As Britain Climbs Out of an Economic Pit, Tough Questions Loom – The New York Times

LONDON — To understand why Britain has spiraled into the deepest recession of its modern history, go for a stroll in central London, no longer a ghost town but still a shadow of its once-bustling self.

Shuttered storefronts pock the shopping promenade on Oxford Street. Theaters in the West End are dark, office towers deserted. Below ground, the tube is a grim parade of signs warning passengers to wear face masks and keep their distance. With traffic at barely a quarter of last year’s levels, that is not hard.

Only restaurants, buoyed by a government stimulus program that subsidizes diners’ meals, are showing signs of life. But like the government’s widely praised furlough program that guaranteed 80 percent of the salaries of millions of workers, the “Eat Out to Help Out” promotion will soon wind down, and the government faces tough choices about whether to extend the support.

Unquestionably, Britain has been laid low by the coronavirus, easily the hardest hit of any European nation, both in public health and in the economy.

“What we’re grappling with is something that is unprecedented, and we don’t have a playbook for how to deal with it,” the chancellor of the Exchequer, Rishi Sunak, told the BBC on Wednesday after the Office of National Statistics reported that the economy shrank by an unheard-of 20.4 percent in the second quarter.

That was the deepest quarterly decline of any major European country, and it prompted a fresh round of hand-wringing in Britain, which has also earned the unwelcome distinction of running up the highest death toll from the coronavirus in Europe, with more than 51,000 fatalities.

In part, Britain’s dire economic numbers reflect a quirk of timing: Prime Minister Boris Johnson imposed a lockdown a week later than most of his European neighbors and lifted the restrictions later as well. That means Britain sustained more damage in the second quarter than France, Italy or Germany, which began reopening during that period.

But Britain’s economic woes are also linked to its broader ordeal with the virus. Because its outbreak was so widespread, prolonged and deadly, economists said, the fear of contagion continues to be higher in Britain than elsewhere. Despite the government’s urging, people have yet to resume normal lives, particularly in cities like London, where working from home is an alternative for many.

Google, which uses cellphone signals to track foot traffic to offices, shops, restaurants and transit stations, shows that commercial activity in Britain has trailed Germany, France, Italy and Spain since mid-May, though the gap has begun to narrow.

“If you have a massive outbreak, people are going to respond by being cautious and it will take a while for confidence to return,” said John Springford, the deputy director of the Center for European Reform, a research institute. “It makes sense that London is going to be among the hardest hit places.”

For all its talk about reopening, Britain still has the strictest set of restrictions in place of any major European country, according to Oxford University’s Blavatnik School of Government, which tracks the stringency of government-imposed restrictions, from schools and workplace closings to travel bans.

It is even more locked down than Spain, which has recently seen a spike in infections that prompted the British government to impose a 14-day quarantine on people who traveled there and returned to Britain.

Like Spain, Britain is particularly vulnerable to a sudden decline in consumption because its economy is more dependent on services, including tourism and hospitality, than those of Germany or France. Economists said it was no accident that Spain’s second-quarter contraction, at 18.5 percent, was closest to that of Britain. The German economy, with its extensive industrial base, shrank by 10.1 percent while France’s fell 13.8 percent.