Coronavirus: Boris Johnson signals no quick end to economic lockdown

Oscar Williams-GrutSenior City Correspondent, Yahoo Finance UK
Yahoo Finance UK
British Prime Minister Boris Johnson makes a statement on his first day back at work in Downing Street, London, after recovering from a bout with the coronavirus that put him in intensive care, Monday, April 27, 2020. (AP Photo/Frank Augstein)
British Prime Minister Boris Johnson makes a statement on his first day back at work in Downing Street, London, after recovering from a bout with the coronavirus that put him in intensive care, Monday, April 27, 2020. (AP Photo/Frank Augstein)

UK prime minister Boris Johnson signalled the country would remain in lockdown for weeks to come, despite “impatience and anxiety” among businesses about the damage being done.

Johnson returned to work on Monday for the first time since being hospitalised for COVID-19 and delivered a speech outside Downing Street shortly after 9am local time.

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The prime minister said the UK was “making progress” in fighting the COVID-19 pandemic and there were “real signs now that we are passing through the peak.”

However, he said the country was now at the “moment of maximum risk.” An even more deadly and dangerous second spike in infections could occur if people begin to “go easy” on social distancing measures, the prime minister said.

Johnson said he understood the “impatience and anxiety” among business-owners about easing restrictions, given the economic damage being caused by the lockdown.

“I can see the long term consequences of lockdown as clearly as anyone,” he said. “And yet we must also recognise the risk of a second spike.”

Avoiding the ‘second spike’

On 23 March, the UK government ordered the closure of all non-essential stores, as well as playgrounds and libraries, and imposed a range of drastic measures on public life, in order to mitigate the spread of COVID-19. This has had a significant effect on the economy.

The UK’s independent budget watchdog, the Office for Budget Responsibility (OBR), said that the UK economy could contract by as much as 35% in the second quarter of 2020 if the current lockdown persists for three months. In this scenario, unemployment is expected to rise to 10%, compared to 3.9% at the start of the year. That would equate to 2 million extra people out of work.

Latest figures show that over 153,000 people in the UK have been diagnosed with the coronavirus and over 20,000 have died from COVID-19 in hospitals.

Johnson said a second spike would lead to a “new wave of death and disease but also an economic disaster” as the government would be forced to once again “slam on the breaks” by reintroducing strict lockdown measures. The prime minister said this would be more damaging to the economy.

The comments suggest that Johnson is unlikely to ease lockdown restrictions when they are reviewed in early May.

“We simply cannot spell out how fast or slow or even when those changes will be made,” Johnson said. “These decisions will be taken with the maximum possible transparency.”

The pound slipped against the dollar and euro in the wake of the speech. Sterling had been trading 0.6% against the dollar prior to Johnson’s address but slipped to 0.4% (GBPUSD=X). The pound had been 0.5% up on the euro but fell back to a gain of 0.3% (GBPEUR=X).

The prime minister thanked the public for their “grit and guts” and said: “I know how hard and how stressful it has been to give up, even temporarily, those basic freedoms.”

“We are coming now to the end of the first phase of this conflict,” Johnson said.

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