Modelling the effects of pandemic control measures and financial support on businesses, regions and households

The economic consequences of the COVID-19 pandemic are far from over. Short-term interventions to contain the spread of the virus and its economic fallout are gradually being unwound. Now, as the lockdown is being lifted, attention is rightly turning to questions of which policies will best support firms, businesses and households in the medium to long-run. Over the coming months, the government faces a number of difficult challenges with long run implications, including how to reopen the economy safely, how and when to address its mounting debt burden, and how to ensure a sustainable economic recovery. We propose two complementary, interlinked strands of research that will help the government navigate these challenges. The first strand will build a sectoral-regional model of the economy. Our detailed model will incorporate several novel features that will allow to assess the impacts of very specific policy interventions, including financial support targeted to different industries, and relaxing or re-imposing social distancing restrictions in different areas. This will provide real-time, practical guidance to policymakers on the short and long-run impacts of different policies on output, investment, and employment in different sectors and regions of the UK. The second strand of work will estimate a model of consumer behaviour to understand the effects of lockdown on households' spending decisions and living standards. This will allow to understand how spending patterns change in response to lockdown measures and price changes, and how restricting the availability of goods affects household living standards (including differences across the income distribution).