UK economy potentially at risk as cases surge due to Indian variant

The UK has recently seen a rise in COVID-19 cases attributed to the newfound Indian variant.

The strain of the virus is much more infectious than the normal COVID-19 strain, consequently, around 3424 cases of the Indian variant have been identified in the UK.

At the same time, 734 positive cases had not been recorded, either due to technical issues or due to consumers avoiding quarantine.

Certain households, especially those on lower incomes, may not be able to afford sick days, hence, even though public health is important, these individuals may feel compelled to avoid quarantine to ensure that they can earn enough money to put food on the table.

This is especially evident as, during the pandemic, many families have struggled, as foodbank usage has increased by 33% with a record of 2.5 million emergency food parcels being handed out in the past year alone.

However, although these families going to work and maintaining their incomes does ensure that they retain their living standards, it does, unfortunately, create the conditions necessary for further spread of the virus as fewer individuals are obeying social distancing.

At the same time consumers who do not report their positive tests are an additional threat to public health, so, despite £37 billion being spent on the Track and Trace program, COVID-19 cases are still rising.

This means that the Track and Trace program may be an example of Government failure as irrational consumers are not following the scheme’s procedures, thus endangering public health and making the spending on Track and Trace regrettable as public health is decreasing despite the implementation of the scheme.

However, it is likely a small majority of households who do not follow the Track and Trace program, meaning that public health, especially due to the UK’s vaccine rollout, has actually bettered.

Despite this, experts and scientists still are vigilant regarding the risks associated with COVID, especially the Indian variant.

It is predicted that due to the Indian variant, case numbers will continue growing as scientists believe the variant is 50% more infectious compared to the UK one.

If a new wave of COVID-19 hits the UK, similarly to how it has hit India, the UK economy will be in grave dangers as public health will drastically decrease.

This will essentially wipe out all of the progress made by the vaccination program and any increase in confidence because of said vaccinations will also fall as the UK will have to re-enter its lockdown phase.

Consequently, if this occurs, the governments’ plans regarding the roadmap will be unfulfilled and the massive fall in confidence resulting from this wave will yield lower spending from economic agents, especially consumers and businesses.

Consumers will decrease spending as due to low confidence, their marginal propensity to save rises due to increased uncertainty.

Because of this, firms see a decrease in demand, consequently, firms spend less and don’t reinvest their profits as they are uncertain that they will make a return on their investments.

Hence, this will lead to a contraction in aggregate demand as consumer and business spending decreases, thus yielding a contraction in economic growth.

This will be an incredibly terrible outcome for the UK as all progress made in recent months will essentially be wiped out.

So, it is essential for both public health and our economy that the vaccine rollout is smooth as we rely on economic agents to act rationally by prioritising public health through guaranteeing when necessary to slow down the spread of COVID.


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Written by Hubert Kucharski

Research compiled by Jonas Theaker


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