As countries emerge from the lockdown measures put in place to slow the spread of covid-19, there has been considerable discussion around the best way to do that. New research from UCL suggests a gradual approach is best, or at least it is from the perspective of global supply chains, as such an approach reduces the risk of future lockdowns.
The paper is among the first to assess the impact of lockdowns on global supply chains, and models the impact across 140 countries, some of which were not directly affected by the virus. The analysis reveals that stricter lockdowns appear to work better from an economic perspective than more moderate lockdowns that tend to require longer adherence. In other words, it’s the length of the lockdown that matters rather than the severity of it.
The researchers posit that businesses can absorb the shock of brief lockdowns by calling on their reserves. Also, shorter lockdowns appear to cause less disruption to both regional and global supply chains.
Global impact
The study also revealed that countries were affected by the lockdowns, even if they weren’t directly affected by the virus. Such countries saw their GDP fall by around 20%, due to drops in consumer demand and supply chain disruptions.
“Our study shows the ripple effects caused by lockdowns along global supply chains, with countries not directly affected by Covid-19 still experiencing heavy economic losses,” the researchers say. “While predicting the true cost of lockdowns is not possible at this stage, our research suggests that shorter, stricter lockdowns minimize the impact on supply chains, while gradually easing restrictions over the course of a year may also be less disruptive than a swift lifting of restrictions followed by another lockdown.”
The assessment suggests that a gradual easing of lockdown measures over a 12 month period would provide the smallest risk to supply chains. By contrast, if restrictions are lifted over a short timeframe, and then reintroduced, this would increase the costs by a third.
“Our analysis quantifies the global economic benefits of robust public health responses and suggests that economic justifications to re-open businesses could backfire if they result in another round of lockdowns,” the researchers explain.
Second wave
The researchers believe that a second wave is a distinct possibility, and in the event of one, urge policy makers to enact a globally co-ordinated lockdown for two months rather than distinct lockdowns at different times in different places. The need for a coordinated response is due to the international nature of supply chains.
“Companies will survive the supply chain failures that lockdowns cause by relying on reserves of stock or finding new suppliers,” the authors say. “If a second shock hits, reserves may be low and supply chains only recently repaired—making a new break much more costly.”
The study found that the most important factor in terms of the costs associated with lockdowns was the sheer number of countries that were implementing them. It underlines the importance of trying to restrict any future epidemics to as few countries as possible.
“Just as individuals staying at home protect others as well as themselves, so countries imposing strict lockdowns provide a public good to other countries,” the researchers explain. “In preparing for the next pandemic, a global facility, in all likelihood administered by the IMF, could ensure that the costs of containing an outbreak are not borne by one country alone. This would remove some of the disincentives to early action and provide enormous health and economic benefits over the long term.”
