COVID-19: Impact on businesses and workers

The Business support package has left many businesses with no access to financial support e.g. due to rateable values, the need to demonstrate business rates, newly self-employed etc. Some local areas are heavily reliant on sectors in which businesses have not received any support other than the Job Retention Scheme or commercial loans. As this scheme begins to taper out and end, there are serious concerns around the number of people who will end up unemployed. Local discretion to manage some of the business grant schemes in a way that reflected local economic conditions, sectors and priorities would have been welcomed. There is also now a lack of clarity on the recovery phase and the financial support that is going to be there to support businesses to recover and sustain jobs in the short-term when furlough and other schemes cease. This also relates to longer term recovery, sustainability, job creation/retention, skills, and growth of businesses. As a result of the economic impact of the crisis, those on the lowest incomes and the least secure jobs will be affected the most, including young people, women, those with disabilities and minority groups, resulting in greater social and economic inequalities. Impacts will affect communities differently. A place-based approach, led by Local Government, in collaboration with other public, private and third sector organisations, is required to develop an inclusive sustainable economy going forward.

Further financial intervention to support businesses to navigate through the four Rs would be welcomed. Local authorities do not have available resources to cover the scale of this challenge and are expecting significantly more pressure on existing resources as lockdown continues to ease. Many businesses will be crippled by the costs of being Covid-secure, which is a prerequisite for increasing consumer, customer and supply chain confidence. The signing off of City and Growth Deals that are in the pipeline will be critical to recovery in many areas, and financial resource needs to be allocated to the recovery. This is particularly important for sectors that are not likely to have a swift restart and in remote, rural and island areas where there is a strong reliance on these sectors. This might mean the continuation of existing support measures, but in a more targeted approach e.g. extending the Job Retention Scheme for specific sectors or sub-sectors which will face continuing pressures throughout 2020/21. It may also mean that new support measures need to be put in place, such as funding for premises to become covid compliant.

A national approach will leave some areas experiencing significant gaps due to their sector profile and may also lead to certain support packages being designed that only benefit specific sectors and local areas. Restrictions are different for each sector, therefore the response for each sector and sub sector needs to be varied. Local government and other community planning partners are best placed to tailor a response to their individual areas, but they require additional resources to do so. Rural and island areas have significantly different requirements to populated areas which have access to more resilient services and supply chains, and more extensive customer bases. In particular, rural areas have a considerable distance to catch up to mainland areas in terms of digital connectivity. Part of the response must be policy measures to ensure that areas which are currently being left behind in terms of access to modern connectivity can catch up.
Building on the work of the Regional Economic Partnerships can support the development of responses tailored to the regions, and tie into the City and Growth Deals. Where these focus solely on the deals these can be expanded following the examples of Edinburgh and Glasgow.

The speed of implementation of some of the response schemes was necessary, but this led to a lack of sufficient flexibility to respond to local circumstances, challenges or opportunities. Greater trust should be given to local authorities going forward to manage funds in a way that is appropriate to local conditions. Feedback from businesses in local areas has praised local authorities for the support received in terms of applying for grants and general assistance and guidance. Local authorities should be given the autonomy to administer support in their local areas, as they are best placed to understand the specific sectoral needs of their economies. All businesses are not standard and many have been ineligible for support because of the way that they are structured. However, the crisis has demonstrated that the public sector can very quickly and effectively make decisions and take things forward and this collaboration should be built upon and standardised. Where important local businesses have fallen through the gaps in national schemes, local government needs to be in a position of trust and given resources to deliver discretionary grants to help safeguard jobs.

Capacity is reduced due to the need for social distancing, and in one area statistics range from between 10% to up to 60% capacity. This will continue to have an impact on the viability of some businesses, and some smaller businesses have had to close down due to the scale of their business or location. Some local authorities are in the process of conducting business surveys which will help them to better understand these limitations for businesses and anecdotal feedback has highlighted that significant numbers are concerned over reduced productivity and business contraction.

Most local authorities will not know the full impact on staffing levels until the furlough scheme ends. However, anecdotal evidence suggests that businesses are taking a number of approaches, including ongoing furloughing of staff, decreasing working hours, laying off staff in the short term, laying off staff permanently and recruiting staff on short-term contracts. Areas of concern include a lack of consumer confidence and resultant continued loss of income, as well as operating restrictions to ensure social distancing.

Business death data has a time-lag of a couple of years, so there will not be accurate data on this until around 2022. However, local authorities are aware of local businesses, particularly in tourism, retail and hospitality, which have closed permanently or decided not to reopen in 2020 due to the high costs of being covid compliant. This is also occurring where businesses are unable to adjust their business model or diversify into home delivery etc. It is thought that viability will be largely dependent on consumer and supply chain confidence, and some businesses have highlighted the need for more certainty and guidance from the Government so that businesses and customers have more confidence going forward.

When furlough ends, the debt that businesses may have incurred during lockdown will be a significant risk to them and those that they employ. This will have a knock-on effect on local economies, reducing spending power and increasing job losses. In the short to medium term, businesses are likely to be focused on survival, therefore medium to long term support packages need to be implemented, and these will vary between sectors. Longer term support should be focused on businesses with the ability to survive and thrive and have positive local economic impact. Anecdotally, some local authorities are aware of businesses that have increased debt through schemes such as the bounce back loan scheme. However, there are also a number of businesses that have been wary of taking on debt during this time. One business survey found that almost 60% of respondents would not be willing to consider debt finance moving forward. In order for debt finance to be sustainable, businesses will require more flexible repayment terms, potential extended payment holidays and advice on managing cash flow. Citizens Advice Bureaus have reported an increase in businesses contacting them due to financial issues and additional support for third sector organisations offering advice would be welcomed as this is a relatively new area of work for them.

Employers required support with this prior to the crisis and will undoubtedly continue to need it, but it is critical that this is actually support rather than additional layers of governance. This also needs to be balanced with employers struggling to maintain their viability and not being in a position to adopt these practices without additional financial support. The fair work premium may need to be mitigated by other incentives from the Government. Local authorities are working hard to assist businesses to adapt to this changing environment, so additional resource for local authority business support functions would also be helpful.

The overall strategy is still applicable, but aspects of it may need to be accelerated to stimulate investment and inclusive growth in the post-pandemic period. The activity that underpins the Strategy and Action Plan will need to be flexible to fit the current situation, and there is a real opportunity to build on the innovative practices developed over the past four months. Inclusive growth remains incredibly important at this time and should be a focus for government in supporting communities to recover. It is clear that business as usual responses will not achieve the recovery and renewal required and the opportunity must be taken to build back better, fairer and greener. The crisis has called current economic practice into question and highlighted the importance of creating a new economic model, focused on wellbeing and inclusion. A shift in focus from increasing GDP towards an economy that benefits everyone is essential. A place based approach, using the five pillars of Community Wealth Building and the key local anchor institutions could help support local economies in recovery. Anchor institutions are key pillars of local economies and should be supported to create additional local fair work and apprenticeship opportunities increasing local economic impact. Fair, flexible and valued work and the provision of a living wage by anchor institutions can help to keep money within local economies and consequential positive multiplier outcomes.

Supply chains are likely to be fundamentally altered as a result of the crisis and there will be limited capacity to source new suppliers. As a result of the crisis, international trade has been severely disrupted causing significant interruptions to supply chains. This has led to a greater appreciation of the need to develop local production and shorter supply chains to create greater levels of local market capacity and resilience. This could be supported by a Community Wealth Building approach to recovery and procurement. More advice, support and information is required, particularly for those exploring exporting for the first time or looking to diversify into new markets. Preparation for Brexit has been lost to some extent within the current economic crisis and this will require an increased focus for businesses and workers in terms of actions needed to enable effective planning for the impacts. At a regional and national level this will require an increased focus, information, promotion and provision of expert advice and support. In rural areas there is still a demand for seasonal workers and this needs to be a priority moving forward to support business and supply chain recovery. A greater understanding of future trade agreements post BREXIT will shape this work and allow local businesses to react and take advantage of any trading opportunities.