England’s Delayed Reopening Is Expected to Have ‘Minor’ Impact

After 15 months of pandemic corporate and socializing restrictions, England is preparing for news that it will face another month of restrictions beyond June 21, the date set for the final lifting of the Covid rules.

However, many analysts say that a delay put in place to get more people vaccinated as the Delta variant of the virus continues to increase hospital admissions would have little economic impact.

Prime Minister Boris Johnson is is expected to announce a four week delay on Monday evening for the third phase of reopening, which would have allowed companies to operate without capacity constraints, reopen nightclubs and sporting events to fill their stadiums.

“If serious restrictions didn’t have to be reintroduced, the damage to the British economy would probably be minor,” wrote Holger Schmieding, economist at the private bank Berenberg, in a press release.

“If there is a delay as reported, the economic impact should be minimal in our opinion,” wrote analysts from UBS. “Especially with the effectiveness of the vaccine against the Delta strain, which has now been proven after two vaccinations for Pfizer and AstraZeneca.”

The country began reopening in April when non-essential retail resumed and al fresco dining was allowed. This month, the economy grew by 2.3 percent compared to the previous month and was only 3.7 percent smaller than before the pandemic. Indoor restaurants opened in May, events like weddings could have more guests, and theaters could open with limited capacity, further fueling economic recovery.

As companies learned to adapt to restrictions – for example, as more restaurants started offering take-away service – the economic impact of each lockdown has been smaller. Last year the economy suffered its worst recession in 300 years due to the severity of the effects of the first lockdown in spring 2020. Earlier this year, when most companies closed their doors due to the second wave of pandemics, the economy contracted only 1.5 percent in the first quarter.

The third phase of the reopening has less economic impact than the first two, “even if it is postponed it should not have a major impact on the outlook,” wrote analysts at RBC Capital Markets.

But some industries predict another heartbreaking blow. The Association of the Night Industry, a trading group that represents nightclubs and concert halls, said many companies are already on “financial cliffs” and will close without further government support. UK hospitality said the outlook for many companies was “bleak” and urged the government not to delay reopening.

In April, the economy was 40 percent below its pre-pandemic level and the arts and leisure sectors were down more than 30 percent, the National Institute of Economic and Social Research said.

“Postponing the final step of the reopening may delay arts and recreation recovery by a few weeks, but if it helps avoid a third wave of infections it could help sustain a sustained recovery in the second half of the year,” said Rory MacQueen, on Economist at the London think tank, wrote.

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