Our conservative estimates are that lockdowns cost £118 billion in lost GDP, and possibly more than that in additional public spending. The current Covid Inquiry under Baroness Hallett is expected to cost £200 million[1]. While it is right that it covers medical outcomes, we must also account for the economic impacts and ask – was lockdown necessary?
The House of Commons Library has estimated the cost of Covid to public finances at £310-410 billion[2]. Meanwhile, Cebr estimated that Covid has cost £251 billion in lost GDP up to March 2021 alone[3]. But here we are looking at the answer to a different question – the cost of lockdown compared with the scenario where the UK was fighting Covid but did not lock down. We judge that about half of the House of Commons’s estimated cost figure could have been avoided.
We distinguish between Lockdown 1 (March to July 2020) and Lockdown 2 (November 2020 to June 2021)[4].
To estimate the impact of lockdown, we start by estimating what GDP might have been. Obviously, there would have been negative impacts on GDP even without a compulsory lockdown, trade and travel would have been affected, and there would have been some voluntary lockdown in any case.
Our proxy for the economic impact scenario is Sweden, where there was no compulsory lockdown. Swedish GDP is estimated to have fallen by 2.2% in 2020 (after having fallen by 3.9% in 2019), before improving by 5.6% in 2021 and 2.1% in 2022. It is currently forecast to fall in 2023.
But Sweden is very different from the UK – it is geographically more spread out, and the public sector is a much bigger part of the economy. A recent study[5] has shown that Swedish companies suffered a fall in sales of 6.1% in 2020 which is probably a better proxy for the likely impact in the UK without lockdown. This means our estimated cost of lockdown is deliberately cautious.
We have also adjusted the data to allow for the likely underestimates of UK public sector GDP during Covid, which made both the 2020 fall in UK GDP and the 2021 rise so large. We have estimated this effect as worth 3% of GDP, which is probably on the high side but means that our estimated cost of lockdown is also cautious on this account.
Using these calculations, we estimate that lockdown cost the UK in total £118 billion in lost GDP, or 7.6% of annual GDP at 2019 values. Lockdown 1 cost £86 billion and Lockdown 2 £32 billion. There will have been an additional cost in public finances also, possibly on a similar scale. The 7.6% of annual GDP is roughly half the 14.7% total shortfall of actual GDP against our constant growth rate assumption though part of the gap is due to the measurement of the public sector.
Evidence from other countries suggests there were alternatives to lockdowns that could have worked here, there is also a live debate in the medical profession whether the second lockdown was necessary at all. But it is easy to be clever with 20-20 hindsight. At the time, I thought that the first lockdown was necessary (but too protracted) and the second unnecessary.
Bear in mind that lockdown didn’t only do economic damage. Physical and mental health and child development have all been set back. Not to mention the trauma of people unable to say goodbye to their dying loved ones.
Even if one only counts the second lockdown, it looks to have been a major policy miscalculation. If the first is also included, it is an error on the grand scale, even greater than (once the additional costs of additional public spending are taken into account) that of HS2 had it been built.
Surely such an error deserves investigation by Baroness Hallett’s Inquiry into why it happened and why in any future pandemic, not only medics should provide advice on issues of this importance.
[4] See here for a useful timeline of Covid actions in the UK
[5] Angelov & Waldenström, 2023 (available here)
For more information, please contact:
Douglas McWilliams, Deputy Chairman
Email: dmcwilliams@cebr.com, Phone: 07710 083652
Cebr is an independent London-based economic consultancy specialising in economic impact assessment, macroeconomic forecasting and thought leadership. For more information on this report, or if you are interested in commissioning research with Cebr, please contact us using our enquiries page.