COVID-19 concerns rise as delta variant delays reopening and recovery 

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COVID concern indices have started increasing again as the delta variant and higher overall case rate may cause a delay to the final steps in the reopening of the UK economy. As a result, professional and family worries have increased by 15%. 
 


A second COVID Christmas! 
 
Despite the good progress with vaccinations, the coverage among younger people is still far from comparable to that of older age groups. Additionally, there is a stark difference in vaccination progress in the UK versus the rest of the world. These factors mean our COVID research panel members question how soon the outbreak will end – and they think we should most likely prepare for a second COVID Christmas. 
 
 
Clearer travel guidance needed 
 
While the UK government’s handling of the pandemic has improved significantly since March this year, the proportion of those either ‘very’ or ‘extremely’ worried about it has started creeping up again – from 0% last month to 12% now. The main issue is the ‘incoherent’ travel guidance, with some concerned that the rules for returning to the UK are not being followed as strictly as necessary to prevent the import of COVID cases. 
 
 
Re-evaluating risk in social activities 
 
The spread of the delta variant, paired with the uneven global rollout of COVID-19 vaccines, is causing UK pension professionals to re-evaluate their plans for the summer. Some now plan to see family in person later than they did two weeks ago, but many are keen to attend family gatherings – perhaps because the weather now permits such activities to take place outdoors. 
 
But our COVID panel is most cautious when it comes to going to the pub or travelling, even within the UK. Panel members went from being ready to engage in these activities last month to now postponing them on average by two weeks. In contrast, resuming work from the office and in-person business meetings now appear less risky to our panel – and many have moved their plans for these forward by one or two months. 
 
 
A delayed and uneven recovery 
 
Some UK pension professionals expect an initial ‘bubble’ of economic activity as more restrictions are lifted, but the discomfort with some social activities and delays to holiday plans point to an uneven and longer recovery. As a result, the expected minimum duration of the pandemic’s macro consequences has fluctuated substantially in recent months, but our COVID panel now does not expect a return to pre-pandemic levels of economic activity until at least the summer of 2023. 
 
 
Business confidence continues to suffer from the uncertainty around the last of the lockdown restrictions, originally expected to be lifted on June 21st. It is also not clear how government support will be scaled back and what the effect will be on different sectors of the UK economy – with parts of the hospitality and travel sectors still affected disproportionately. This will likely weaken sponsor covenants at some schemes, the early signs of which we might be seeing in data from the last two weeks. 
 
 
A perfect economic storm? 
 
Pent-up demand (especially in the consumer discretionary sector) is pushing inflation up. Our COVID panel considers it highly likely that interest rates will also rise. And with the government debt weight showing no signs of improvement, tax rates are also expected to increase. Does this spell a perfect storm for UK pension schemes, and will risks be balanced out by opportunities? It remains to be seen. 
 
 
When do you expect a return back to ‘normal’, and what risks are you most worried about? Click here to tell us in our bi-weekly survey. 
 
 

Previous articles in this series: 

 
 
 

About the COVID Concern Index 

 
This short survey helps gauge sentiment of our community on the pandemic. The results are distributed via the community newsletter. Until 31/08/2020, this was a weekly survey. From 01/09/2020, the survey shifted to a bi-weekly cadence. 
 
The COVID Concern Index values should be used as indication only and do not constitute advice. Their values are bound by the choices available in the survey on which they are based. 
 
COVID Concern Index: 
 
 
Expected minimum duration of outbreak: 
 
A methodology change took place on 06/10/2020, affecting data from 20/10/2020 onwards. 
 
Prior to 06/10/2020: 
 
 
Following 20/10/2020: 
 
 
Expected minimum duration of macro effects: 
 
A methodology change took place on 15/04/2020, affecting data from 21/04/2020 onwards. 
 
Prior to 15/04/2020: 
 
 
Following 15/04/2020: 
 
 
Macro rates index: 
 
 
Sector sentiment index: 
 
 
Concerned about the coronavirus outbreak and its macro implications? Click here to take part in the bi-weekly COVID-19 survey. 

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