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The outlook for the UK economy, interest rates and inflation

- Philip Shaw, Investec Chief Economist



The future of Covid-19 – what’s next?

- Professor Michael Barrett, Institute of Infection, Immunity and Inflammation, University of Glasgow



The future of Covid-19 – what’s next?

- Professor Michael Barrett, Institute of Infection, Immunity and Inflammation, University of Glasgow



  • Philip and Professor Barrett answer questions on travel, the efficacy of local lockdowns, easing restrictions, the global economic recovery, the risk of another pandemic, and the future of hygiene habits.

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After months of good news, including declining Covid-19 cases and a historic vaccination push, the tone shifted with the emergence of the new Indian variant, which has cast doubt on the UK’s timetable for reopening.  

The UK has recently seen an accelerating rise in Covid-19 infections caused by a variant of the virus first detected in India last year. Now, scientists are investigating the increase to understand whether it will impact Britain’s end-game roadmap.


Optimistic outlook


While the threat is concerning, Professor Barrett said the good news is that the threat has been diminished following evidence that the current vaccines provide some protection against the new strain.


“The overwhelmingly good news was the fact the variant, which initially arose in India, is susceptible to current vaccines. This means people who have had two vaccine shots will not, in all likelihood, be hospitalised or die from this new variant,” he said.


That, he said, means the UK is still well on track to finding a way out of this pandemic. Moreover, Professor Barrett clarified that the vaccine also works against previous new variants associated with Brazil, South Africa, and Kent.


One remaining doubt 


While Professor Barrett declared himself optimistic due to the “phenomenal” success of the vaccines, his one remaining worry is that variants may mutate into more evasive forms. The Indian variant, for example, is less susceptible to vaccines than previous variants.


“As more and more people across the world get vaccinated with those original S-antigen vaccines, we are going to be putting new pressures on the virus, potentially triggering accidental mutations which are even less susceptible to the vaccines,” he said.


The positive news, Professor Barrett said, is vaccines can be readily adapted to cover these new variants as well. Nevertheless, he said there will always be a time lag between variants appearing, producing a new vaccine, testing a new vaccine, and the logistics of getting those new vaccines into the population – and this remains his concern.


Will there be a third wave? 


Professor Barrett believes a third wave is inevitable, irrespective of Indian or any other new variants, due to the remaining number of people who have not been vaccinated – particularly younger people.  


“Young people will go out and they will infect each other. We have got testing and we will find they are infected through the testing system. So, I think we will watch numbers go up from around 2,000 now, to 4,000, 5,000, or 6,000 a day during the summer.”  


Professor Barrett predicted that the majority of new infections would have no symptoms or only a mild cold. Thus, the third mini-wave will likely be divorced from the hospitalisations and death we have seen.


“This is not something to ignore altogether because we still do not yet know what long-term consequences things like “long Covid” may have on the population. But I do not foresee the government being obliged to call for another lockdown, as lockdowns are to prevent hospitals from overfilling and people from dying needlessly because they cannot get hospital care.”


While Professor Barrett had some lingering concerns, he was convinced England is nearing the end game. Barrett’s words resonated with the webinar’s attendees, about 60% of whom said in a poll that they thought the lifting of all social restrictions in the UK should go ahead as planned on 21 June.


Barrett also thought it was time to consider the lessons from the pandemic and prepare for the next outbreak, which centred around five main themes.


Professor Barrett’s five lessons from the pandemic


1. Act tough, act fast


“The UK did not act tough or fast enough. Contact tracing was not effective enough as, while the contacts were being made, the enforcement of critical quarantine was a failure. In the future, we need to take a more serious approach to mandatory quarantines, and this should include building out app-based technology.”


2. Follow the good science 


“We need to follow the good science and avoid the bad. I think the government did want to hear alternative opinions, but the herd immunity policy was always going to be catastrophic. Scientists who were promoting that policy should have been defeated in any rational debate, and epidemiologists who really did understand the pathology and the risks should have been listened to earlier.”


3. Sustain epidemic surveillance 


“We now have a world-beating capability to quickly screen for viruses. This is enabling us to see where the clusters are and where we need to intervene, perhaps locally, to prevent us having to intervene nationally. We need to maintain this infrastructure, not just for Covid-19, but for the next pandemic-causing virus or pathogen.”


4. Invest in technology 


“We need to prepare for the next pandemic through technological development. Just a year ago, I would have said there is no way we would have vaccines in 2021. By investing in our modern understanding and ability to manipulate genetics, we developed RNA vaccines that reached fruition in time to roll out in a crisis. We also need to apply this approach to testing.”


5. Overhauling medical regulation


“One of the reasons I would have thought it impossible to roll out vaccines for use in 2021 is that with any drug development I have been involved in, you end up going into the regulatory process literally for years. Because of the emergency situation, regulatory authorities were able to put more resources toward the Covid-19 approaches. Still, we need to look at medical regulation so we can pass new milestones.”

An economic snapshot

According to Investec Chief Economist Philip Shaw, the increased optimism over a route back to normalcy is being reflected in the UK economy, with data showing a stronger-than-expected recovery. For example, gross domestic product (GDP) grew by 2.1% in March on the month.


“Surveys for April and May have been very buoyant,” Shaw said. “If you look at the numbers of retail sales, March rose by 5.1% in volume terms on the month, which is remarkable considering non-essential retail was effectively still closed for a lot of that period, and 9.2% in April.”

“Implications for GDP growth bode well as a whole. We have notched up our growth forecast for 2021 to 7.7%, up from 7.5%, but we could easily see economic growth over 2021 exceeding 8%. For 2022, we reckon we will get 5.5% growth.”


What does that mean for interest rates? While the Bank of England is reviewing how to begin removing its unprecedented levels of economic stimulus, Shaw is inclined to believe policymakers will wait until next year before any tightening of its monetary policy stance.

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