Focus on... lessons learned from Cardiff pt 2

Updated: 1st December

Following the release of the two week ‘firebreak’ restrictions implemented by the Welsh Assembly between 23rd October and 9th November, Cardiff experienced a significant uplift in activity. This was reflected in the Recovery Index, which rose from 70.2 on 1st November to 81.5 on 17th November – an increase of 16%.

The majority of the sector indices for Cardiff increased during this period, with strong upward momentum from Retail and Mobility in particular. Despite a number of continued restrictions, the city saw a relatively festive atmosphere as people celebrated the end of the firebreak, and the ability to return to restaurants, pubs and shops.

A few days before the lifting of the Welsh restrictions, on 5th November, England went into a month-long lockdown of its own. Non-essential retailing was stopped, interactions beyond immediate households were heavily reduced and people were once again asked to remain in their homes as much as possible.

Recovery Index data and specific indicators, such as Google mobility data which can be viewed in detail on the ‘Local Mobility Data’ tab, suggest that the impact of ‘lockdown v2’ has been significantly lower relative to the first round of English national restrictions.

Mobility trends before and after the first and second set of English National restrictions

There are several reasons for the differentiated impacts. Firstly, the restrictions of lockdown v2 have been more limited than lockdown v1 - with schools and workplaces remaining open. Public attitudes may also have shifted since the spring, with a degree of ‘Covid-fatigue’ setting in and individuals gaining confidence from the positive news around vaccine testing. Knowing the length of the latest restrictions may also have helped to mitigate the impact, with businesses in particular able to plan more effectively.

Chart 1: Recovery index for the UK following English national restrictions

Cardiff’s rebound from the firebreak provides a timely comparison and highlights the fact that the lifting of restrictions will be markedly different from that observed in the summer, with Christmas on the horizon. Analysing the relationship between the Recovery Indices for Cardiff and National, excluding incomparable data, allows us to hypothesise on what the emergence from the English national restrictions may look like, with the expectation that the National Index will remain subdued during the restriction period before trending upward once lifted.

"The revamped tier system adds some complexity to the situation. With 99% of the country in Tier 2 or 3, we would expect the post-restrictions bounce to be dulled by c.25%"

Chart 2: Recovery index for the UK forecast

However, the revamped tier system adds some complexity to the situation. With 99% of the country in Tier 2 or 3, we would expect the post-restrictions bounce to be dulled by c.25%.

In our model, this results in a delayed recovery of the Recovery Index to the level observed at the start of November, from two days to about five days after the national restrictions expire. The tier system effectively introduces a ceiling on the activity levels of certain sectors (particularly affecting hospitality) which may in turn force a plateau in the medium-term recovery for its duration.

If the forecasted trend is realised, then it is likely the overall economic impact of the latest English restrictions will be significantly reduced compared to those in the spring, with a softer crash and a higher trough, although clearly activity will remain significantly below pre-Covid activity levels. It is also worth noting that whilst this is positive for the economy the sustained levels of activity may also indicate a reduced efficacy in terms of lowering the Covid-19 infection rate for the latest restrictions relative to that in the spring.

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