. However, people travelling from Ireland and France would be spared from these quarantine rules.

Step 2 measures (Beginning June 1, 2020)

• In a phased return, schools will be opened for early years from June 1. Students of early years settings, Reception, students of Year 1 and Year 6 will be allowed to attend school in smaller sizes.
• The Government shall also allow the phased re-opening of non-essential retail shops beginning June 1, provided these retailers can follow the new Covid-19 Secure guidelines.
• To restore livelihoods, construction and manufacturing activities shall be allowed to resume from June 1.
• The cultural and sporting events will be permitted, but only behind the closed doors, thereby steering clear of any large-scale social contact.
• More local public transport will be allowed in urban areas, subject to strict distancing and hygiene measures.

Step 3 measures (Beginning July 4, 2020 or later)

• July 4 onwards there will be a gradual re-opening of restaurants, cafes, pubs, hospitality accommodations, hairdressers, beauty salons, public spaces like places of worship and leisure facilities like cinema halls, again subject to their meeting the new Covid-19 Secure guidelines.

However, this is a conditional plan, and its exact timetable shall depend on the infection risk at each point, and the effectiveness of the Government’s mitigation measures such as contact tracing.

Concerns over the phased ending

It is evident that Government’s approach is changing from ‘Stay Home’ to ‘Stay Alert’. At the same time, there are some concerns being raised by the different sections of the society for its gradual re-opening, which are being described below:

• The National Education Union conducted a survey of 1,000 parents (after the Government phased lockdown easing plan was released) which revealed that 33 percent parents are not willing to send their kids back to school from June 1 and will delay the return. They suggest that there is a need for widespread testing and tracing before the schools are allowed to re-open.
• It is expected that people in lowest income groups have the highest chance of catching the Corona infection since they most likely would need to go out of their homes for work. Some of these group of people could be working as security guards, educational support attendants, construction workers, transit workers, launderers, nursery nurses, pharmacy assistants and shop assistants etc.
• The probability of male deaths due to corona infections is almost double as compared to that of the females.
• In the big city of London, the advice of using personal transport is difficult to follow as most people do not own cars.
• Police organisations have warned that the new rules are challenging, and their enforcement is difficult than earlier.
• Overall, the plan lacks clear communication on what exactly each phase involves and has minimal guidelines on isolation. Healthcare officials add that even after extensive testing and tracing operation begins, Government must aid the households whose members are quarantined.

The overall impact of corona lockdown on the UK economy

The impact of corona lockdown on the UK economy so far suggests that the economy is expected to shrink by 14 percent in 2020 and the unemployment rate will be as high as 9 percent for the year 2021, which will have its repercussions on the government exchequer.

According to the Bank of England’s statistics, household spending has fallen by 30 percent since early March 2020. The success of the Government’s plan will depend on the fact that consumer spending can be revived soon. At the same time, Bank of England Governor Andrew Bailey is encouraging banks to keep lending to get the economy back on track. This is a good move for most of the businesses, giving them the much-needed growth impetus.

Understanding the gravity of the current pandemic, Mervyn King, the former governor of the Bank of England has also suggested that the UK Government should continue to pay 80 percent of people’s salaries and not mull over lowering the same to 60 percent. These payments can later be financed over the long term once things normalise.

Further, it’s evident from the plan that the sectors that are likely to recover last from the slowdown are expected to be travel, transport, retail and hospitality.

Looking at the current state of the British economy, Bank of England estimated that GDP has shrunk by 3 percent in the first quarter of this year 2020 and will contract further by 25 percent during the second quarter of the year. For the month of March 2020, the British services sector is expected to contract by 8 percent compared to the same month last year. A positive indicator is that Britain’s trade gap with the rest of the world could reduce due to lower import of consumer goods during the lockdown period.

A realistic picture of UK’s economic recovery indicates that even when the virus is contained in the UK and the rest of the world, a best-case scenario V-shaped recovery may not be seen. (A V-shaped recovery means a sharp fall in growth followed by an equally sharp recovery.) This is because incomes are falling, businesses are curtailing investments and consumers are postponing spending. The contracted GDP in 2020 is likely to have a lasting effect on growth in the times to come. The effect on the labour market, inflation and interest rates needs to be closely watched out for. Most economists feel that a U-shaped recovery is more likely a possibility for the economy of the nation. A U-shaped recovery means that first the output contracts then bumps along the bottom for some time, and then gradually starts to climb back. An actual picture will undoubtedly be decided by the biggest unknown, which is the course of the coronavirus.

Finally, to summarise, the UK government’s plan of a phased opening of the corona lockdown in three steps (beginning May 23 to July 4 this year), is primarily based on the corona infection rate continuing to remain low. Economic recovery is surely on its way but is more likely to be gradual and bumpy rather than quick and sharp.