COVID-19 Restrictions and UK GDP Growth

Abstract

This paper discusses an empirical model of UK GDP growth in the context of the COVID-19 pandemic. The model estimates that social distancing and lockdown restrictions reduced, on average, annual UK growth by 9.7 percentage points compared to the scenario of no government action. At the other extreme, had government stringency remained at its April 2020 ‘lockdown level’ throughout the pandemic, annual UK growth would have been lower by (a further) 1.9 percentage points on average compared to the impact of the imposed restrictions. The economic impact of the continuous strict lockdown scenario is slightly worse than what actual lockdown policies deliver which arguably shows the ability of the economy to adjust and get on during lockdown restrictions. The paper also finds that the pace at which lockdown restrictions have been eased since early 2021 appeared to be more responsive to the proportion of the UK's population who had been fully inoculated than the number of people who had received a single dose of vaccine.

Keywords: COVID-19 pandemic, Divisia money, Stringency index, Vaccination uptake

JEL Classification: C5, E4, G1