November 2020 Economic Overview: Assessing the impact of COVID-19
COVID-19 has presented serious challenges for Cumbria’s economy over the past eight months. Here, Cumbria LEP's Chief Executive, Jo Lappin, addresses the facts.
This has required significant injections of government funding to stave off the worst economic impacts with Cumbria receiving its fair share of this, including receiving furlough support for 78,100 employments; £182.4 million of grant funding through the Small Business and Retail, Leisure and Hospitality Grants; and loan funding of £319.5million through the Bounce Back and CBILs loans schemes. Clearly, the decision to further extend these schemes and provide further grant support to businesses that have been told to close is very welcome.
However, moving into a second lockdown its worth pausing to reflect on the impact of the support to date and there are a number of factors that can be compared to see how we fare against the rest of the UK, outlined in the table below:
Factor | Overall | By area or sector | Comments/summary |
---|---|---|---|
Claimant rate | Rate is lower than the UK rate (4.6% vs. 6.5%) and has not risen as quickly. Fell slightly in September, compared to small national rise. Overall increase since March 6,600 claimants | Lower in all districts, but has risen faster since March in Carlisle, Eden, and South Lakeland. | Change in claimant rate indicates some evidence of speedier recovery in Cumbria |
All benefits | Overall UC rate is 11.7% of adults, the overall increase (15,000 claimants) is substantial but lower than the UK rise | Below UK rate in all areas as has been the % points rise | Since the large rise in April, Cumbria has seen rate largely unchanged, but have crept up in the UK |
Vacancies | Job postings data suggests that towards end of September returning to near pre Covid-19 levels in Cumbria. At UK level online job adverts round 60% of 2019 levels by early October 2020 | At UK level jobs in hospitality sector running at around 30% of 2019 levels, in Cumbria 80% of February levels (not entirely comparable). Job posting have improved in September on August for LDNPA) | Data suggests that vacancies have recovered more strongly in Cumbria than in the UK and that the hospitality sector has seen a stronger recovery than at a UK level |
Job retention scheme | The very high numbers of employments at the peak have reduced considerably with the Cumbria now 1% below the national average level of 11% | The very high rates of usage in Eden and South Lakeland have reduced considerably with only South Lakeland being higher than national average at 13%. | Cumbria’s position is now comparable with the national average, so the significant concerns have abated slightly |
Impact on young people | As with the UK, there has been a particularly heavy impact on younger people in term of claimant rate and move onto Universal Credit | Suggest that younger people have been impacted significantly as at a UK level | |
Source: Labour Market Briefing Oct 2020, Cumbria Intelligence Observatory |
Cumbria, as with the UK, saw a large initial labour market hit in March/April/May. However, over the period to September the labour market situation in Cumbria has improved relative to the UK and in effects remained unchanged. This is likely to be due to a combination of the particularly significant role of the CJRS and a relatively strong recovery in the hospitality sector in Cumbria. This is clearly relative in relation to both the UK and to pre-COVID levels. This does suggest that overall Cumbria’s economy might have recovered slightly more quickly than the UK since the early part of the lockdown. Clearly, the implications of a second lockdown are yet to be seen.
Scenarios and Forecasts for the Future
There continue to be a succession of assessments of the likely impact of Covid-19 on the UK economy by a range of private forecasting, consultancy, research firms, think tanks, the Bank of England and the Office for Budget Responsibility as well as international organisations such as the International Monetary Fund.
All those assessing economic impact emphasise the extraordinary level of uncertainty at present, with normal economics forecasting tools and models not well designed to assess a shock like COVID-19. However, the assessment of the overall reduction in the size of the UK economy in 2020 is converging with most recent forecasts ranging from a 10% to 12% reduction compared to 2019. There is still uncertainty about the length and severity of the current second wave and UK government’s measures to address it. Equally, uncertainty remains about recovery in 2021, from as low as 4% to up to 10%., but under almost all scenarios the UK economy will not fully recover in 2021.
So, what does this mean for Cumbria? The graphs below outline the current forecasted recovery trajectory for both GVA and employment growth.
Source: Experian |
In considering these scenarios it is worth considering:
- Cumbria was already forecast to have slower overall economic growth pre-COVID, largely as a result of slower employment growth than the UK rather than slow rates of productivity growth.
- September 2020 Experian forecasts that the economic hit from COVID-19 will be more severe than for the UK, with the overall fall in employment nearer 6% than 4% and with a post-COVID increase in employment diverging even further from the UK.
- There are uncertainties in any assessment and the assessment by Experian does not necessarily fully pick up the more positive impact of the increase in UK domestic tourism since July 2020 in Cumbria in an otherwise generally gloomy picture for the overall hospitality sector.
In conclusion, the scenarios suggest that the wider economic operating environment for Cumbria and Cumbrian businesses is likely to remain challenging through 2021 and very possibly into 2022. However, the experience to date suggests that Cumbria is faring better than the UK on most counts and there is no reason to assume that this cannot continue going forward.