November 02, 2020
UK: locking down the economic ruins_image

UK: locking down the economic ruins

  • The UK government has decided to follow other European states again into a sweeping nationwide lockdown. Such an aggressive response is more severe than I assumed, so I am downgrading my forecast again to contain an even deeper winter recession.
  • Additional fiscal support is slim but should postpone the bulk of the unemployment rise again. Deficits are also raised through lost revenue. Monetary policy is likely to continue absorbing the issuance and be ready to go into overdrive again if the gilt market breaks.

October 01, 2020
UK: winter is coming to crush the recovery_image

UK: winter is coming to crush the recovery

  • A second wave of the Covid-19 pandemic is motivating new activity restrictions, which seem set to get tighter as seasonality raises infections. I now assume this reaction function occurs and crushes the recovery over the winter.
  • Behavioural changes are likely to be reinforced by repeated restrictions, further impeding the recovery. The deficit outlook is boosted in response, and I now expect the BoE to announce £75bn more gilt purchases in Nov, and £50bn in Feb.

September 24, 2020
UK: fiscally focused on frustrating flows_image

UK: fiscally focused on frustrating flows

  • The government is replacing its furlough scheme with a wage subsidy, which will support some partially-viable jobs. Many jobs will be lost, without any new or significant scheme to encourage a smooth flow into expanding businesses.
  • Other announcements postpone the adverse cashflow effects of loans and tax being due during a 2021 depression. It's still mostly liquidity, not solvency support.