JPMorgan says a two-week lockdown in the UK could slash 2% off GDP

• A two-week lockdown in the UK could slash 2% off the country's monthly gross domestic product, a JPMorgan economist said.
• New measures against COVID-19 in the UK could lead to a "greater policy response" in the form of further stimulus and support for affected workers, JPMorgan's Allan Monks wrote in a note dated September 21.
• Closing down the hospitality industry could lead to a behavioral change, which might mean "the indirect impact might end up being larger, or longer lasting."
• Prime Minister Boris Johnson's scientific advisers have said the daily number of cases in the UK could reach 50,000 every day by mid-October without further measures.
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A two-week lockdown in the UK could cut 2% off economic output and likely trigger further fiscal stimulus, according to JPMorgan.

A resurgence of cases in Britain has led to new restrictive measures across the country, with people again being asked to work from home where possible.

The government also introduced a 10 p.m. curfew for pubs, bars, and restaurants and a limit on wedding invitees to 15 guests only. People working in hospitality and retail are mandated to wear masks.

Hospitality was the worst-affected sector in the second-half of the year, and has not seen a full recovery yet. Food services, hotels, and accommodation contribute to around 3% of UK's GDP, while arts and entertainment add another 1.5%.

A shutdown in the sector is largely expected to last around two weeks, knocking off 2% from monthly GDP and about 0.6% from quarterly GDP.

Britain has been the worst affected country in Europe by the coronavirus outbreak. The disease has killed around 40,000 and infected 10 times that many. Cases are rising by more than 4,000 a day at present.

Considering a behavioral change that a two-week lockdown could bring, "the indirect impact might end up being larger or longer lasting – especially if the lockdown were extended or repeated," JPMorgan economist Allan Monks wrote in a note dated September 21.

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Any sort of lockdown would likely usher in a "greater policy response" in the form of further stimulus and support for affected workers, Monks said.

The Bank of England has lowered rates to near zero and pumped billions of pounds into the economy, while the government has handed out billions in employment benefits and other forms of support.

Prime Minister Boris Johnson has been under pressure to tighten social-distancing guidelines as the number of new infections increase. 4,368 new COVID-19 cases were reported on Monday.

Johnson's scientific advisers have said the UK could reach 50,000 new cases a day by mid-October without further measures.

Separately, the Bank of England has warned of an "unusually uncertain" economic outlook and expressed openness to negative rates as an option.

Despite a recent rise in business activity, bank officials expect economic output to be 7% lower in the third-quarter than at the end of last year.

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