The sharp sell-off across financial markets on Monday is linked to fears about a global resurgence of the pandemic. Nowhere is that more evident than in the U.K., where R – the reproduction rate of COVID-19 – is approaching 1.7. That is akin to a nuclear event in terms of public health. An R at that reading could conceivably result in another round of lockdowns among select communities in the U.K. or a general lockdown.
At risk is the possibility of another economic lockdown.
Given the economic and financial risks, the prospect of another economic lockdown is one reason why the Bank of England is considering turning to negative interest rates to bolster economic activity should that happen. We continue to make the case that risks to the U.K., United States and global economic outlooks are skewed to the downside until there is a vaccine. Until there is a global plan to produce and distribute a vaccine, accompanied by follow-up health care, the global economy will not experience a meaningful recovery. No vaccine, no recovery.
For more information on how the coronavirus is affecting midsize businesses, please visit the RSM Coronavirus Resource Center.