COVID-19: Will a third COVID wave hit the UK this summer?

• UK Prime Minister Boris Johnson confirms that lockdown will be eased in line with his roadmap target
• UK government scientists warn of a third COVID wave this summer
• Britons could be required to wear face masks and social distance until 2022
• Pound Sterling (GBP) currency outlook versus the euro (EUR) remains optimistic

UK Prime Minister Boris Johnson announced that phase two of England’s lockdown exit strategy would go ahead as planned on April 12th as Britain’s coronavirus situation does not currently pose a threat to progress.

During his televised address to the nation on Monday evening, he said that moving to the next stage of the government’s lockdown easing strategy was “fully justified” due to the country’s vaccination programme’s success and a significant decrease in hospitalisations and recorded new cases.

Nonetheless, Mr Johnson urged the British public to remain cautious and not become complacent to ensure all lockdown restrictions can be lifted by the June 21st target date.

The next phase of Prime Minister Boris Johnson’s lockdown easing strategy will see pubs, restaurants and bars with outdoor seating reopen. Simultaneously, non-essential stores, hairdressers, theme parks, zoos, gyms and other leisure facilities will also be allowed to reopen with appropriate social distancing measures in place.

Visits to libraries, community centres and drive-in cinemas are also permitted under phase two of lockdown easing.

While the Prime Minister refused to reveal any details on international travel during his COVID-19 update, he gave the green light on staycations.

From April 12th, Britons can go on self-catering holidays with members of their households or social bubbles, providing they stay in accommodation where there are no shared facilities.

Suppose the infection rate, number of hospitalisations, cases and deaths don’t rise exponentially in the month to May 17th. Then, the UK government will allow indoor mixing under the rule of six or between two households.

The limit on outdoor social gathering will be increased to 30 people, while hotels, hostels, B&Bs, play centres, indoor cinemas, play areas, museums will also reopen.

Under the UK government’s final easing stage, which should take place from June 21st, Mr Johnson will lift all legal limits on mixing. Other sectors of the economy, such as nightclubs, which have been closed since Mr Johnson imposed the first national lockdown in March 2020, can resume business operations.

However, government scientists have said that hopes for an immediate return to normality following the June 21st target date are naive.

England exposed to the risk of a third COVID wave

According to comments from members of the Scientific Advisory Group for Emergencies (SAGE), reopening venues next week could reverse Britain’s hard-won progress and cause the NHS to come subjected to overwhelming pressure.

SAGE scientists also warned that the British government’s plans to remove further limitations in May and beyond will likely “lead to a third wave of COVID-19 this summer”,  which the group said could be as deadly as the one experienced last winter.

England’s chief medical officer, Professor Chris Whitty, appears to share the same view and warned that Britain would have “significant problems with the coronavirus for the foreseeable future.”

Although more than 31 million adults have now received their first dose of a coronavirus vaccine, the stark warnings will likely influence Prime Minister Boris Johnson’s stance on easing lockdown restrictions.

The UK leader has already refused to comment on international travel and said that a COVID-status certification system could be introduced as a temporary measure to reduce the risk of transmission and safely reopen the UK economy.

A task force headed by Cabinet Minister Michael Gove has reviewed whether there is any benefit in using domestic coronavirus passports at high-risk venues to restore freedoms more safely.

While the UK government has recognised the potential ethical implications of vaccine passports, several ministers believe that domestic coronavirus passports would allow businesses to perform COVID status checks efficiently.

Other suggestions proposed for what could become the norm following the June 21st target for removing all lockdown restrictions are:

• Twice-weekly rapid mass testing
• Booster jabs for priority groups
• Ongoing social distancing and face mask rules
• Vaccine passports for international travel

The new position was published in a series of reviews, including ensuring a safe return to mass events and foreign holidays, especially amid warnings about mutant strains of the virus being reimported from Europe once overseas travel resumes.

UK government trialling COVID-19 vaccine passports

On Monday, SAGE warned that Britain’s rapid vaccine rollout would not be enough to eliminate COVID-19 as all modelling points towards an increase in COVID death rates, hospitalisations and cases as the economy is unlocked.

Vaccine Minister Nadhim Zahawi said social distancing measures and face mask rules might be in place beyond June 21st. Mr Zahawi also admitted that the UK government is piloting domestic coronavirus passports despite backlash received over ethical implications.

One senior government figure said that the Prime Minister is eager to get the country back to normal and is prepared to “introduce COVID certification for livelihoods.”

The minister went on to say, “if you allow pubs and restaurants to reopen at 40% capacity, they’ll go bust anyway, so part of the debate behind closed doors is whether to drop social distancing in return for passports. That’s part of the battle now.”

However, Nadhim Zahawi said it’s unlikely that vaccine passports will be required in shops or on public transport but for large-scale events where a significant number of people attend, such as football stadiums and music festivals.

Despite deep political opposition, the Vaccine Minister said it would be irresponsible of the government not to trial COVID passports, especially given the risks of cases, hospitalisations and deaths rising as restrictions are eased.

Scientific advisors have insisted that “baseline measures”, including social distancing and face mask rules, would need to stay in place until 2022 to prevent a spike in the infection rate.

It comes after official statistics reveal that the number of new daily COVID-19 cases in the UK has declined by more than 27%, compared to most of Europe, with countries such as France, Spain and Belgium reporting an uptick in positive tests.

Separate data shows that Britain also has one of the lowest COVID death rates in Europe, with the number of coronavirus-related fatalities at their lowest level since 2014.

Government figures revealed that only ten coronavirus deaths were recorded on Monday. Furthermore, with four deaths recorded per 100 million people in the week to April 4th, Britain is fourth-lowest for COVID-19 fatalities in Europe, behind only Norway, Denmark and Portugal.

Following heavy criticism for its handling of the pandemic, the UK government has received wide praise for its rapid vaccine rollout, which has stoked hopes for a swift economic rebound in the second half of 2021.

The news triggered a sharp move higher in pound Sterling (GBP) exchange rates, and with the diverging fortunes of the UK and the EU widening, the UK currency’s outlook remains positive.

GBP/EUR trading lower but outlook remains optimistic

After rallying to a high of EUR 1.1803 on Monday – its highest level since February 2020, the British pound to euro (GBP/EUR) exchange rate is trading on the backfoot in Tuesday’s European session.

While analysts forecast further upside in the currency pair, GBP/EUR has tumbled by 0.5% to EUR 1.1711 as a softer risk-on tone drives some flows to the risk-off euro (EUR) and US dollar (USD).

Pound Sterling (GBP) outperformed yesterday, supported by confirmation that the next stage of lockdown easing will commence from April 12th – a stark contrast to Europe, which appears to be reimposing lockdown restrictions.

Although a lack of guidance on international travel prospects disappointed investors, GBP continued to trade with bullish conviction in foreign exchange (FX) markets.

EUR/GBP has received a boost on Tuesday amid a shift in sentiment and reports revealing that the EU could achieve its vaccination target earlier than expected.

The Eurozone Sentix investor confidence index also edged higher in April to 13.1, contributing to EUR strength.

However, given the nascent divergence between the EU and the UK economies and contrasting policy stances between the Bank of England (BoE) and the European Central Bank (ECB), any losses in the British pound to euro (GBP/EUR) cross should be temporary.

The technical picture for GBP has also improved. With the economy set to reopen on April 12th and economists forecasting a consumer spending boom into the summer, there are more reasons to be cheerful about pound Sterling (GBP).