Herefordshire & Worcestershire Chamber of Commerce, in partnership with the Worcestershire Local Enterprise Partnership, have released the results of the latest quarterly economic report, outlining the impact of Coronavirus on businesses during Quarter 2. The report also places a specific focus on the impact of COVID-19 on employment and skills. This report captures the impact of Coronavirus on businesses in Herefordshire and Worcestershire between Monday 18 May 2020 and Monday 8 June 2020.
The outbreak of Coronavirus has led to a crisis which has been characterised by an unprecedented suspension of economic activity in the UK. It will come as no surprise to see that this report suggests that the impact on businesses in the two counties is unparalleled by any previous data. The extent and pace of damage to local businesses has been far more rapid than during the global financial crisis. The data in this report shows that the impact has manifest into a much sharper shock.
The government are estimated to have borrowed £62.1 billion in April 2020, the highest borrowing in any month since records began in January 1993, to fund the unprecedented package of support offered to businesses during the Covid-19 pandemic (ONS, Public sector finances, UK: April 2020). For many businesses this support has been an invaluable lifeline.
Yet, even where schemes have worked well, it doesn’t mask just how difficult this quarter has been for businesses. 74% of businesses that filled in this quarter’s QES experienced fewer UK sales than last quarter. At the height of the 2007/08 financial crisis that figure was 55%. Confidence and plans to increase investment have reached their lowest on record. 59% of businesses expect their turnover to decrease over the next 12 months, compared to 50% at the peak of the financial crisis. In the most concerning statistic from the report, a third of businesses expect to reduce their workforce in the next 3 months. Such figures only reinforce forecasts from the Office for Budgetary Responsibility, which expect the unemployment rate to peak at a level between 9.7% and 13.2%.
As lockdown is eased, businesses are trying to reopen safely whilst remaining commercially viable, all the while conforming to social distancing rules. The Chancellor’s Summer Statement saw some welcome announcements regarding investment in skills and schemes to boost a green recovery, but the Coronavirus Job Retention Scheme Bonus seems unlikely to prevent many businesses from needing to make redundancies if demand does not pick up.
The biggest challenge for businesses moving forward will be maintaining cash flow in a subdued economy. The easing of lockdown measures will need to do more than simply open businesses; consumers will need to have the confidence to go out and spend. Without a dramatic increase in demand and cash flow, the risk to the labour market will be significant.
To read the full report click here.