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A year in lockdown

Tuesday next week marks a year since the UK’s first national lockdown began. The end of our third period of compulsory confinement is on the horizon, but the damage that Covid-19 has caused to our health, wealth and wellbeing is likely to be long lasting.

Newsletter from 19 March 2021

Exactly one year ago, the Prime Minister announced that the UK could ‘turn the tide’ on the coronavirus crisis within 12 weeks. Those weeks have now turned to months – and while we may have grown strangely accustomed to life at home, few could have imagined that a year on we would still be in lockdown.

With over 25 million people now having received their first dose of the vaccine and a path out of the restrictions mapped, the end of the pandemic might feel tantalisingly close. Yet its effects on people’s lives – from the devastating loss of loved ones to missed education, job loss and financial hardship – will persist.

Indeed, as one of our earlier newsletters said, we are perhaps only at the end of the beginning of this crisis. That theme runs through this week’s articles on the Economics Observatory, including the effects on trade, inequality and children’s mental health. As the authors stress, these are complex challenges that will take time to overcome.

School, interrupted

Last week, many children in England returned to school for the first time since their single day in the classroom in January. Most will have missed as much as 21 weeks of in-person schooling, which has led to concerns about learning losses and how they might be made up.

But the focus of an Observatory piece by Jo Blanden, Claire Crawford, Laura Fumagalli and Birgitta Rabe is on the negative effect of school closures on children’s mental health. They show that those who have spent longer away from the classroom have experienced greater declines in their mental wellbeing – an effect that seems larger and may last longer than the direct impact on their education.

Children’s wellbeing had already dropped in 2020 compared with previous years, and it has declined further as the pandemic goes on, making these findings particularly worrying. Some children will be more affected than others: as Sarah Smith pointed out last week, teenage girls’ mental health has suffered more than that of boys during lockdown.

How long these effects will endure is unclear, but they are unlikely to subside quickly without policy action. To date, proposed educational measures, including additional tutoring, longer school days and shorter holidays, have focused on learning loss. But children’s wellbeing needs to be taken into account, which could explain parents’ limited support for extended time at school.

Wealth inequality

Throughout the pandemic, those already vulnerable or in poverty have experienced rising hardship. For example, over half of adults in families in the lowest 20% of the income distribution had to borrow money last spring to cover everyday costs such as housing and food.

Conversely, as Helen Hughson underscores in an Observatory piece on wealth inequality, affluent households have been well placed to weather the storm. Not only does their wealth act as a buffer against income shocks or job loss, but evidence suggests that they have saved more during the pandemic than usual.

Indeed, household savings as a proportion of disposable income grew by 19.5% between the first and second quarters of last year – a record high since 1987. Fewer opportunities to spend on holidays, eating out and live entertainment have resulted in more money in the bank for the well-to-do – a total of £44.6 billion more in accounts across the UK.

The difference in debt and savings exacerbates existing wealth inequality, which is already striking. Financial and business wealth make up a larger share of richer households’ overall wealth. For those worth over £10 million, these types of assets constitute 72% of their wealth, compared with only 10% for those with less than £250,000 – see Figure 1.

Figure 1: Composition of wealth by total wealth

Source: Author’s calculations using Office for National Statistics Wealth and Assets Survey 2016-18.
Note: This chart shows the composition of individual total net wealth according to wealth in each of the broad asset categories, and by range of total net wealth. It excludes those with negative net wealth (that is, those who are overall in debt).

Trading places

The latest data on UK trade reveal significant changes over the past year. Since January 2020, UK imports of goods from the European Union (EU) fell by 16% while UK exports of goods to the EU fell by a staggering 38%.

As set out in this week’s data piece by Thomas Sampson, trade with non-EU countries has also been affected but to a lesser extent – see Figures 2 and 3. UK exports to non-EU countries were only 8% lower than the previous year, and UK imports from non-EU countries were down 9%.

Figure 2: UK goods exports, £ million

Figure 3: UK goods imports, £ million

Source for Figures 2 and 3: Office for National Statistics (ONS); data exclude trade in precious metals

These declines coincide with national lockdowns, which suggests that restrictions have played a role. But the differences in trade with EU and non-EU countries are likely to reflect Brexit, as customs checks on UK exports and other barriers to trade were introduced in January.

Trade may rebound once early teething problems are worked out, but some reduction may be permanent. As Thomas explains, ‘doing business with the EU will be more costly from now on than it was before Brexit’ and some UK firms will cease exporting. The hit to trade will only be exacerbated when customs checks are introduced on imports from the EU in 2022.

Gender inequality

Our final piece looks at the pandemic’s disproportionate toll on women, continuing the theme from last week. A team of development economists explore how gender disparities have widened in low-income countries during the crisis, focusing particularly on Sierra Leone.

Like women in richer countries, those in low-income countries have reduced working hours or left jobs to take on caring responsibilities. But they have also been at greater risk of infection because of the sectors in which they work – and they are less likely to own a mask or have detailed information on the symptoms or spread of coronavirus than men. Maternal healthcare has also declined as resources are diverted to care for Covid-19 patients.

To ensure that these inequalities don’t widen further, particularly as vaccination efforts begin, the researchers call for information campaigns that target women’s social networks. They also identify the need for social protection and crisis relief programmes specifically designed to target households headed by women.

Coming up

Next week, we stay in sub-Saharan Africa with a piece by Lotanna Emediegwu and Emmanuel Oluwole Oni on how experiences during the Ebola pandemic have informed responses to Covid-19.

In the coming months, we plan to explore digital innovation, vaccine nationalism and the path to a green recovery. If you have questions on these or any other topic, please submit them here. Equally if you would be interested in contributing to the Observatory, do get in touch (office@economicsobservatory.com).

You can stay up to date on all our upcoming articles on Twitter (@EconObservatory) and by signing up to receive our weekly newsletter directly to your inbox.

Author: Ashley Lait
Photo by Ellen Auer for Unsplash
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