UK Roadmap out of lockdown stocks and sectors to watch

UK roadmap out of lockdown: what you need to know

UK prime minister Boris Johnson has announced a four-step plan to gradually end lockdown in England for good by as early as June. Rules will start to be eased in March and there will be at least five weeks in-between each step.

The government will only progress to the next step if it is satisfied enough people have been given their first jab, infection rates are low enough, the NHS is not under pressure, and the threat from new variants of the virus is low.

Step One: From ‘Stay at Home’ to ‘Stay Local’

The first step will see schools reopen on March 8 and two people from different households will be able to meet outside, representing a very cautious start. This could help companies like Pearson, which sells books and other educational products to schools.

On March 29, the government will drop the ‘Stay at Home’ rules and replace it with advice to stay local. Outdoor sport facilities, like golf clubs, will be able to reopen and organised sports will continue.

This is likely to encourage an uptick in travel, at least locally, which could prove beneficial for bus operators like Stagecoach, Firstgroup and Go-Ahead Group, although the last two will still be weighed down by their rail operations, where demand is likely to remain depressed with people still being actively encouraged to work from home.

Step Two: Retailers and (some) pubs reopen

The second step is provisionally pencilled in for April 12, when the UK hopes to see non-essential retailers, gyms, hairdressers and outdoor hospitality venues reopen.

This will allow the likes of Primark-owner AB Foods, Next, Greggs, Frasers Group, Dunelm, WH Smith, and Games Workshop to start welcoming customers again, while pub and restaurant chains like Wetherspoons, Mitchell & Butlers, Marston’s, Restaurant Group, Whitbread and Fuller Smith & Turner will be able to start serving people outside.

The albeit cautious reopening of the hospitality industry should also start to feed through for beverage companies that have not been able to sell through on-trade channels for much of the last year, such as Diageo, Britvic and Fevertree.

There will still be a limit of up to six people from two different households meeting in outdoor hospitality venues, but there will not been any curfews in place or rules requiring people to purchase a ‘substantial meal’ to drink.

Step Three: Most of the economy reopens

The third step will kick-in on May 17 at the earliest, when it is hoping to remove most of the social contact rules that have stopped people socialising for much of the last year. This will allow people to start mixing indoors once again, including in pubs, restaurants, cinemas, theatres and hotels.

This is when the hospitality industry can really start to get going again, just in time to reap what will undoubtedly be a thirsty summer for Brits. Leisure stocks like Cineworld also come into play, as do companies that hold events such as Informa.

The rule of six outside will be removed and replaced with a limit of 30 people. However, indoor events like music concerts with up to 1,000 people will be allowed, while large sporting venues like football stadiums will be able to host up to 10,000 spectators (or 25% of the their usual capacity).  

Notably, there are reports that the government is considering introducing what is being referred to as a vaccine passport as a way of ensuring places, especially larger events, can operate safely, despite several ministers having denied it was being considered over the recent months.

The government intends to review the state of play with international travel before April 12, but that will not be given the go-ahead until May 17 at the earliest. If the UK can stick to its schedule then Brits will start to feel emboldened with their jab to book a well-deserved trip abroad this year, although there are arguments that the industry needs more notice to prepare and uncertainty may put people off or encourage them to vacate closer to home this year. This brings airlines like IAG, easyJet and Wizz Air back onto investor’s radars, alongside other travel stocks like Carnival, TUI, Saga, Rolls Royce and InterContinental Hotels.  

Step Four: The end of lockdown

Step four would be the final step and represent the end of lockdown with all social contact rules relaxed and virtually all areas of the economy allowed to reopen again. This would happen on June 21 by the earliest.

This would be when the economy can start firing on all cylinders again and those businesses that have been burning through cash while closed during lockdown can start to generate some money and get back on their feet.

UK roadmap: Is this the end of lockdown and the pandemic?

The roadmap out of lockdown is big for business, laying out some sort of - albeit rather loose - dates for them to work with. Those that have been hamstrung during lockdowns and reliant on the cash of lenders and shareholders finally have some certainty that they can reopen before summer this year.

The dates should be taken lightly. There is growing pressure to ease lockdown rules sooner rather than later, but the government wants its plan to be ‘cautious but irreversible’, implying it could err on the side of caution rather than rush through the steps.

There is plenty to be optimistic about. The vaccine programme is progressing well with around one-third of all adults having now received their first jab. Early data from Israel and the UK implies vaccination is significantly reducing the number of people being hospitalised by the virus. Infection rates have continued to plummet, and people are yearning for lockdown to end.  

The major threats to lockdown lasting longer than intended include disruption to vaccine or testing supplies. It is also important to note that it is still early days for the vaccines, and it is still not known how long they offer protection for and how they interact with the ever-growing lists of variants. The threat of the virus mutating to become immune from the vaccine remains a large threat to the world’s recovery efforts.

The government has said its decisions will be driven by data and not dates, so extra attention should start to be paid to the daily data dump of infection rates, NHS capacity and vaccine distribution over the coming weeks and months to gauge whether the government is likely to keep to its schedule.

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