Second national lockdown 'would lead to permanent scarring in the economy'

Going into a national lockdown for the second time would have severe consequences, business experts have warned.

Julian Jessop, a fellow at the Institute of Economic Affairs, said: ‘We can take one hit to the economy, but not two of that size.

‘It would lead to permanent scarring in the economy, and much higher levels of unemployment for longer.’

He told Metro.co.uk that for this reason, there was little appetite for restrictions similar to those imposed in March, when shops and schools closed and people were told to stay at home.

With coronavirus cases rising, Prime Minister Boris Johnson said today that he is seeking to avoid reimposing such measures by putting in place more limited rules.

People have been told that from Monday they can be arrested if they meet in groups of more than six, whether indoors or outdoors.

Mr Johnson told a Downing Street press conference: ‘I want to be absolutely clear. These measures are not another national lockdown.

‘The whole point of them is to avoid a second national lockdown.’

A more likely outcome is more local lockdowns, similar to those we have seen recently in Greater Manchester, according to Mr Jessop.

‘We adopted a one size fits all, blanket lockdown the first time because we weren’t sure where the biggest risks were,’ he said.

‘Now we know a lot more about the type of people more at risk – for example older people – so we can target lockdowns much more effectively at the sorts of people who are most at risk.

‘We’ve got better data than we had on the local impact of coronavirus so it’s easier to target lockdowns in local areas as well rather than having to do it across the whole country.’

He said that to help mitigate the economic impact of these lockdowns, the government could target local support there too such as a variation of the Jobs Retention Scheme (furlough scheme).

Mr Jessop added that there was reason to be positive about how well the economy had recovered from the first national lockdown, saying: ‘So far the UK has seen the smallest fall in employment of any major European country. The government has actually done a pretty good job at protecting jobs and I think in an environment of local lockdowns it can probably do so again.

‘We’ve got one of the strongest recoveries in the world at the moment. I’d be relatively upbeat about the economy.

‘I still think there’s a good chance the level of GDP is back to pre-Covid levels by Christmas, which I think will be a lot earlier than most people anticipate.

‘There probably will be a bump in unemployment in the autumn but I think there are good reasons to think it will be quite limited, for example most people have already come off the furlough scheme.’

Mike Cherry, National Chair of the Federation of Small Businesses, also warned that a largescale lockdown would be harmful.

He said: ‘The first national lockdown was incredibly damaging for the vast majority of small businesses – if we can avoid a second through the utilisation of alternative measures to contain the virus, that would give hope to a lot of small firms as they try to get back on their feet.

‘Small firms are resilient. Throughout the course of this year, many have found ways of operating productively from home, offering alternate services and galvanising their online operations.

‘However, many firms – not least those in the incredibly hard-hit leisure and hospitality sectors – that rely on bricks and mortar operations will find future lockdowns, including those at the local level, increasingly difficult after struggling immensely over the past few months. 

‘This is why it is absolutely vital that small firms which are affected for an extended period by restrictions receive the support they’ll need to bounce back. In any case, given the severity of this recession, we’ll need a massively pro-enterprise Budget – that eschews tax rises and promotes start-ups – in the coming weeks.’

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