The delay of ‘Freedom Day’ has not hit markets, with hospitality and travel stocks holding up well, but hospitality industry experts are warning of job losses and widespread economic damage.
Boris Johnson said on Monday night that lockdown in England won’t end on 21 June as previously planned, but four weeks later.
It means that the current restrictions will remain in place with sports, pubs and cinemas sticking to limited capacity, while nightclubs will stay closed.
Health experts are concerned over the Delta variant, which transmits faster than other COVID-19 strains and has higher risk of hospitalisation.
A paper submitted to the government’s Scientific Advisory Group on Emergencies (Sage) said ending restrictions later than 21 June could cut peak death rate from 700 to 500 a day.
As of Monday, new daily cases across the UK were 7,742, with 187 hospitalisations and three deaths. Over the previous seven days, new cases were up 45% to 52,076.
Four-fifths of the total adult population had received the first dose of a jab and 57% the second one.
The cost of lockdown
Britain’s managed pub, restaurant and bar groups recorded a 26% drop in total sales in May from the same month in 2019, according to the CGA.
Social distancing restrictions held down sales despite the two Bank Holidays.
Trade body UKHospitality has warned these measures will cost the sector around £3bn in sales, put at risk 300,000 jobs and have a knock-on impact on bookings throughout the summer and into the autumn, or “economic long Covid”.
It asked the Chancellor, who said the furlough scheme won’t be changed, to provide more support for businesses that risk trading to be hampered the most.
The furlough scheme is currently covering 80% of wages of people not working because of restrictions, but the funds will be reduced to 70% from 1 July and cut completely by September.
The latest jobs data showed that the number of employees has risen for the sixth consecutive month in May, up 197,000, but it’s still down 553,000 from before the pandemic.
“Pushing the full reopening of the economy back four weeks could be a horrible blow for the jobs market. The continued recovery of employment depends on people being able to return to work, and on businesses staying open and viable. If the Delta variant puts any of these things at risk, the jobs market will be under pressure,” said Sarah Coles, personal finance analyst at Hargreaves Lansdown.
“Even if everything went to plan, the Bank of England was expecting half a million people to still be on furlough when it was withdrawn in September, so unemployment would peak at 5.5% in the autumn. If we reach the end of the summer with more restrictions in place and more jobs relying on government help, the rise in unemployment could be more significant.”
Conversely, economists at Capital Economics said a later end to lockdown is unlikely to prevent the economy from climbing back to its pre-pandemic size by the autumn.
“As long as any further delays can be measured in weeks rather than months COVID-19 probably won’t leave a big scar on the size of the economy,” said Paul Dales, chief UK economist.
Investors feel confident
Some degree of optimism has also been spotted in the markets, which fretted on Monday ahead of the Prime Minister’s announcement but recovered on Tuesday after the 19 July date was confirmed.
“Confidence may have been boosted by comments government’s chief medical officer Professor Chris Whitty who said it was important to strike the right balance between protecting people and opening up society, offering hope that yet another delay will be unlikely,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“Rumblings of discontent among conservatives on the back benches who are opposed to the extension may also help keep Boris Johnson to his July promise.”
Travel stocks got a boost over hopes that an easing of quarantine rules may accompany end of social distancing in July, though there isn’t a guaranteed quick roadmap out of restrictions.