Bank of England forecasts for the UK economy optimistically predict a bounce back in 2021, but before that the economy is expected to plunge to unprecedented depths in the 2nd and 3rd quarters of this year. If these predictions are correct, we are currently heading into the eye of the economic storm
In the next few months as we slowly emerge from lockdown, we can expect to see rising job losses and business closures. How many largely depends on the Governments handling of the next phase of this crisis. Taking the country into lockdown happened speedily and comprehensively, coming out of it is going to be a lot slower, more complex and a more fragmented process to navigate. The Treasury has already acknowledged this with the extension of the job retention scheme until October. But some industry sectors are already calling for extra help, knowing that they will be among the last to return to normal.
Timing and management of the return is crucial. There is a very fine balance to be struck between protecting the nations health and protecting its jobs and long-term economic survival. To date all the support measures have helped and have bought time for businesses but they have only pressed pause on the problems, delaying decisions and inevitable job losses, business closures and huge financial losses.
What is needed now is clear and unequivocal guidance for businesses and continued support throughout the period while restrictions remain – no cliff edges, no removal of support, but a measured and gradual return. From research NE1 carried out in Newcastle, the business community is in a fragile state. Over 54% of businesses warned that they will not survive if the lockdown lasts for six months, with the figure rising to 75% if it extends beyond 6 months.
Tens of thousands of people are employed in Newcastle city centre alone, 50-75% of these jobs are at risk if the delicate balance of safety and restarting the economy isnt handled properly. NE1 has been working closely with its business community to gauge the state of the nation during the Covid Crisis and to put measures in place to support businesses as best we can. A survey of city centre businesses was conducted to understand how the citys business community was faring five weeks into lockdown.
The results echo the Bank of England predictions and paint a bleak picture of the economic fortunes facing businesses in the 2nd and 3rd quarters of the year, showing the devastating impact the virus has already had on Newcastle businesses. The survey warned that 56% of businesses have essentially mothballed their operations and have temporarily closed and only 2% of businesses are operating as normal.
59% of respondents have seen a decrease of between 81-100% in turnover with only a small minority of 8% seeing a significant uplift of 81% or more in turnover since lockdown began.
Returning to work and normality will be tricky for businesses struggling to apply new social distancing measures and introduce Covid-safe working practices to their business practices and premises. Protecting staff, customers and the wider public will be paramount but exceptionally difficult where premises and public spaces are not designed for social distancing.
NE1 has been working closely with Newcastle City Council, with businesses and other city partners to identify risks and measures to mitigate and support people as they return to the city. Many businesses have started planning for how they will return and operate in the new norm. Those who cannot work at home and are now allowed have started the gradual return to work while the majority remain in full lockdown.
With no definitive guidelines, all businesses will have to find their own way seeing what works and adapting as they begin to reopen. Employees and the general public will all have their part to play in staying safe and making this work. To date, the collective response to the crisis has been phenomenal. Maintaining this sense of personal responsibility will be essential as restrictions begin to be lifted.
For Newcastle, like the rest of the country, one of the worst affected business sectors has been the licensed trade. Bars and restaurants are expected to be among the last to return and will struggle to get back to work and to full strength while social distancing rules apply. If venues are permitted to open with social distancing restrictions in place, they will be expected to reduce capacity, restrict numbers and covers by up to 90%. With the majority operating on an average margin of 3 -5%, these restrictions could be catastrophic. Many would be opening only to see their business close, permanently. For this reason ongoing, sector-specific support will be required as the city and traders adjust.
Government support to date has been significant – 67% of businesses think the measures provided so far have been effective, or very effective. As the situation changes, Government support is changing too. The message from Newcastles business community is clear; the support needs to continue and be flexible, targeted and adaptable as the city begins to reopen and get back on the path to profitability.
