Lifting COVID-19 restrictions highlights supply chain and inflation concerns 

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COVID concerns remain subdued below the critical level of 50 – and apart from family worries, the indices remain unchanged compared to two weeks ago. Are we finally out of the woods? Not necessarily – the COVID-19 virus is not endemic yet, and the actual economic impact of the pandemic may have only just started to be felt. 



Is the current sense of normality too good to be true? 

 
Pension professionals are increasingly embracing a sense of normality, meeting friends and travelling around the UK – something they were postponing since August. They are also now seeing family in person. However, these activities are not without any risk – elderly parents and other vulnerable people still need to be protected, so some are choosing to get tested before such gatherings. Many have seen close friends and family succumb to COVID-19 and the recovery times vary dramatically. 



Balancing mental health needs and the risk involved in more frequent social contact, many pension professionals are choosing time with friends and relatives over seeing colleagues in the office – and are willing to postpone a return by a further four months. 
 
However, members of our COVID research panel are now saying they would consider in-person meetings within the next month, bringing this timeline forward. Additionally, some report having attended smaller events already (with up to 20 double-jabbed people) and find them well organised, with sufficient space and ventilation.
 

A successful vaccination programme buoys the government’s image – for now  

 
The success of the vaccination programme in the UK has made restoring a sense of business as usual possible. The UK government has further simplified travel rules. But while most pension professionals are now only ‘somewhat’ worried about its handling of the pandemic, new challenges are on the horizon. 



To begin with, the sense of normality has brought back more risky behaviours, such as not wearing masks where it would be advisable to do so to protect each other. This makes some members of our COVID research panel insist that some restrictions should have been maintained – or the guidance should have been stricter at the very least.
 
Additionally, there are growing public concerns about the ‘waning’ of vaccine effectiveness. While it has been indeed documented that the protection of the COVID-19 vaccine declines over time, this concern may be exaggerated. For example, one study suggests that four months after the second dose, the Pfizer/BioNTech vaccine’s effectiveness at preventing infection falls from 96% to 84% but does not disappear altogether. 
 
But while the UK government is busy engaging in ‘sloganeering’ and ‘boosterism’, the supply chain effects of COVID-19 and Brexit are increasingly felt across the country – starting with the shortages of HGV drivers and its effects on fuel supply. UK pension professionals say this reflects a lack of strategic planning in Whitehall that would be strongly needed at this time.
 

Are supply chain disruptions driving inflation and slowing economic recovery? 

 
Staff shortages and supply chain issues are far from a UK-specific problem. Global COVID-19 vaccine and infection rates remain very different, which has a knock-on effect on workforce availability in various sectors.
 
This could be why our COVID research panel have changed their sector views. While the outlook for the materials sector has improved significantly to a ‘neutral’ view, there is deterioration in the prospects for consumer staples, energy, utilities and real estate – all reflective of the natural gas inventory shortage in Europe and market worries about struggling Chinese property developer Evergrande. 



As a result, rising prices are squeezing consumer spending – as are planned national insurance increases in the UK. With all this in mind, we should expect the macro effects of the COVID-19 pandemic to continue until at least the summer of 2024. 



What are you worried about as winter approaches? Click here to tell us in our bi-weekly COVID-19 survey. 

 

Previous articles in this series:

 
 
2020:
 
 
 

About the COVID Concern Index

 
This short survey helps gauge sentiment of our community on the pandemic. The results are distributed via the community newsletter. Until 31/08/2020, this was a weekly survey. From 01/09/2020, the survey shifted to a bi-weekly cadence. 
 
The COVID Concern Index values should be used as indication only and do not constitute advice. Their values are bound by the choices available in the survey on which they are based.
 
COVID Concern Index: 
 
 
Expected minimum duration of outbreak: 
 
A methodology change took place on 06/10/2020, affecting data from 20/10/2020 onwards. 
 
Prior to 06/10/2020:
 
 
Following 20/10/2020:
 
 
Expected minimum duration of macro effects: 
 
A methodology change took place on 15/04/2020, affecting data from 21/04/2020 onwards. 
 
Prior to 15/04/2020: 
 
 
Following 15/04/2020: 
 
 
Macro rates index:
 
 
Sector sentiment index:
 
 
Concerned about the coronavirus outbreak and its macro implications? Click here to take part in the bi-weekly COVID-19 survey. 

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