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Xinhua News Agency, London, November 2. Financial observation: UK implements an economy lockdown once again, “a second crash”
Xinhua News Agency reporter Yang Hairuo
British Prime Minister Johnson announced on October 31 that, in view of the increasingly dire situation of the new corona epidemic, he planned to implement a four-week full-scale “footless” measure again in England from the 5th of November. Scotland, Wales and Northern Ireland have implemented stricter epidemic prevention regulations since October. In March this year, the UK implemented a comprehensive “foot ban” order.
British economists are concerned that the large-scale lockdown measures could cause the British economy to experience a “second crash”, but the economic losses caused are expected to be less than the first lockdown.
The economy may contract again
Paul Dale, a macroeconomics consultant economist at Capital International, predicts that due to the lockdown, the UK economy may experience zero growth or even a slight contraction in the fourth quarter of this year. He said, “All the signs point to a ‘second floor.’ Investment bank Goldman Sachs also predicts that the UK’s economic growth rate in the fourth quarter will change from a previously expected 3.6% increase to a 2.4% contraction.
The Oxford Institute for Economic Research, a British think tank, believes that since the new round of lockdown measures is not strict for the first time, the lockdown will cause less damage to the economy than the first. It is reported that the manufacturing and construction industries will continue to operate, and the continued opening of schools will allow parents to work normally. Furthermore, many industries still operate at a much lower level than before the epidemic, and a low base makes the room for substantial economic decline less.
However, representatives of British business groups believe that a new round of large-scale lockdown will put more companies in trouble. Caroline Fairbairn, director of the Federation of British Industry, said: “The second total lockdown marks the beginning of a cold winter.”
Adam Marshall, CEO of the British Chamber of Commerce, also said the new restrictions will deal a devastating blow to the business community. He said: “Many companies are now in a much worse situation than at the beginning of the outbreak. Surviving constraints on demand has become a challenge.”
Market response is temporarily stable
On the first trading day after the new epidemic lockdown measures were announced, the average price index of 100 “Financial Times” shares of the London Stock Exchange (FTSE 100 index) closed at 5,654.97 points on day 2, an increase of 77.70 points from the previous trading day. It is 1.39%.
In this regard, AJ Bell’s chief investment officer, Ross Maud, believes that although the lockdown will affect investor confidence, around three-quarters of the shares in the FTSE 100 index receive income from abroad, so the lockdown local in the UK will not affect it. Big. Furthermore, the market has assimilated expectations of blocking in advance last week.
As for individual stocks, online retailer Ocado, which has raised its earnings forecast, led the day, with an increase of 8.04%. Maude believes this clearly shows that investors are surveying the market, looking for companies that will benefit from the lockdown period.
But British Interactive Investment Company market manager Chad Hunt said investors still face a number of concerns going forward, after all, the impact of the second lockdown will spread to all industries. The aviation and tourism industries will remain paralyzed, the retail industry is adapting to shift its sales focus to online, and banks should consider increasing loan loss reserves.
The central bank can push for quantitative easing
Market analysis believes that the Bank of England’s Monetary Policy Committee is unlikely to cut already low interest rates and will rely on quantitative easing to cope with the next economic downturn again.
Samuel Thoms, chief economist at Pantheon Macroeconomics Research Company, said the current debt purchase target of £ 745 billion from the Bank of England will not be reached until the end of this year, taking into account the new lockdown policy and the future of the Bank of England. UK and EU. The uncertainty of the relationship negotiations may not be too late to extend quantitative easing until December. The central bank is expected to announce this week that it will buy another £ 100 billion worth of Phnom Penh bonds in the first half of 2021.
Martin Baker, an economist at the Oxford Economics Research Institute, said that applying quantitative easing policies can “raise the confidence of financial markets, businesses and consumers,” which will also help prevent unnecessary risks.
