Every two weeks of lockdown could cost the UK at least £8 billion in lost output, says IEA expert
Julian Jessop, IEA Economics Fellow, commented on the potential economic impact of a second national lockdown
“The case for reintroducing the sort of nationwide restrictions that crashed the economy in the spring remains weak; and this morning’s briefings failed to provide a persuasive analysis of all the costs and benefits.
“In a best case scenario, the economic hit from a short second lockdown, such as a two-week ‘circuit break’, could be more like that in March (when GDP fell by ‘only’ 7 per cent over the month) rather than April (when it collapsed by 20 per cent).
“However, the measures announced on 16 March for the public to avoid all unnecessary social contact only hit the second part of the month, meaning the fall in GDP in the final two weeks was more like 10-15 per cent.
“Considering this impact, it is likely that every two weeks of lockdown could cost the UK at least £8 billion in lost output, even if GDP snapped back as soon as the new restrictions are lifted again.*
“However, a two-week lockdown alone – if it is only two weeks – may not have a devastating impact on jobs, but there are still probably close to 3 million people currently on furlough.
“Even if just 10 per cent more lost their jobs as result of the increased disruption and uncertainty, that’s another 300,000 unemployed.
“The economic recovery had been on course to win the race against the winding down of the furlough scheme. But slamming on the brakes again now could prove fatal for many businesses and jobs – especially in the retail and hospitality sectors.
“Even the fiercest critics of the ‘nanny state’ would agree that the response to a public health crisis cannot be left entirely to the markets, or to individual choices. But the government does not always know best, particularly when it comes to the specific risks faced by each household.
“It is reasonable to conclude that the costs of the first national lockdown soon began to outweigh the benefits. A repeat of this could be a blow from which the economy and society would take much longer to recover.”
*(Annual GDP is c£2200bn, £2200bn/52 weeks=c£40bn, 10% of that is c£4bn, *2 = £8bn)
Notes to editors
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Julian Jessop is available for interview and further comment.
The mission of the Institute of Economic Affairsis to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems. The IEA is a registered educational charity and independent of all political parties.
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