As this blog has shown over the past few months, the impact of COVID has proven to be particularly targeted on our areas of economic strength, meaning that our economy appears to be among the worst affected in the country. Previously our blogs have focused on Gatwick, but we are also looking carefully at the impact on our wider regional economy.
Give the considerable impact of the pandemic, we commissioned research to further understand the impact on the wider Coast to Capital economy. Over the past two months, Hatch Regeneris have been undertaking an in depth analysis on the impact of COVID-19 on our region. The research is still underway but some of the initial findings of this report are:
- There has been an estimated GVA (Gross Value Added) net loss of £9.8 billion (17%) between 2019/20. This is higher than the national average (13%).
- Doubling GVA growth by 2022 (~6%), GVA would reach pre COVID trajectory by 2026.
- An estimated 11,000 (13%) businesses in Coast to Capital had temporarily closed.
- Corporate insolvencies are increasing in volume – 74 companies were declared insolvent or liquidated in June compared to 39 in May.
- 34% of Coast to Capital’s economically active population has been furloughed, is in receipt of self-employed income support or in receipt of Jobseekers Allowance / work related Universal Credit.
- Crawley has had the greatest impact with 44.2% of the population affected.
- 1 in 3 businesses have 1 to 3 months’ worth of cash reserves and 1 in 5 have less than a month.
The headline finding is that we estimate a GVA net loss of £9.8 billion (17%) between 2019 and 2020¹, which is higher than the national average (13%) and based on only ‘one lockdown’ scenario. Our high GVA loss is likely due to our dominant sectors being adversely affected by lockdown restrictions. The education sector is hardest hit experiencing a 38% loss. Unsurprisingly, the arts and entertainment sector is next hardest hit experiencing a 37% loss, followed by a 36% loss for the accommodation and food sector. It is clear lockdown has meant that many of the businesses in these three sectors were unable to trade during this time. And although the construction sector is experiencing a 30% loss, work is now resuming and projections suggest this sector could recover at a quicker rate than others.
Surprisingly, despite the education sector being hardest hit, the number of job postings have remained relatively strong since lockdown. This is running counter to the pandemic recruitment cycle and suggests there is confidence that this sector will bounce back as lockdown eases.
Also interesting was the fact that whilst insolvencies spiked in June, with the largest proportions in Brighton & Hove, we are also seeing a high proportion of new businesses being registered. It was encouraging to see that since mid-March there has been around 3,400 new businesses registered in the Coast to Capital area – with a quarter being registered in Brighton & Hove and 10% of those in the innovative digital sector. This highlights the entrepreneurial strength of Brighton and resilience of parts of our economy.
Similarly, the retail and hospitality sector has not experienced high numbers of insolvencies; however, we believe this is due to many business in the sector accessing the Coronavirus Job Retention Scheme. The evidence seems to suggest the scheme has provided a lifeline to these businesses at a critical time. This highlights the critical need to further support these businesses once the scheme closes in October. Our Growth Hub continues to provide support, advice and guidance to businesses and will continue to evolve our services in order to meet the needs of our businesses.
Jobs and Skills
We have addressed in previous blogs about the impact the pandemic is having on our places, but it is worth highlighting here why the impact on Crawley is particularly concerning. Historically, Crawley has been one our main productivity drivers with higher than the national average on GVA measures and business growth, largely due to the strong economic output from Gatwick airport. And with Crawley being considered the most exposed to the pandemic with over half of its jobs either in vulnerable or very vulnerable sectors, it will be critical to support Crawley’s economic recovery. There is however an opportunity for its vulnerable workforce to re-skill to fill in-demand vacancies or new jobs.
We have also been following the Government announcements with interest and the Chancellor’s multibillion pound package announced earlier this month was encouraging.
One of the key measures to support economic recovery was the Job Retention Bonus, offering a £1,000 bonus to businesses who bring back staff from furlough. Although this measure may be welcomed by some businesses, we have started to see larger chains like Primark announce their deferral of the bonus, siting historic profits and that the scheme should be reserved for those businesses with little to no reserves.
This suggests that the incentive is not enough to protect jobs of those who have been furloughed. Companies may still make large scale redundancies and huge pressure will be put on unemployment schemes. This is concerning for our area as 34% of our working population are currently on Government support schemes and we have already seen a 150% increase in claimants since March 2020. It will be crucial to support re-training and job matching to help our economy recover, otherwise we risk losing our highly qualified population to the likes of London and the North where there are suitable vacancies.
These initial findings illustrate the diversity of our economy and whilst some of our more dominant sectors are experiencing negative impacts from COVID-19, we are fortunate that we are not completely reliant on one sector. The diversity of our sector strengths means that some of our sectors will be able to bounce back quickly and support economic recovery. Indeed we have already seen reports from Estate Agents citing a surge in interest from buyers and sellers, especially since the Chancellor’s announcement about stamp duty holiday on home purchases. We are yet to see what this impact will have on related sectors, but we expect this surge in demand will have a knock on effect for mortgage and legal services.
This is still very much a moving picture that we are continuing to monitor closely. As the Local Enterprise Partnership for this region, we are committed to providing impartial and relevant information on the evolving regional economic picture. This puts us in the unique position to provide our strategic role for the region. Look out for the final report which is due to be published later this summer.
Caroline Haynes, Director of Global Urban Solutions, Hatch Regeneris: “The Coast to Capital region has been impacted greatly by COVID-19 with particularly acute impacts on jobs and business survival around Gatwick Airport. The good news is the region has a number of unique assets and competitive advantages that if levered quickly and effectively, can help the region recover at an accelerated rate. This will inevitably mean targeting residents moving out of large cities during a substantial population shift over the coming years.”