From the US to the EU: the UK's economic response to the second wave compared to other countries
As the second wave of the coronavirus returns to the UK with a vengeance, cases of people testing positive for the virus appear to be reaching an all-time high, with the daily count in mid-November overtaking even the highest rates that were reported in spring. In an attempt to curb the spread of the virus, the government released a series of national restrictions that were implemented across the country on November the 5th; the most notable of these restrictions being the temporary closing of all non-essential business and venues, and instructions for all individuals to remain at home (unless for specific reasons).
Despite the 'circuit-breaker' lockdown successfully lowering the rates of infection as we hastily head into the winter months, these tighter regulations also leave large swathes of the UK population without a stable source of income. So, as a new £150bn stimulus package (aimed at boosting the UK's economy and supplementing the income of millions of people) is laid out by the Bank of England, and various financial support schemes are being extended throughout the winter, we're turning our gaze further afield, to analyse how the rest of the world is coping with the economic impact of the second wave.
From China to the Czech Republic, no two countries have handled the virus in the same way. With differing cultural perspectives, healthcare systems, and approaches to economic welfare shaping each country's unique response to the second wave, some countries seem to be emerging significantly more unscathed than others. Some barely experienced a second spike in cases at all. So, in this article, we're going to take a look at the success stories and cautionary tales that can be found in global responses to the second wave - and compare the UK's economic strategy against other countries that have also been grappling with a re-emergence of Covid-19. But before this, what countries have been hit the worst by the second wave, and why?
As soon as Covid-19 regulations began loosening across the UK in early July, health experts warned ministers to prepare for a 'second spike' of infections later on in the year. So, before the dust from the first wave even settled, the nation was faced with the reality that the coronavirus may be lurking around for far longer than expected.
Despite being made aware of the cyclical nature of the virus, along with the additional strain the NHS is under throughout the winter months, the government largely relaxed restrictions in the summer. They even introduced schemes such as 'Eat Out to Help Out' in an attempt to boost the economy by bringing in more revenue to the hospitality sector. For reasons like this, alongside a widespread flouting of covid-guidelines, and the increased transmission rates brought on by colder weather, the UK has witnessed a steep increase of positive Covid-19 cases, with the worst-hit regions predominantly being located in the North West of England. However, despite the highest number of cases being recorded in this area, no part of the UK has been exempt from this resurgence of cases. And even though recent covid-related deaths haven't nearly reached the same heights as they did during the first wave, on the 11th of November, the UK was tragically the first nation in Europe to surpass 50,000 fatalities from the virus.
Sadly, aside from the UK, many of our European neighbours also seem to be suffering badly from the impact of a second wave. Despite bearing much of the brunt of the first wave of the virus, and being aware of the potential of a future surge in transmissions, the continent appears to be at the epicentre of the pandemic once again, with Europe even surpassing the United States in cases per capita at the end of October.
Among the continent’s worst-hit countries are France, Czechia, and Belgium. France and Czechia both saw the steepest incline of recent cases, with France slightly taking the edge as its daily cases rose to around 34,500 a day in mid-October. Czechia and Belgium also witnessed a steep surge in daily cases, and they are both home to most of the regions with the highest number of recent Covid-19 cases, with 12 of the top 20 being located in Czechia. Countries like Spain, Italy, and Germany have also seen a sharp increase in COVID cases. Fortunately, due to lessons learnt in the first wave, deaths have predominantly stayed much lower than those recorded during the earlier surge back in spring.
But why was Europe hit so severely by the second wave? According to Michael Meyer-Hermann, a modeller at the Helmholtz Center for Infection Research, the resurgence of cases in Europe was primarily due to summer not being appropriately used to try to drive cases down to zero. Instead of continuing to be vigilant of the virus, and religiously following protocol, Meyer-Hermann argues that many European countries adopted an increasingly casual approach to mask-wearing and social distancing while enjoying the holiday season. This, combined with the advent of colder weather and government incentives to help struggling economies along, is largely what's being understood to have contributed to the recent radical increase in cases across Europe.
Despite Europe overtaking the United States in COVID cases per day as the second wave swept through the EU, the USA is now also experiencing a similar, sharp increase in new cases. According to data from Reuters, the nation has recently reached a record high of 69,494 daily cases, with deaths lingering at around 800 per day. This sudden increase in cases brings the total death count from the virus up to a sobering 246,000, a painful indicator of how poorly the virus has been contained in the country.
The extraordinarily high number of cases comes as very little surprise, however, as the government's response to the virus has proved to be extremely ineffective since COVID-19 first hit US shores in January. Due to a combination of market-driven healthcare systems, decentralised approaches to controlling the virus, and popular public sentiments to continue living life as normal, the US had the highest COVID-19 death count out of any country in the world. However, due to the absence of a centralised national lockdown after the first wave of the virus, it appears that cases aren't spiking up again as high as they are in some European countries.
In contrast to the cautionary tales of Europe and America's COVID response, not all countries have responded to the virus so inefficiently. Due to lessons learned from the 2003 SARS virus, and a more measured and consistent approach to containing the virus, East Asian countries such as South Korea and Taiwan have adopted much more successful strategies to mitigate the damage of the pandemic. The use of technology to provide citizens with consistent channels of information, in addition to maintaining an open and transparent dialogue between the government and the people, are two core factors that helped these countries to stay on top of the virus.
The trust that these systems helped to ensure made it easier for the governments to enforce practical measures that successfully reduced the rates of covid-transmission. So, due to a combination of these practical solutions and a widespread trust of the government's handling of the pandemic, South Korea only experienced a tiny spike in cases in late August, and Taiwan barely saw an increase in cases at all.
The circuit-breaker lockdown
As cases pick up again around the globe, a series of countries are adopting the 'circuit-breaker lockdown' model, which simply refers to a tighter set of regulations being introduced to try and lower the spread of the virus. Unlike the initial lockdowns that many countries experienced in spring, they aren't designed to be in place indefinitely, and typically last a much shorter time.
This model was used to slow a second viral wave in Singapore that peaked in early August, and since then has been implemented in countries such as New Zealand and Israel, to reasonably high degrees of success. Therefore, when cases picked up again in Europe, many countries felt like implementing a circuit-breaker lockdown seemed to be the next logical step to lowering the rates of transmission before we headed into the crucial winter months.
In late September, the UK's governmental Scientific Advisory Group for Emergencies strongly recommended the country implement a circuit-breaker that lasted for at least two weeks, to 'reset the incidence of disease to a lower level'. In addition to the UK, Germany has introduced 'lockdown-lite', which requires all bars, restaurants, gyms, and theatres to be closed for four weeks, while schools and essential-businesses remain open. Partial lockdowns have also been introduced in Belgium, Italy, and Greece.
States of emergency
After France saw hospitalisations from Covid-19 jump above the 9,100 thresholds for the first time since June 25, the government declared an official public health state of emergency. The state of emergency was implemented because it gives officials more power to deal with the spread of the coronavirus. With this newly-listed power, a curfew of 9.p.m to 6.a.m has been imposed on nine of the country's largest cities.
Following in this vein, Spain has recently entered into a state of emergency that is set to last at least six months, in a move that has been criticised by many of the country's citizens. The state of emergency will see an extension of bars, restaurants and entertainment venues being shut down, while also giving regions the legal backing and autonomy to decide curfews and travel restrictions. And while it's likely this transition will take a lot of pressure off the buckling health service, it's feared that letting smaller regions decide their own measures will create a patchwork of different restrictions across the nation.
Robust testing and tracing systems
Alternatively, as we mentioned earlier in the article, some countries have been able to avoid implementing widespread lockdowns and curfews that bring substantial damage to national economies, because they have been handling the virus more efficiently throughout the year. East-Asian countries like South Korea and Taiwan, in particular, have been able to largely avoid the re-emergence of a second wave through sticking to robust track-and-trace systems, voluntary social distancing measures, and isolations for those who test positive for the virus.
The impact this has on the economy is pronounced, with South Korea only looking at a 1% contraction in their GDP for the whole of 2020, making them the second best-performing economy in the world, behind China.
With the economic impact of tightening restrictions sending shockwaves across the country, here's what the government has done to try and support those whose income has been compromised by the second wave of the coronavirus.
Increased quantitative easing
Despite the UK officially falling into a recession following two consecutive quarters of negative growth in 2020, the Bank of England has recently launched a £150bn stimulus package as a result of the lockdown that was implemented across the country on the 5th of November. The Bank of England's Monetary Policy Committee (MPC) unanimously voted to increase its quantitative easing bond-buying programme, making them the first central bank in Europe to boost stimulus measures in response to a second wave of the virus emerging. This package was designed to cushion the economic fallout of more stringent COVID restrictions, bringing the total of the qualitative easing programme to a whopping £895bn.
Extension of government-backed loans
Government-backed loans are administered through private lenders, and they enable borrowers to receive loans with little or no interest rates, because the government subsidises the loans. Since the second lockdown has required all non-essential businesses to temporarily close their shutters, the government has decided to extend government-backed loans such as the Coronavirus Business Interruption Loan Scheme (CBILS) - to increase the amount of support available to small to medium-sized businesses (SMEs).
The Coronavirus Business Interruption Loan Scheme, which was due to end on the 30th of November, has been extended to the end of January 2021, so applications from businesses will still be processed up until this date. Compared to other loan schemes, the CBILS is predominantly catered towards slightly larger businesses, and if the company satisfies all the relevant eligibility criteria, they are eligible to borrow up to £5 million to help tide their business through this challenging time.
If your business is looking to apply to the CBILS, Market Finance offers a quick and fuss-free platform to access government-backed loans. Whether it's our friendly customer service team that's here to guide you through the whole process, the wealth of business advice we offer on our site, or our 100% no-fee guarantee, we're here to make sure you're getting the best deal possible. For more information on government-backed loans, and for details on how to apply, just visit our site here.
Extension of the Job Retention Scheme
Luckily, for the 9.6 million people who have been relying on the government's Coronavirus Job Retention Scheme for a basic income, the initiative has also been extended to 31st of March 2021. Previously designed to only last until late December, the new stimulus package issued by the Bank of England allows the government to continue paying employees salaries throughout the winter and into spring, helping to protect millions of people from becoming redundant as businesses temporarily close.
Popularly referred to as the 'furlough scheme', the amount that employers receive has also increased from 55% of total wages back up to the original 80%, and employers aren't expected to cover as much of the payments. Additionally, the option for flexible furloughing has also been introduced, as well as to more traditional-full time furloughing, so staff can work on a part-time basis and still be supported, as long as they are abiding by the up-to-date Covid-19 regulations. For more details on the scheme, as well as information on how to apply, visit the government site here.
Extension of the Self-Employed Income Support Scheme (SEISS)
Much like the employees who are currently supported by the furlough scheme, self-employed workers and small limited businesses are also able to access help from the government as covid regulations tighten across the country. Even though the first two instalments of the Self-Employed Income Scheme have reached an end, the third one, designed to financially support individuals from November to January, is open to applications as of the 30th of November.
The SEISS offers us taxable government grants that provide around 80% of self-employed workers' trading profits, with the amount being capped at £2,500 per month, per applicant. If you received the first two grants, you're likely to be eligible for the third one. However, you are now required to provide evidence of how your business has experienced reduced demand as a result of COVID-19, which means you are unable to make this claim if you are unable to work due to self-isolating or shielding.
For more information on the Self-Employed Income Support Scheme, and for details on how to apply, visit the YouGov page here.
As governments across the globe continue to place restrictions on movement, leaving millions of individuals in financially compromising situations, how do their economic responses to the second wave of the coronavirus compare to that of the UK's?
As we've addressed previously in this article, Europe was the continent hit hardest by the second wave of COVID-19. From France to Ukraine, tighter regulations have led to millions of EU citizens being left without a stable source of income, and, on a macro level, the disruption to crucial industries has contributed to a severe stagnation in the continent's GDP.
Luckily, the Eurozone ministers have started to review their economic response to the second wave of the virus, and it's likely that the 1.8 trillion euro recovery plan (set up by EU leaders in July) may be used to pump life back into struggling European economies. The details of this package are still being agreed upon between the bloc's governments and the European Parliament. Still, it's being assumed that the fiscal stimulus will be available at the start of next year.
With individual countries throughout the continent (like France and Spain) doling out large amounts of money on furloughed staff, and emergency loans to prevent nationwide bankruptcies and redundancies, many nations are in dire need of Eurozone funding sooner rather than later. In the meantime, as French Minister Bruno Le Maire remarks, Europe looks like it may be heading into a double-dip recession, and the path to economic stability looks like it may be long and drawn out.
As positive Covid-19 cases in America incrementally grow, so do the number of citizens that are falling below the poverty line. The recovery of the labour market has abruptly slowed down, and a mass shortage of jobs across the country has sparked a massive rise in unemployment rates. This mass unemployment has led to the demand for state unemployment benefits reaching a new high as of the 10th of October, with the number of cases peaking at 898,000 (compared with 845,000 in the previous week).
However, despite growing calls for a more comprehensive stimulus package to be administered throughout the country, the amount of support that the government is able to provide appears unclear, as Congress and the White House are unable to agree on a second fiscal stimulus package. With a limited amount of funding now being left in the Federal Reserve, and Wall Street's main stock indexes taking a tumble as faith in the job market decreases, if drastic and immediate action isn't taken, the US's economy will continue to contract; and millions more across the country may face economically turbulent times ahead.
Although many East Asian countries have not experienced a second wave as forcefully as many countries have in the West, lots of countries in the region have placed generous fiscal stimulus packages at the centre of their response. Despite low infection rates, South Korea has administered around £9.2 billion, or approximately 0.7% of the nations GDP, to struggling businesses or individuals impacted by the virus. Far from this being a one-off, they are continuing to support their citizens by pumping £173 billion into a loans-and-guarantee program; and, more recently, announcing a fourth round of financial stimulus, worth an additional £4.9 billion.
Taking a slightly different tack, China's economic recovery efforts were geared towards a £413 billion stimulus package that aimed to boost investment in the country's trade industry. Unlike many Western countries who prioritised supporting the incomes of the workforce through furlough payments, the Chinese government has appeared to prioritise their businesses interests to bolster their country's economy. And while this strategy has been criticised for providing little support to individual households, the method seems to be working, with China becoming the first country in the world to outgrow its economy after Covid-19.
So, as we reflect on the global responses to the second wave of the Covid-19 pandemic, both in terms of how governments mitigated the spread of the virus, as well as how they administered financial support, stark differences come to the fore. It's clear that there are obvious lessons to be learnt from countries like South Korea and Taiwan, who led with and stuck to a vigorous and comprehensive response strategy that centred around trust, clarity of information, and robust financial interventions. Also, by consistently enforcing sensible restrictions throughout the summer months, a second wave of the didn't virus pose as much of a threat to their economies as it has done to ours in the UK.
On the other end of the spectrum, like much of Europe, the US's response to the virus has proven to stand as a cautionary tale for the rest of the world to learn from. From the fragmented regional regulations, and the poor enforcement of social distancing guidelines and mask-wearing, to the lacklustre financial stimulus packages and the little help made available to the unemployed, it's clear that the US has failed on both mitigating the spread of the virus in the first place, as well as dealing with the subsequent economic fallout.
Therefore, after gleaning insights from the rest of the world, it's evident that in addition to implementing robust reactionary strategies, we should also preemptively work at preventing a surge of cases. This would give our economy time to recover, and prevent us from kicking the can down the road by entering into an endless cycle of lockdowns.