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More debt, shrinking GDP: the impact of England's new lockdown

LONDON (Reuters) - British Prime Minister Boris Johnson has ordered England back into lockdown to slow the spread of COVID-19, a move that will add to the country’s 2 trillion-pound ($2.6 trillion) debt mountain and cause the economy to shrink again.

FILE PHOTO: An empty bus is driven through the quiet streets outside the Bank of England in the early hours, as the city is deserted at night like never before, while the coronavirus disease (COVID-19) lockdown continues, in London, Britain April 22, 2020. REUTERS/Dylan Martinez

Below are comments from analysts about the expected impact of the lockdown on the economy.

DEUTSCHE BANK

- November GDP will probably plunge by a monthly 6-10%; fourth-quarter GDP is likely to drop by between 2.5% and 3.5%.

- The Bank of England is now likely to increase its bond-buying programme by 100 billion pounds at the end of its November meeting on Thursday. Deutsche Bank had previously expected an increase of 60 billion pounds.

CITI

- GDP will shrink by over 4% in the fourth quarter, or by more if there are longer lockdowns.

- Borrowing in the current financial year is likely to hit 411 billion pounds, or 20.8% of GDP.

- BoE likely to expand its asset purchases by 75 billion pounds on Thursday, versus 50 billion pounds expected before the lockdown announcement.

BERENBERG

- November GDP will slump to 12% lower than its level in September. Fourth-quarter GDP will be 5.5% below its third quarter level, compared with a previous forecast of an unchanged outcome.

- The Bank of England is likely to announce 100 billion pounds of bond purchases on Thursday and may launch additional credit support.

J.P. MORGAN

- Britain’s budget deficit this financial year will hit 20% of gross domestic product - twice its peak after the global financial crisis - with the extra stimulus costing over 20 billion pounds.

- GDP contracts by 1.5% in the fourth quarter, a much smaller quarterly hit than a crash of nearly 20% in the April-June period which covered the first lockdown, largely because Britain’s economy is still 9% smaller than before the pandemic

- Also softening the hit this time: no closure of schools, manufacturing and construction firms asked to stay open, better preparedness by firms not asked to close, and households better positioned to use online services and work from home.

GOLDMAN SACHS

- The economy will shrink by 2.4% in the fourth quarter - rather than grow by 3.6% as the bank had previously expected - before expanding by just 0.4% in the first quarter of 2021.

MORGAN STANLEY

- Cut its fourth-quarter GDP growth forecast to minus 3% from minus 0.2%.

OXFORD ECONOMICS

- GDP to shrink by 3% in the fourth quarter. A factor which will help cushion the blow is the likely rush by companies to stockpile ahead of a possible Brexit shock at the start of 2021.

ING

- November GDP to fall 6-7%, and fourth quarter GDP to drop by 1.5%, assuming lockdown measures end in December

- The new lockdown “may well also add further political impetus for both sides to agree a UK-EU trade deal over the coming days.”

Writing by William Schomberg and David Milliken

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