The rising number of coronavirus cases and related deaths prompted UK prime minister Boris Johnson to announce new lockdown measures for England over the weekend against a backdrop of more stringent measures for the devolved administrations.
Announcing new measures to take effect from 5 November until early December, Johnson said citizens had to be “humble in the face of nature”.
“In this country alas as across much of Europe the virus is spreading even faster than the reasonable worst-case scenario of our scientific advisers whose models suggest that unless we act we could see deaths in this country running at several thousand a day,” said the prime minister.
“A peak of mortality alas [is] far bigger than the one we saw in April.”
But what does it mean for the UK economy?
Ratbones’ head of asset allocation research Ed Smith (pictured) said the UK economy contracted by 26 per cent during the initial six-week lockdown period of mid-March to end-April. 
“If four weeks of lockdown were exactly same as last time, we’re looking at a 17.5 per cent contraction,” he said.
“But this time construction and manufacturing has been explicitly told to continue; education and childcare services as well. And other sectors are now more adept at working from home.”
As such, Smith said the economy would likely contract by 10-12.5 per cent this time around and is likely to mean that the UK economy is 14 per cent smaller than the pre-Covid high-water mark at the end of the year.
Nevertheless, the outlook for UK assets – relative to the rest of the world – hasn’t changed that much, said Smith, as it was already working on the assumption that it would have “one of the worst economic outcomes of the 42 economies we’re keeping tabs on”.
He said: “The UK has a larger consumer services sector than most other countries, and therefore is more sensitive to Covid restrictions.
“Similarly, out of 22 advanced economies, it ranks third for the proportion of its GDP produced in its cities.
Smith continued: “Key sectors were already ailing before the pandemic, and there’s evidence to suggest the UK may have had a greater share of so-called “zombie” companies.
“The private sector is more indebted than many countries too, which increases fragility.”
In addition, business and consumer sentiment survey findings have been weaker than in other countries partly due to the uncertainty caused by Brexit.
It should be remembered that around 70-80 per cent of UK equity market earning come from overseas and important to maintain a global perspective, said Smith.
Although those could be more reasons to underweight domestically focused stocks, he added.
Rathbones’ head of asset allocation research said the risk of such a stop-start recovery phase that is now beginning to emerge had been behind its arguments against rotation into more risk-on assets.
“As we’ve been saying for a couple of months now, with Covid cases rising and permanent unemployment rising, and the flu season around the corner, there is a risk that the recovery enters a stop-start phase that curtails consumer spending and unnerves financial markets,” he said
“That’s why we’ve been, and continue to be, against rotation into deep value, high beta and other risk-on factors.”
Nevertheless, there are still some policy tools that the UK government can make use of to help soften the blow of yet another lockdown period, according to Smith.
The extension of the furlough scheme – which had been due to expire on its original terms – has now been extended for the duration of the new lockdown. And it’s something the government can easily afford.
“The UK has the second lowest debt to GDP ratio in the G7 – even after this year's extra spending – and interest costs are rock bottom,” he said.
Additionally, there was also plenty of spare capacity left in the government's guaranteed lending scheme, according to Smith.
There is also further room for the Bank of England to act, he said.
“The Bank of England is also likely to step in with more QE [quantitative easing] and targeted long-term financing for commercial banks – i.e. interest rate linked to lending activity,” said Smith.
Although he warned that negative interest rates might be unlikely before the end of the year as there are still concerns about the implementation of such a policy and is likely to be something of a “last resort”.
He finished: “The interest swap and gilt curves suggest to us that the market was already pricing in high chance of extra stimulus at some stage, so this isn't a gamechanger.
“And while it could drive some downside in the pound, I don't expect a material impact once the dust settles.”