How big a setback is the new UK covid strain?

The new UK strain of  Covid -19 is not to be lightly dismissed- that's the message from the nationwide lockdown imposed in the UK. 

The UK strain is said to be 50-70% more transmissible than the earlier one. It's not more lethal or less amenable to treatment but the sheer rise in numbers also means a potential rise in hospital cases and fatalities.

The new strain and the rising incidence of cases- often, 50,000 a day in the UK- will derail the hoped for recovery in 2021. We don't yet know how much. Since fiscal and monetary policies were stretched quite a bit in response to the earlier outbreak, it's not clear what policy options will be available to deal with the new threat. 

The British response shows that a stringent lockdown is still considered the best way to limit the spread despite numerous assertions to the contrary. FT's Science Writer Anjana Ahuja writes:

If 2020 taught us anything it is that countries can never act too early and that postponing the inevitable leads to protracted agony. A recent Imperial College London analysis suggests that locking down one week earlier in the first spring wave would have cut UK deaths from around 37,000 to about 16,000.

Taiwan, Vietnam and New Zealand demonstrate that early, aggressive intervention delivers a healthy population able to participate in a healthy economy. Treading a middle way between public health and the economy, as the UK has tried to do since March, is a half-measure that protected neither. It is like trying to keep a motorway open after a pile-up and hoping drivers can swerve to avoid the debris, rather than shutting the road and clearing it so traffic can flow normally. Further collisions simply produce more debris and casualties.

That is a fitting answer to those who claim that India's lockdown in March last year was too harsh.

In another article, fund manager Mohamed El Erian spells out the implications for the global economy of the new strain:

Inevitably the new strain will amplify the dispersion in economic performance around the world. Europe is experiencing further disruptions to the movement of people and goods and accelerating the fall into a double-dip recession. So it is probable that we will see previously unthinkable differences in the growth rates of big economies. This may well include as much as a 20 percentage point annualised difference between the most stressed G7 economies and China according to my calculations. Even within the G7, growth dispersion will be at exceptionally high levels. 

Once again, an already excessive level of inequality in many countries will worsen. The burden of the mutated virus environment is suffered disproportionately by the disadvantaged segments of society. 

Once again, the wealthy are likely to benefit if central banks feel compelled yet again to inject liquidity into markets. Once again, large companies with access to capital markets will benefit at the expense of smaller ones who rely on banks and local lenders.