The UK appears to be on a war footing. The enemy is an invisible one, the COVID-19 coronavirus. ‘We must act like any wartime government’, said Prime Minister Boris Johnson recently. We know he is a keen student of war-time leader Winston Churchill, who at the start of his tenure as war-time leader famously said:
‘What is our policy? I can say: it is to wage war, by sea, land and air, with all our might and with all the strength that God can give us; to wage war against a monstrous tyranny, never surpassed in the dark, lamentable catalogue of human crime. This is our policy. You ask, what is our aim? I can answer in one word: it is victory, victory at all costs…’
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The UK appears to be on a war footing. The enemy is an invisible one, the COVID-19 coronavirus. ‘We must act like any wartime government’, said Prime Minister Boris Johnson recently. We know he is a keen student of war-time leader Winston Churchill, who at the start of his tenure as war-time leader famously said:
‘What is our policy? I can say: it is to wage war, by sea, land and air, with all our might and with all the strength that God can give us; to wage war against a monstrous tyranny, never surpassed in the dark, lamentable catalogue of human crime. This is our policy. You ask, what is our aim? I can answer in one word: it is victory, victory at all costs…’
The kinetic energy of those words is palpable; the UK’s government fight against COVID has been anything but. The UK had the opportunity to take a global leadership role against the virus. It has world-leading research universities, a powerful government, and central involvement in all international bodies from the World Health Organization (WHO) to G20. Yet despite Boris’ exclamations, the UK has been prone to inaction or late action at best– in stark contrast to most other countries.
An odd attachment to herd immunity, which would mean allowing the population to be infected even without a vaccine in the hope of generating immunity, was the initial idea behind the choice not to act. Then, there was the simplistic modelling work, which appeared not to take heed of the explosive growth of cases in China, Korea and Italy – and more fundamentally the nature of exponential growth.
These ideas, unsurprisingly, have attracted serious flak and have now subsequently been discarded as the number of COVID cases has exploded. We estimate that the UK could see Italian levels of cases within two weeks. So, while other countries have already banned large public gatherings, closed restaurants and bars, and shut schools, the UK has only now come around to some these measures.
Then, there has been the poorly timed budget. The first COVID case was seen in the UK on 31 January; by budget day on 12 March there were close to 500 cases. And at the time, the cases in Italy had exploded to 12,000. But the UK decided to offer two budgets – a large one reflecting its election promise of infrastructure spending and another more modest coronavirus one.
The UK could have delayed the infrastructure version, and instead pivoted towards positioning the UK as a world leader in bio-medical sciences, medical diagnostics and genetics. We’re no longer in the Brexit world. Rather, we’re in the age of COVID and should be adopting the words of Keynes: ‘when the facts change, I change my mind’.
Throughout all of this, markets have taken notice (see chart). The pound has plunged to its lowest level since 1985. Stock markets are back to levels first seen in 1997. There is still time for the UK to turn things around, however – to learn from the successful strategies in other countries, to take a science-led approach to the pandemic and deploy some imagination on how the UK could re-engineer itself during this state of flux.
Chart 1: UK: Exploding COVID Cases, Collapsing Pound
Source: John Hopkins CSSE, Macro Hive
Bilal Hafeez is the CEO and Editor of Macro Hive. He spent over twenty years doing research at big banks – JPMorgan, Deutsche Bank, and Nomura, where he had various “Global Head” roles and did FX, rates and cross-markets research.
(The commentary contained in the above article does not constitute an offer or a solicitation, or a recommendation to implement or liquidate an investment or to carry out any other transaction. It should not be used as a basis for any investment decision or other decision. Any investment decision should be based on appropriate professional advice specific to your needs.)