COVID-19 Weekly Update: 23-26 March 2020

4most’s weekly update on the Coronavirus (COVID-19), providing insight on the economic impacts of the pandemic.

The UK’s mortality curve has dipped below Italy’s in the last week. This is unlikely to be due to recent lock down as the impact is too soon but potentially driven by a high level of test and trace in the initial “Contain” phase of the government’s response.

Cumulative death from days since 10th confirmed death as at 24 March 2020

Distribution of deaths from Covid-19 by age as at 22 March compared to the population structure

• Deaths are heavily skewed to the older ages as represented globally

• Italy and Spain showing a greater potential for risk of deaths than Asia, with UK data yet to emerge.

Total tests completed compared to growth in mortality from Covid-19

• There is a suggestion that increased testing leads to lower growth in mortality

• The message from the World Health Organisation is “test, test, test”.

Sources for all data: UK Public Health England, www.worldometers.info, www.populationpyramid.net

“Unprecedented measures in unprecedented times” – Rishi Sunak

UK Government’s financial response

On 20 March, the UK’s Chancellor announced further sizeable updates to the support package, notably:

• Introduction of a new job retention scheme where employers can contact HMRC for a grant to cover wages for those “furloughed” rather than layoffs. This will cover 80% of salaries up to a total of £2,500 a month, backdated to 1 March.

• For the Business Interruption Loan Scheme, no interest will now be extended to one year.

• The HMRC are aiming to have this working before the end of April, with grants starting to be paid within the next few weeks.

• Deferral of next quarters VAT payments – which is a direct cash injection of £30bn.

• A number of other measures to strengthen the safety net through the tax system to help the most vulnerable, renters and self-employed amounting to an extra £7bn to protect incomes.

4most insight on Government’s response

The measures announced will undoubtedly take some time to feed through directly to those in need and there are some gaps to address:

• Self-employed people (c.5million) are currently falling into the benefit system where they typically only get 20% of earnings covered. A bespoke package of support is due to be announced shortly.

• Many firms appear to be ignoring the offer of covering 80% of the wages of “retained workers” and are asking staff to take unpaid leave or laying them off. There is concern about the terms applied to government backed loans which may be limiting uptake.

• Claims for Universal Credit have gone up 500,000 in the past nine days – equivalent to a rise in the unemployment rate to 5.5%.

• A ‘YouGov’ survey reports 5% of previous employed Britons have lost their jobs. Another 9% have reduced pay or hours. The survey should be treated cautiously but it is consistent with 8% unemployment.

• Anecdotal evidence suggests AirBnB landlords are putting their properties back on the long-term rental market, depressing rents. This will in turn, put downward pressure on house prices.

4most insight: epidemiology of Covid-19 – “the known unknowns of Covid-19”

The key concerns that face the UK are:

We do not have a good understanding yet of how widespread the infection is. The current tests for the virus can only tell who is infected, not who has been exposed and subsequently recovered. Without good data on who is or isn’t infected, it’s difficult to predict how severe an outbreak will eventually become and where new outbreaks could occur.

Infection may not bring immunity. Seven species of coronavirus are known to infect people. Two (SARS and MERS) appear to confer life-long immunity, while immunity to four others (which cause mild cold-like infections) fades after a year. If Covid-19 infection does not provide immunity, it could return after the current epidemic subsides.

We don’t know when an effective treatment will become available. Several drugs are being tested against the disease, with ones that block replication in influenza showing some promise. An effective vaccine isn’t expected for 12 to 18 months, long after the worst of the epidemic has passed.

Human behaviour will make the infection difficult to control, and we don’t know how people will react to a prolonged shutdown. Reducing the rate of infection is crucial to managing the epidemic, however once the number of infections drop, the worry is that people will push to resume life as normal, risking a second wave of the epidemic.

Market Update

• “STAY AT HOME” – this is the message sent by Boris Johnson, who addressed the nation on 23 March and many other leaders globally. Markets continue to whip-saw in this volatile environment.

• Purchasing Managers’ Index (PMI) indicators hit global lows in March, consistent with the UK GDP falling 5% in March.

• The UK government looks to clarify confusion on which jobs count as ‘essential’, with construction workers and tradespeople unsure, with further restrictions likely to be announced.

• IMF is ready to deploy $1 trillion in lending as it warns a recession could be worse than 2009.

Do you have any questions? Please contact Keith at keith.church@4-most.co.uk