School Closures Cost Economy up to UKP 5bn

Up to 2m parents unable to work due to childcare demands, knocking as much as 2.1pc off the economy through the length of the shutdown.
This article is part of an editorial series on Covid-19
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This article is part of an editorial series on Covid-19

It's not just about the lost time for students, losing schools for two weeks has a significant impact on the economy too, with up to 2m parents unable to work due to childcare demands.

Martin Beck at Oxford Economics estimates it could knock as much as 2.1pc off the economy through the length of the shutdown, equating to £1.75bn ($2.4 bn) over a fortnight, even before counting for the disruption facing working parents.

Samuel Tombs at Pantheon Macroeconomics estimates that two million parents are "lost" to the workforce through closures, because they have no alternative childcare and need to pay close attention to those aged under 12. That is the equivalent of 6pc of the workforce out of action.

Analysts at Capital Economics estimated the total cost last time around was a blow of between 3pc and 6pc of GDP, amounting to as much as £5bn per week.

A renewed lockdown in the first quarter would push GDP down by another 1pc to 2pc, said Thomas Pugh at Capital Economics, as the economy would be flattened further from its already low base. Adding school closures would push that closer to 3pc, and the impact on working parents could lead to a contraction in the region of 5pc in the opening three months of the year, if school closures were sustained.

“The longer the Tier 4 restrictions stay in place, potentially the bigger the rebound. People save more money and therefore once everyone is vaccinated, they have more money to spend and you could get a bigger rebound,” said Mr Pugh.

“But the longer businesses are closed, the bigger the scarring effect on the economy. You could have people who have been more or less off work for a whole year, businesses which have barely done any trade for a year, potentially piled up with debt taken on to get through this year. This has implications for investment.”

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