FTSE 100 suffers £51bn plunge as Covid-19 lockdown fears hit markets – business live
Prospect of new restrictions to combat rising Covid-19 cases has triggered the worst selloff since June
- Latest: FTSE 100 closes down 3.3% – worst day in three months
- Pub stocks hit six-month low as curfew looms
- IAG hits eight-year low, Rolls-Royce at lowest since 2004
- Heavy losses on Wall Street too
- UK Covid-19 live: Whitty calls for ‘break in unnecessary links between households’
Professor Costas Milas of Liverpool University says Britain could face a W-shaped recovery, if tough new lockdown measures are introduced.
And this chart shows why:
I have plotted together UK GDP (% change from pre-pandemic level; the latter proxied by the average GDP value in the last three months of 2019) and the UK stringency index. The latter captures the impact of lockdown measures (monitored by the Blavatnik School of Government, University of Oxford) on the UK economy.
As the (previous) lockdown came into force in late March and was fully implemented in April 2020, UK GDP plunged by a massive 25.5% also in April 2020. In July 2020, GDP stood at 11.6% below its pre-virus level. Notice also that UK stringency measures have been relaxed (slightly) since then. But not enough to guarantee a significant rebound in UK activity.
Analysts at Capital Economics have warned that new restrictions to curb Covid-19 would inevitably hit the recovery, telling clients:
A tightening in restrictions designed to quash the resurgence in new COVID-19 cases would set back the economic recovery.
We’ll be in a better position to quantify the impact once the government announces its plan tomorrow. But if the government resorted to a two-week national lockdown at some point, that could reduce the level of GDP by 5% and set back the economic recovery by a year.