When will the Lockdown end?
1st May 2020
There is one single point that is most important for determining the future path of your investments. When can they switch the world on again? It is of course the same question that will determine the future path of all our lives.
We have spent some time crunching the available data that shows us when the lockdown in the UK is likely to end. There are a few points we must note. Firstly, we can analyse the data and find the most logical time for a lockdown to end but of course the politics may take over. Secondly, all the data shows that it is a full lockdown which really supresses the virus. The lesser social distancing approaches seem to have very little impact indeed. For this reason, we can expect that we will largely be in a state of lockdown until the case numbers in the UK have fallen very significantly. There may be very minor loosening of restrictions before then – but they will be minor. Finally, all the analysis we can show today is only based on what the virus itself is currently doing in the population. Trends can change.
With all of those health warnings, what is the best current estimate? The government has chosen a tactic which suggests it will seek to employ mass testing and track and trace as a means of supressing the virus to a level that the NHS can cope with whilst re-opening the economy.
Understanding when the UK can open is based upon understanding this technique. Our quantitative analysis guru Dr Russ Bubley puts it like this: “We’ve been told that the government is looking to hire 18,000 people to work on track and trace. Also, that the NHS is looking to develop a Bluetooth app that will aid in finding contacts.
‘But how many contacts will need to be traced? It depends on the protocol used.
‘Imagine lockdown ends, and we tell people to self-isolate if they have symptoms and call for a test if they are still ill a week later. There will still be asymptomatic people out there infecting others. Suppose we manage to keep it down to 1,000 new community cases each day. For every community case that comes to light, that person will have been infectious for maybe a week prior. We can estimate that they may have had 30 unique contacts in that week (although this will vary widely). Each may require 2 tests - an immediate one, and one a week later, to check. That is 60,000 tests a day. Plus, tests will continue to be needed for all hospital admissions, and for front-line staff.
‘This level feels challenging, but possible.”
So when might we be down to the level of 1,000 new cases a day? Imperial College estimates that there are – as of the 29th April – around 13,266 cases in the community. The infections per day are declining at a compounding rate of 5.43% per day. At this rate it would take 46 days for infections to reach that 1,000 a day level. This would be around 14 June 2020. Of course, things may be better than this, there may be a lag in registering gains or of course people may start to flout the lockdown rules as the daily newsflow improves.
Another way to think about this problem is when will it be politically possible to re-open the economy? The political pressure hits in two ways. In one sense there is pressure to re-open, this is being felt by the government from the right of the Conservative Party in particular. However, there is also the political risk of re-opening and then being held responsible for every death beyond that point.
With this in mind, we believe the actual number of daily reported deaths will need to fall substantially for lockdown to be released. The good news is the death rate is falling a lot. This is hard to see in the daily data released by the government. It is keen to avoid creating a sense of complacency. As the daily death rate fluctuates a lot it is almost intentional from the government that we do not see the pattern of sharp improvement. However, if we place a trendline on top of the daily death numbers which looks at the average death rate for the past seven days each day (a moving average) then we can see the decline.
On this basis we can see there was a clear peak in the first week of April and a fairly consistent rate of decline since that point. If we extrapolate this trend (and trends can always change) then we reach the point where less than 100 people are dying each day around…wait for it…14 June.
For these reasons our best estimate is that whilst there may be some gradual release of lockdown before this point, we will find that most of the restrictions are in place until roughly the first half of June. After this we may see most things re-opened with some on-going social distancing in place.
The government may also conclude that a relaxation in the early part of June would provide a couple of weeks for the economy to switch back on again – creating the possibility of some better economic data in the third quarter of this year which starts in July.
The UK lockdown is of course just one small part of the overall global picture. The market cares much more about the US and the wider European situation than purely the UK one.
Other European economies are perhaps three or four weeks ahead of us and making tentative steps to re-open. The US meanwhile appears to be somewhat rushing ahead – risking a second peak. Nonetheless, we can take comfort that provided policy works and is executed correctly we do seem now to be at the beginning of the end. Just don’t expect to be holding that end of the lockdown house party before the end of May.