The economic fallout from the slow reacting to the treatment of the COVID-19 treat in the UK was swift. Employment, along with manufacturing and services surveys now reflect a country that is reeling.
The UK is now caught up in the global scramble for essential equipment to treat patients, as well as the necessities to protect those who are treating patients. The focus for the postmortem reaction is on how leadership failed the UK by putting the Brexit ideology above people’s lives. Britain is not alone in its slow reaction to the virus.
Italy saw COVID-19 sweep across the Lombardi region, but eventually, the government issued a nationwide quarantine. The US has seen the largest spread globally, and its leaders made many of the same missteps the UK made. The failures of Mr. Johnson to react quickly must have been on the Prime Minister’s mind when he was fighting for his life in a critical care unit after he contracted COVID-19. The UK is well behind many of its neighbors who have developed the testing ability and the willingness to trace COVID-19 through contact tracing.
The UK Reacted Too Slowly
The failure to act decisively at the outset to suppress the spread of COVID-19 stands above all as the strategic mistakes made by the UK government. The tactical errors in judgment made by PM Johnson and his team at the outset, allowed the virus to gain a foothold and spread throughout the country. Initially, the PM thought a strategy could be to allow the majority of the country to contract the infection which would provide herd immunity. In such crowded living conditions such as the cities in the UK, this policy was destined to fail. While countries across Europe were taking swift action to curtail the spread of the pandemic, it took well into March for leaders to wake up and smell the coffee. UK ministers refused to grip the gravity of the threat because PM Johnson did not want to contemplate a draconian response.
The Prime Minister Did Not Focus on the Obvious
The Prime Minister was not paying much attention to the virus as it began to spread across Europe. The failure was evident in February when PM Johnson chose not to attend several meetings of the emergency ministerial group Cobra. A virus by nature spreads when it is allowed to touch many people who are not practicing social distancing. This misstep is now haunting the UK’s effort and explains why the pandemic is sweeping through nursing homes and assisted living for the elderly. The slow response did not give the country time to purchase personal protective wear for medics and care workers who are now scrabbling for safety clothing when treating COVID-19 patients. What is clear is that Britain is behind nations such as Germany in mapping the virus through testing and contact tracing.
Death Rates are Rising in the UK
One of the greatest concerns is the COVID-19 death rates compared with other countries. Poor leadership has resulted in continued inadequate personal protective items and testing. There is also very little clear guidance on social isolation policy. Additionally, airport arrivals into the UK are still not being screened, and transport without distancing is actively used throughout the UK. The results have led many to view Boris Johnson’s commitment to and involvement in the COVID-19 crisis is questionable. The PM seems to have appointed ministers and advisers who will not threaten his authority.
Initial Data for April is Disappointing
The initial data released in the UK and the rest of Europe is very disappointing. Preliminary April UK PMI readings, which can be followed on an economic calendar, were devastating. Manufacturing PMI came in at 32.9 versus expectations that it would come in at 42.0. This compares to 47.8 in March. The April services PMI came in at 12.3 versus expectations of 27.8 and 34.5 in March. The UK composite flash PMI came in at 12.9 versus 29.5 expected and 36.0 in March.
While the UK data was horrendous, the EU PMI reading was not much better. The aggregate manufacturing PMI came in at 33.6 versus expectations that it would come in at 38.0. This compared to 44.5 in March. The services PMI for the EU came in at 11.7 versus expectations it would come in at 22.8 expected. This compares to 26.4 in March. The composite PMI came in at 13.5 versus 25.0 expected. This compares to 29.7 in March. Germany and France saw their composite readings dropping to 17.1 and 11.2 versus 28.5 and 24.5 expected, respectively.
What is Policy Response?
Both the BoE and EU have several monetary policy tools they can use to buoy financial assets. The EU leaders are still trying to lock down their fiscal stimulus. The discussion now moves towards a €2.2 trillion economic stimulus plan. This follows several rounds of stimulus already released in the US. The plan would be funded by a combination of budget spending and a new financing mechanism. What is clear is that the longer it takes the UK to set a path forward, the longer it will take the region to rebound.
