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Coronavirus: Markets poised as France could help tip UK into lockdown

British Prime Minister Boris Johnson, President of France Emmanuel Macron and Chancellor of Germany Angela Merkel stand onstage during the annual NATO heads of government summit on December 4, 2019 in Watford, England. Photo: Steve Parsons-WPA Pool/Getty Images
British Prime Minister Boris Johnson, President of France Emmanuel Macron and Chancellor of Germany Angela Merkel stand onstage during the annual NATO heads of government summit on December 4, 2019 in Watford, England. Photo: Steve Parsons-WPA Pool/Getty Images

Britain is teetering on the edge of a lockdown, but France’s new threat to shut its border with the UK and Boris Johnson’s “social distancing” warnings going unheeded is making an official shutdown more likely.

According to French newspaper Liberation (link in French), citing unnamed sources in French president Emmanuel Macron’s office, Macron gave Johnson the ultimatum that unless he installs more stringent measures to contain the coronavirus, then there will be an entry ban on any traveller from the UK.

“We had to clearly threaten him to make him finally budge,” said a source in the Liberation report.

Meanwhile, Johnson pleaded with the public to adhere to “social distancing” and if people do not act now, the NHS would be “overwhelmed” by the “accelerating” spread of the coronavirus. Those at-risk people — such as the elderly and those with underlying health conditions — are strongly advised not to go out for 12 weeks to protect themselves. He told the public to not visit their mothers on Mother’s Day.

His warning comes after he told the public in a televised press conference that is all cafes, bars, clubs, shops, and restaurants should close on Friday night. He urged that people also do not go out unless absolutely necessary. However, a variety of TV reports showed that people were ignoring the warning:

The number of those who have died from the coronavirus has risen to 233 as of Saturday with the number of cases reaching 5,000.

Coronavirus: How does Britain differ from other European countries?

UK prime minister Johnson initially announced following the ‘mitigation’ strategy, which involves home isolation of suspect cases and their family members but allows the rest of society to roam about freely and no restrictions are put on others.

However, the Imperial College Covid-19 Response Team, which advises the government, found that the strategy previously being pursued by Johnson and his cabinet would result in the deaths of hundreds of thousands of people and overwhelm the NHS.

They recommended the UK government to switch to the ‘suppression’ strategy, which will lead to restrictions on wider society. However, this is not a lockdown — that would involve official measures and authorities stopping the movement of people and officially imposing closures.

“National responses have fallen into roughly two groups. There is the lockdown path set by Wuhan in China, and now followed in Italy, Spain, France — and now California. And then there is the gradualist approach adopted by Britain and the U.S., and which also characterises responses by the Netherlands, Switzerland and a few others,” noted Bloomberg.

READ MORE: Coronavirus: UK government to pay workers' wages as it tells pubs, restaurants, and gyms to close

“The empirical evidence for a lockdown couldn’t be clearer: To slow and stop the spread of the novel coronavirus, go early and go hard. The more stringent the measures to keep people physically apart and isolate those who have become infected, the quicker the curve of infections is flattened.”

In Germany, five major states have imposed a total lockdown. This was led by Bavaria — the country’s largest state — after Bavaria’s state premier Markus Söder warned that the public was not taking the pandemic seriously.

He said that too many people were not heeding warnings to keep their distance from each other and stay at home, instead doing things like having “corona parties” and in some cases treating the virus as a joke.

“This cannot continue,” Söder said. “We have to break the wave of escalating infections.”

France is currently in its sixth day of a lockdown where 100,000 police and gendarmes are deployed across the country to enforce the new measures. People are only allowed to leave the house for officially sanctioned reasons such as going to work, shopping for necessities or getting medical treatment, and have to present paperwork.

Market reaction

This weekend, Britain's Financial Conduct Authority said companies should not publish preliminary financial statements for at least two weeks due to the rapid developments of the coronavirus.

"The FCA will be writing tonight to companies it is aware were intending to publish preliminary financial statements in the next few days to delay their planned publications," the watchdog said in a statement.

Markets have been extremely volatile since the start of the coronavirus outbreak, especially amid the largely different approaches governments have been using to help combat those being affected by COVID-19.

Markets, such as the pan-European STOXX 600 index (^STOXX), London’s FTSE 100 (^FTSE)Germany’s DAX (^GDAXI), France’s CAC 40 (^FCHI) all finished in positive territory on Friday, as investors appraised the potential impact of government and central bank measures, such as ECB and Bank of England interest rate cuts and emergency funding for the economy.

But they are all still massively down since the outbreak:

The pan-European STOXX 600 index. Chart: Yahoo Finance
The pan-European STOXX 600 index. Chart: Yahoo Finance

While the fiscal measures help alleviate concern for now, markets will see how those pledges and funds will help people, businesses, and the economy, and if more measures will be needed.

This week, Deutsche Bank (DB) economists Sanjay Raja and Oliver Harvey warned that, in a worst case scenario, the UK economy could shrink by 5.5% this year. That would be the worst performance since 1920.

“Relative to Italy and China, it's clear that the spread of the virus remains merely at its nascent stage,” Raja and Harvey wrote. “With the UK government moving closer to enforcing self-quarantine measures, disruptions to the economy will hurt households and businesses severely.”

READ MORE: Coronavirus could prompt 'worst recession in a century' in UK