The R number

Written by Juan Palenzuela, associate

Edited by Harriet Moll, creative director

Good morning,

The transmission rate for Covid-19, or the R number, has become part of the new language of everyday life. In policymaking, its importance feels hard to overstate. In the UK regions, the rate has become one of the most important variables to consider when moving between stages of the lockdown easing plans.

If the rate sits above one, then the outbreak is growing. If it is below one, it is shrinking. Watching it evolve is an intuitive way of assessing at which stage of the pandemic we are sitting at. But while

the press and government communications continue to focus on it, is it time to reexamine its importance?

Two of the measures used to estimate it, confirmed cases and mortality, are often imprecise and come with a significant lag of about a week or two. Taking that time lag into consideration, the transmission rate becomes a much less useful tool for real-time decision making. Thankfully,

supercomputers modelling thousands of simulations are able to use it to give us a rough forecast of the current rate.

But even then, the fixation with the transmission rate may become unhelpful as we enter the later stages of the pandemic. When active case numbers are really low, as they are starting to be in Scotland, the infection rate will become much more volatile, as sporadic outbreaks emerge, skewing the data.

Deciding on whether to move from one stage to the other is based on a lot of variables. The infection rate may well have been a way of simplifying the communication of those decisions and helping us all understand. Perhaps it is now time to reconsider its importance.

News

Australia is set to close the border between Victoria and New South Wales (NSW), its two most populated states, in the hope of containing an outbreak that emerged in Melbourne. The outbreak has accounted for over 130 new cases in less than two weeks, which is more than 95% of all new infections in Australia. Only permit holders will be allowed to cross between the two states, starting on Wednesday.

Rishi Sunak announced a new £1.5bn credit lifeline for the country’s arts industry, including support for theatres, music venues and museums. The cash injection had long been awaited, given that social distancing made many of the activities in the sector impossible. The settlement, secured by culture secretary Oliver Dowden, includes £880m of grants for the financial year to April 2021.

Thirteen universities in the UK are facing prospects of insolvency unless they receive government bailouts, according to a new study by the Institute of Fiscal Studies. In particular, high-ranking universities are to suffer the most, as they face a large drop in the number of international students. The IFS estimates an £11bn loss in the sector, amounting to a quarter of its annual income.

Business and economy

Employers planning to execute mass redundancies of furloughed workers may be forced to pay back the share of the wages that the Treasury supported. The measure comes as a result of growing fears that the job retention scheme was not used by some businesses as intended. The latest rewording of its definition by the Treasury states that it is “integral” that it is “used by the employer to continue the employment of employees”.

The British prime minister now has “sound technical reasons” to reverse his decision to allow Huawei to build the UK’s 5G infrastructure, according to Sir John Sawers, former head of MI6. The new American sanctions imposed on the Chinese company meant that allowing Huawei to expand its involvement with the UK’s infrastructure posed security risks that did not exist when the government announced a compromise solution in January, Sawers said.

According to a new independent audit by KPMG, Wirecard’s core business in Europe and the Americas had been making losses for years, contradicting EY’s previous audits. The company officially went into administration last month due to an accounting scandal. KPMG’s audit, which has not been published yet, may help authorities understand what went wrong.

Columns of note

Writing for the Financial Times, Joh Sawers, former head of the MI6, argues that barring Huawei from operating in the United Kingdom is a necessary part of a greater coordinated effort that the West needs to undertake to stand against, what he calls, the rising “Chinese aggression”.

On Project Syndicate, Alex Soros says that if Joe Biden defeats President Donald Trump in November, his administration will probably look to strengthen transatlantic relations once again.

Source: The Times

Markets

The week ahead

The British pound will come on sight today, as UK and EU negotiators are scheduled to meet in London to discuss an arrangement on their post-Brexit relations by the end of the month. Unless the UK manages to meet its self-imposed deadline for a trade deal with the EU by the end of July, it will drop out of the EU’s single market and customs union at the end of this year.

Meanwhile, Hong Kong’s stocks have faced a slowdown over the past year due to the protests and coronavirus. China’s imposition of the national security law is a fresh new threat. This week will be an opportunity to see if investors believe that Hong Kong could get back on its feet.

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