The global lockdown has seen economies shrink and unemployment soar across the world, pushing governments to borrow at rates never seen in peacetime. On Wednesday, the OECD published country-by-country estimates for the economic hit – and its projections for the UK are some of the worst. Under the scenario of no second wave (that is, assuming countries won’t need to lockdown again this year), Britain’s economic downturn is forecast to be the worst in the G7, and fourth-worst in the OECD, with an 11 per cent fall in annual GDP. In the case of a second wave, prospects still aren’t great: in the G7, Britain’s 14 per cent downturn is on par with Italy and France, and the country retains a dismal place in the OECD line-up.
In order to cope with this surreal crash, Britain is borrowing like there’s no tomorrow – and no debt collector either. Along with the Netherlands and Denmark, the UK is on course to see one of the biggest hits to its public finances, with borrowing rising to a level not seen since the end of the second world war.
It’s not as simple as saying that lockdowns led to economic downturns, and avoidance of lockdown kept economies strong. Sweden never implemented a formal lockdown – but it has not avoided massive economic disruption: its public finances are set to lurch from a surplus of 0.5 per cent of GDP last year to a deficit of 8.8 per cent of GDP this year, a smaller swing than in most European countries, but still about par for the developed world. There's no doubt that behaviour changed despite no legal requirement for it to do so, and the shutdown of its neighbours will have had a knock-on effect on the country too.
But while the impact of lockdown differs from country to country, there is another important piece in this puzzle, perhaps the most troublesome one for the UK: the Covid-19 death toll. While other countries have taken substantial hits to their economic, employment and growth prospects, many have managed to keep the impact of Covid-19 on public health largely under control. The UK is experiencing some of the worst economic pain, yet also has the highest number of Covid-19 deaths in Europe. Bad news across the board will lead to louder questions about why Britain’s economic and health outcomes are so poor and what, if anything, could have been done to mitigate the impact of coronavirus in at least one of these areas.