Questions and answers about coronavirus and the UK economy
Questions and answers about coronavirus and the UK economy

Arms race

Even as the UK’s vaccine rollout continues to gather momentum, the moral and economic arguments for ensuring global immunisation mount. At home, promoting an even recovery across regions and sectors remains paramount.

Newsletter from 7 May 2021

Well over a billion doses of coronavirus vaccines have now been administered around the world. But with a total global population of nearly eight billion and wide cross-country variation in the percentages of people vaccinated, a huge number of arms are still awaiting injections. And as the World Health Organization chief Tedros Adhanom Ghebreyesus and European Commission president Ursula von der Leyen noted back in the autumn: ‘None of us will be safe until everyone is safe. Access to vaccines, tests and treatments for everyone who needs them, anywhere, is the only way out.’

This week’s lead-off article on the Economics Observatory echoes this view. ‘When faced with a worldwide pandemic, controlling the disease globally is a necessity and in each country’s national interest’, the researchers explain. Their conclusion that as new coronavirus variants emerge, we may only be as protected as our ‘weakest link’ is exemplified in the dire news from India and potential spillovers to the rest of the world.

Co-author Flavio Toxvaerd (Cambridge), who’s been working on the economics of infectious diseases (‘economic epidemiology’) since long before Covid-19, has written about many of the fundamental issues at the heart of this crisis.

At the Observatory, he’s covered the difficult trade-offs facing policy-makers; the importance of recognising the impact of individuals’ actions on others’ wellbeing (what economists call ‘externalities’), implying the need for coordinated public action, particularly in times of a deadly contagion; how people’s behaviour changes in response to protective measures such as mandated wearing of face masks; and misperceptions about the extent to which lockdowns save lives – the pound-of-flesh fallacy.

In his latest piece, he’s teamed up with independent economist Tony Yates, who has also blogged and tweeted widely on the pandemic, including calling for the establishment of a UK Centre for Economics and Epidemiology. This would be an independent public body charged with producing integrated economic and epidemiological forecasts, analysis and options for public health and economic policy.

In their new Observatory piece, Flavio and Tony explore the challenges of ‘vaccine nationalism’ – the race among governments to secure Covid-19 vaccines for their own people despite the wider collective benefits of cooperation. The conflict between national interests and global outcomes that are both morally desirable and economically beneficial is complicated by the nature of vaccine development, which is typically done by big pharmaceutical companies like Pfizer, Moderna and AstraZeneca.

This issue has been widely discussed in the past couple of days following an announcement by the US trade representative Ambassador Katherine Tai that she supports suspending intellectual property protections on Covid-19 vaccines in the expectation that it will lead to scaled-up manufacturing and more jabs in arms sooner.

Whether patent waivers can indeed provide a rapid boost to vaccine production is a key question. The potential impact on future pharmaceutical innovation is another important consideration. As recent IGM Forum surveys show, some economists worry that removing intellectual property protections could have a negative impact on vaccine development efforts for future variants of SARS-CoV-2 or for the next pandemic. That said, a great deal of government investment has already gone into developing the current crop of vaccines, and the research behind them will no doubt inform future discoveries.

Levellers?

We plan to explore the global public health issues around vaccine production and distribution further in the coming weeks. We will also be looking more closely at what’s happening to the economic health of the nations and regions of the UK in the wake of the pandemic, Brexit, yesterday’s election outcomes and reiterated government promises of ‘levelling-up’.

Last week, as part of the series of Observatory articles brought together by one of our lead editors, John Turner (Queen’s University Belfast), to mark the centenary of the partition of Ireland, we explored the big economic challenges facing Northern Ireland, not least persistently low productivity and the legacy of the Troubles.

This week, Andrew Henley (Cardiff) asks similar questions about Wales, focusing particularly on the Welsh Government’s 2015 legislation – the Well-Being of Future Generations Act – which requires that long-term considerations of poverty, health inequalities and climate change are at the forefront of policy-making. Amid speculation that these demands might conflict with UK ambitions for improved productivity and levelling-up, he concludes that the two agendas can be combined in pursuit of inclusive and clean economic growth.

The final stop on our most recent tour of the nations is Glasgow, where we collaborated with the Scottish Economic Society on a special session at their annual conference last week. Two of our lead editors – Tim Besley (LSE) and Graeme Roy (Glasgow) – were joined by Graham Brownlow (Queen’s University), Andrew Henley, Tanya Wilson (Glasgow) and our Bristol colleague Helen Simpson to discuss the different approaches taken by each of the devolved nation’s governments during the pandemic and the effects these have had on both public health and economic outcomes.

A recording of that online conversation should be available soon. In the meantime, Graeme and his Strathclyde colleague Stuart McIntyre wrote an Observatory piece in February on the impact of devolution in the pandemic. This includes links to the many other articles we’ve posted on local, regional and national effects of Covid-19.

Graeme has also just published a piece in The Herald on lessons from our series on Ireland for discussions of Scottish independence. And we intend to return to Glasgow in person in November with economic analysis and commentary around the United Nations Climate Change Conference, COP26.

Damaged goods

Our final new piece this week is an update on one of our greatest hits in terms of readership and citations: Paul Mizen (Nottingham) and colleagues at Stanford and the Bank of England have taken a fresh look at the UK firms and industries that have been most badly damaged by the pandemic.

Analysing responses to a monthly survey of around 3,000 chief financial officers of small, medium and large firms (the Decision Maker Panel), as well as other data from the British Chambers of Commerce, the Confederation of British Industry and the Office for National Statistics, they find that from April 2020 to March 2021, the average firm’s sales were 21% lower and their investment down 26%.

As expected, the sectors and businesses that have been most affected by lockdowns and other social restrictions are the ones that have suffered most in terms of loss of sales and impacts on staff. It is also these industries, principally those related to food, travel and leisure, which face significant future uncertainty. The full re-opening of gyms, pubs and restaurants due later this month will undoubtedly be welcome, but they will still face considerable challenges in recovering their business viability.

Figure 1: Expected impact of Covid-19 on sales and employment from 2020 Q2 to 2021 Q1 by industry

Source: DMP
Note: Questions: ‘Relative to what would have otherwise happened, what is your best estimate for the impact of the spread of coronavirus (Covid-19) on the sales/employment of your business in each of the following periods: 2020 Q2, 2020 Q3, 2020 Q4, 2021 Q1?’ Estimates for 2020 Q2, Q3, Q4 and 2021 Q1 were based on the July 2020, October 2020, January 2021 and March 2021 DMP surveys respectively.

What’s next?

Finally, a reminder that our first hard copy publication will be coming out soon: if you would like to receive a copy, please send us your details here. We are also planning our own annual conference, working with the Bristol Festival of Ideas on an event to be in held in person in mid-November with top researchers, senior policy-makers, practitioners and journalists. And as we approach the first anniversary of the launch of the Observatory on 1 June, we count more than 300 articles published, more than 800 subscribers to this newsletter and more than 3,000 followers on Twitter.

As always, please do spread the word to colleagues, friends or family who might be interested in what we’re doing. And do think about submitting a question for us to answer: that’s what we’re here for.

Author: Romesh Vaitilingam
Photo by Gustavo Fring from Pexels
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