To its critics, the decision by the Boris Johnson government to roll back social distancing and other measures designed to limit the spread of coronavirus would lead to a surge in new cases.
Some feared the emergence of new variants.
“On the basis of the spread of the delta variant, and the U.K. government’s decision to lift all legal restrictions on individual mobility, mixing and adherence to nonpharmaceutical interventions, we expected new COVID-19 infections to rise very sharply,” said David Mackie, an economist at JPMorgan.
Just the opposite has happened. The seven-day average of new cases in the U.K. peaked on July 20, just a day after “Freedom Day” was declared, and has dropped sharply since. Granted, hospitalizations have increased, but the trend is similar to previously.
“Possible additional explanations are a seasonal weather effect and an early arrival of the school vacation effect,” said Mackie. “But it is hard to fully explain the dramatic collapse in new infections.”
The flip side, however, is that the new freedoms haven’t materially changed behavior.
While mask wearing is less pronounced inside stores and restaurants, a look at Google mobility data finds U.K. movement much as it’s been during the last few months. And the mobility differences aren’t terribly different in Scotland, where the restrictions are still in place until early August.
That suggests the economic benefits of opening up may not materially accelerate either.
“We would argue that the ‘reopening trade,’ i.e. companies such as those in the retail and hospitality sectors that have been among the early beneficiaries of the reopening of the U.K. economy, has largely run its course,” said Alan Custis, head of U.K. equities at Lazard Asset Management.
“Following this initial relief rally, some businesses may start to find that sustaining growth at these levels is challenging, especially when supports — such as the value-added-tax relief for the hospitality sector — are removed.”
The midcap FTSE 250 index
MCX,
+0.30%,
which is considered more a play than the large-cap FTSE 100 UK:UKX on the U.K. economy, has climbed 13% this year.
