Press Release of the Day – 17th March

A coronavirus lockdown in London could cost the UK half a billion pounds a day

If the UK is to see a significant increase in coronavirus cases over the next few days or weeks, one of the more likely channels is through travel from Italy. This is due to the rapid recent increase in cases in the country – as of February 27th eleven towns have been quarantined [1] and over 500 cases have been reported [2]. Italy also happens to be one of the most popular destinations for UK tourists – 2018 saw 4.3 million individuals visit the country throughout the year. As of Friday 28th, two new cases in the UK have been confirmed which are linked to recent travel from Italy.

By extrapolating from UK outbound tourism data, we estimate that nearly 15,000 Londoners are likely to have travelled back from Italy in the last two weeks alone. This is the potential incubation period for COVID-19, per the Centers for Disease Control and Prevention [3], thus symptoms may still be hidden.

Clearly, enforcing a full lockdown in London is an unlikely scenario, and would represent a dramatic step. But modelling this as a ‘worst-case scenario’ is not without merit. If even a small percentage of recent travellers returning from Italy begin to exhibit symptoms, employers may consider it prudent to at least temporarily close offices and enforce remote working where possible. Indeed, a precedent has already been set. On Wednesday, Chevron sent 300 Canary Wharf workers home after an employee returned from an Italian skiing holiday feeling unwell. Crossrail (who share the building with Chevron) followed suit.

Should businesses in London send all non-essential workers home, i.e. doctors and health staff remain posted but all other businesses close, the economic impact would be substantial. For some industries, such as manufacturing, catering and traditional retail, working from home is not a viable option. Additionally, there are many industries where individuals sent home can continue working but at a reduced capacity – the potentially abrupt decision to implement remote working means it is unlikely individuals would remain as productive.

Our estimate of the economic impact of such a lockdown suggests that London’s output would fall by £495 million per day for as long as it was imposed. Should it last a week, the economy could effectively lose £2.4 billion in output. If lockdown was imposed for a month, this rises to £10.3 billion.

These losses in output represent a 31% fall on London’s current levels, and per 2018 ONS data, London is directly responsible for approximately 20% of the UK’s GDP. This implies that a London lockdown would result in UK output falling by 6% over the period of lockdown.

Additionally, these numbers understate the true impact of a London lockdown, as they only account for London’s specific output without considering the interconnected nature of the UK economy, or measures in other major UK cities. So the economic cost of a full lockdown would be almost prohibitively high. Would it help to stop the spread of the virus? Experts don’t seem to think so. The UK’s Influenza Pandemic Preparedness Strategy [4] recommends that public life continue as far as possible. This will likely still cause some serious economic pain, but adaption and preparation currently seem to be the most promising ways forward.

[1] https://www.bbc.co.uk/news/world-europe-51645902
[2]https://gisanddata.maps.arcgis.com/apps/opsdashboard/index.html#/bda7594740fd40299423467b48e9ecf6
[3] https://www.cdc.gov/coronavirus/2019-ncov/faq.html
[4]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/213717/dh_131040.pdf

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