Investors and policymakers are failing to grasp how deeply the new variant of coronavirus will damage the European economy, Element Capital, one of the world’s largest macro hedge funds, has warned.

Expectations for economic growth need to be cut as the B.1.1.7 coronavirus variant spreads beyond UK borders, and lockdowns across the continent could extend months beyond current estimates, the fund’s head of markets Colin Teichholtz said in an interview.

“What you are seeing in the UK today you will see over much of continental Europe, and I don’t think markets [and]?.?.?.?policymakers are really grasping that,” Mr Teichholtz said. “Are policymakers getting this? Are people updating their economic forecasts for the second quarter to reflect a much worse outcome in terms of the economy being able to reopen? There is very little indication of that in forecasts.”