Lockdown and Brexit make for a bumpy Christmas

The UK is facing up to the possibility of a festive period dominated by COVID-19 restrictions and Brexit. We think that the England-wide lockdown will shrink the economy by 8% m/m in November and that the rebound in December will be muted. But an extension of the lockdown beyond 2nd December and a no deal Brexit are downside risks. We don’t consider the concerns over Brexit of US President-elect Biden, which may hinder UK-US trade talks, to be an extra downside risk as we have not been expecting a quick US-UK trade deal. The upside risk is that the positive reports about a vaccine, which have buoyed equity markets today, allow the economy to recover quicker in 2021 and 2022.