Economic Impacts of COVID19 Info Pack Updated 04

Economic Impacts of COVID-19: Info Pack - Updated 04. 08. 2020 SCC Economic Policy Team – Research & Intelligence

Business Intelligence

FSB, ‘New Horizons’ Report, May 2020 The FSB in their ‘New Horizons’ report analysed a variety of trends within small businesses as a result of the Covid-19 pandemic at the national level. Key headline figures included: Digital engagement: • 16% of businesses developed a new online presence/developed an existing presence. • 24% of all small businesses adopted or increased their use of digital technologies to facilitate WFH capability. New Services/Products: • 10% of all small businesses diversified into producing new services, 6% diversified into producing new products/goods, and 9% started making deliveries to customers’ homes. Business Practices: • 14% of all small businesses made structural changes that allowed them to keep trading while respecting social distancing. • 30% of businesses reported alterations to business practices to accommodate WFH capability. Management Skills • 51 per cent of small businesses reported that leadership and management skills are most important for the future growth of their business, 34 per cent for product or service innovation and 22 per cent for organisational innovation. • 53 per cent of small businesses invested in or introduced improvements to working practices and processes, 49 per cent into technology or machinery and 41 per cent into staff training and development over the last year.

National Farmers Union (NFU) • Many farmers unable to access grants due to agricultural property not being rateable or Government backed loans due to state aid rules. • Credit Insurance being withdrawn. • Insufficient credit rating to access loans – banks unwilling to lend. • They are net receivers of VAT so deferred payments are of no help. • Farming businesses can't furlough staff because the animal and crop husbandry continue, even where the value of the product has decreased exponentially. • Processors must keep factories running so can’t furlough staff and get Gov. to pay 80% of wages. • If a processor accesses a loan or grant, there is no guarantee that any benefit will be passed back down to the farmer suppliers. • . The announcement of the dairy hardship fund to support struggling dairy farmers has yet to be articulated in sufficient detail, with many farmers concerned they will not receive the support they need. • Efforts are being made to re-align supply chains to ensure meat/dairy products find their way to market. Major food retailers are being encouraged to ‘buy British’, with some retailers stocking imported meat and UHT milk. • Difficulties for sheep farmers in acquiring a shearer, with many usually coming from New Zealand. The price of wool has also decreased significantly.

NFU Report, May 2020 The NFU in the South West has produced a report highlighting some of the key impacts/challenges faced by the farming industry, as well as producing a roadmap to frame future recovery planning in the ‘new normal’ post Covid. Some of the key challenges highlighted by the report include: • The risk associated with farmers relying on a single type of outlet (such as restaurants) to purchase goods, highlighting the need for a more resilient supply chain built upon robust local networks. • The issue of labour has also been emphasised, with a lack of access to a mobile and skilled workforce often meaning farms are reliant on seasonal or off-farm labour. • Infrastructure investment has also been raised as a priority issue, with a desire to improve communication to farmers of best practice in regard to both environmental and productivity gains contingent on a reliable broadband/mobile communication network.

Visit Somerset • Visitor Economy – Somerset visitor economy is worth £ 1. 3 bn annually and 28, 000 FTE jobs. Loss of visitor nights April, May, June leads to an estimated loss of £ 178. 8 million to the accommodation sector. • Visit Exmoor: Reports that tourism impacts 60% of all employment on Exmoor, with accommodation alone accounting for 31% of jobs across Exmoor. In the period April to June, it is estimated the local tourism economy for Exmoor/Greater Exmoor will have lost £ 122 m with a further £ 190 m at risk for the period July-sept. • Exmoor National Park Authority have also published a recovery plan, which can be accessed here. • Visit Somerset report that cash flow is king for the visitor economy, and the forthcoming peak season (April-Aug) is going to be vital. However, social distancing is going to make re-booting the visitor economy an enormous challenge • Visitor Somerset Intelligence: Closure of Major Shopping Centre in Mendip for 3 months could cost an estimated £ 24 million stripped from regional centre turnover, employs over 1000 staff. • Another retail outlet store with over 400 staff has had difficulty securing a six figure loan from its bank, faces losses of £ 1. 5 million over the next 3 months and potential closure of business • A coach company that employs 130+ staff has seen significant loss of private hires leading to severely reduced revenue and furloughing of vast majority of staff.

Somerset Chamber • Previously reported the risk of wide-scale redundancies if the furlough period was not extended beyond June. Not least for those businesses who will not be able to return to working as usual at that date due to social distancing requirements (e. g. tourism, events, museums, theatres, sports, etc. ). Despite the extension of the CJRS, • Concerns • Still significant concerns about phased return to work • Businesses need support to understand social distancing and Health and Safety procedures/policies for return to work • Businesses (especially construction and manufacturing) concerned about supply chain and demand being out of phase with the return • Directors who take small salary dividends still excluded under Government Schemes • Hospitality, leisure and retail sectors likely to experience longer impact so will need further support • Positives • CJRS scheme successfully implemented and extended in current form to end of July. More detail needed on scheme terms/sector specific changes. • Bounce Back loans seem more accessible and can replace CBILS loans with more favourable terms (interest free for a year then 2. 5% interest)

National Economic Overview

ONS GDP Statistics Q 1 2020 • ONS data from Q 1 (Jan-Mar) indicates that UK GDP has contracted by 2%. • Nearly all industries suffered a fall in GDP during this period, with accommodation and food services suffering a 9. 5% fall, and transport and storage suffering a 4. 9% fall. • Manufacturing and construction, along with retail also witnessed significant reductions, of particular importance given Somerset’s business composition.

ONS GDP Statistics May 2020 • GDP fell by 19. 1% in the three months to May 2020. • Monthly GDP grew by 1. 8% in May 2020 but was still well below the levels seen in February 2020. • All the headline sectors provided a negative contribution to GDP growth in the three months to May 2020. The services sector fell by 18. 9%, production by 15. 5% and construction by 29. 8%. • Some industries in production and services saw a small rise in May 2020, such as manufacture of food products, and manufacture of motor vehicles, but these levels still remain substantially below February. • Construction output grew by a record 8. 2% in the month-on-month all work series in May 2020 following the record decline of 40. 2% in April 2020. Source: GDP Monthly Estimate May 2020 (latest release)

Bank of England: Agents’ summary of business conditions Q 2 • Spending on consumer services and non-food goods were significantly weaker than a year ago, however sales of homeware, furniture, computing and audio-visual equipment were strong. • Stores that were permitted to re-open early, such as garden centres, DIY and homeware stores and car dealerships reported strong demand. • Contacts expect concerns around the wider economic outlook & social distancing measures may weigh on overall demand for several months. • Manufacturing: Output continues to be significantly weaker than a year ago, though there has been a modest improvement in recent weeks as companies reopen. Social distancing & weak demand is likely to constrain output for several months. • Construction: Sites are reopening in some parts of the UK, but output is still significantly lower than a year ago due to weak private sector demand. The outlook for commercial work over the next two years appears bleak, with enquiries & orders collapsing. Housebuilding is resuming slowly however, with public sector projects also holding up. • Demand for credit is high and expected to increase as companies start to reopen over the coming months. • Housing market activity is gradually resuming in England, and there are early signs of demand returning for some commercial real estate properties, but the outlook for both markets remains highly uncertain. • Investor demand for commercial real estate remains subdued overall, but there are some signs of activity picking up for distribution industrial sites and data centres. By contrast, uncertainty about the rental outlook is deterring investment in office and non-food retail premises. • Companies have mostly cancelled or postponed non-essential investment to preserve cash buffers, and many are uncertain when or whether investment plans will be reinstated. • A number of contacts anticipate having to lay off workers if demand does not recover sufficiently once the CJRS/other support mechanisms are phased out.

Survey Data

Federation of Small Business • Survey results of 5471 small business owners between 22 -30 th April show one in three small employers consider redundancies as they struggle to pay bills, shelve exports and pause product development. • 41% of small business have been forced to close since the beginning of the coronavirus outbreak in the UK. Of those that have closed, 35% are not sure whether they will ever reopen again. • For those small businesses paying a mortgage or lease on their premises, over a quarter (28%) have failed to make, or faced severe difficulties in making, rent or mortgage repayments as a result of the pandemic’s economic impacts. • . A similar proportion (25%) have had to shelve product development plans. • Among exporters, a fifth (21%) say they have had to either reduce or cancel international sales. • In response to the strain being placed on them, more than one in three (37%) small employers are considering, or have already made, redundancies. • Seven in ten (71%) small employers have furloughed staff to aid the survival of their business, illustrating the extent to which the Job Retention Scheme has protected the livelihoods of millions as economic activity has slumped. • Close to one in ten (8%) business owners have applied for universal credit, with close to a third (29%) having their applications rejected. Even amongst those that have had applications approved, less than one in seven (13%) have received their advanced payment. • Meanwhile, of those small business owners that say they are not using the Self-Employed Income Support Scheme, the majority (68%) say this is because they are directors of limited companies.

British Chamber of Commerce, Quarterly Economic Survey, Q 2 Domestic sales • The percentage of manufacturers reporting increased sales dropped to -59% in Q 2. • The percentage of service firms reporting increased sales fell to -64% from +16% in 2020. Export Sales • The percentage of manufacturers reporting increased export sales fell to -52%, with -55% for service firms. Investment • -38% of manufacturers and -32% of service firms increased investment in training in Q 2. Cash Flow • -31% of manufacturers and -36% of service firms have reported increased cash flow. Confidence • -31% of manufacturers and -36% of service firms reported they were confident that turnover would increase in the next 12 months. Source: https: //www. britishchambers. org. uk/media/get/QES%20 report%20 Q 2%202020. pdf

British Chamber of Commerce: Coronavirus Business Impact Tracker – May 20 th Release • 83 per cent of respondents report that they know some or a lot of details about government guidance on working safely • 37 per cent of firms report they can implement the guidance and fully restart, and 45 per cent report they can partially restart. • 10 per cent of respondents did not agree that they would be ready to implement guidance and restart operations, mainly citing social distancing as difficult. • 85 per cent of respondents have received payment from furlough scheme, with around 70% of employers furloughing a portion of their staff.

SWMAS – South West Survey of SME Manufacturers Q 1 2020/21 (April, May & June) Sales & Profits • 70% of respondents reported a reduced sales turnover the past six months, with 42% expecting sales turnover to decrease in the next 6 months. • 72% of respondents saw a decrease in profit over the last six months, with 41% expecting profits to fall in the next six months. Employment • 36% of respondents reported a reduction in staff numbers over the past six months, with 32% expecting staff numbers to decrease in the next six months. COVID-19 • 30% respondents described there business as ‘surviving’ whilst 28% reported being in a ‘recovering’ state. • 80% of respondents had made use of the furlough scheme, whilst 18% had made redundancies. • Encouragingly, 83% of respondents reported enough clarity had been provided to implement safe social distancing at work.

South West Tourism Alliance Survey • Visit Cornwall have commissioned a series of surveys from March to May via the South West Tourism Alliance covering the South West region generating 799 responses for March, predominantly gathering from Devon & Cornwall (90%). • 89% of non-accommodation businesses said their turnover had decreased when compared to March 2019, with a majority of these businesses (60%) seeing decreases of 71% or more. • In the accommodation sector, in regard to future bookings lost, 45% estimated they had lost between 1 -30 bookings, with 22% estimating they had lost 100+ bookings. • For March, 25% of businesses had to lay off staff, 13% had to put some/all their staff on reduced hours, and 11% had to make all/some of their staff take unpaid leave.

Somerset Results of SWTA Survey • Only a very small cohort of respondents to this survey were from Somerset (44 in total). We are aiming to rectify this in the next round of surveys. • 55% of these respondents were from the accommodation sector and 23% from the food and drink sector. 66% of these responses were from SWa. T district. • 91% of these businesses had closed during the survey, with 100% of businesses reporting decreased turnover compared to March 2019 (22 responses). • Out of 44 respondents, 36% had to lay off staff, with 23% requiring some/all of their staff to take unpaid leave.

Rural Enterprise Exmoor Covid-19 Economic Impact Survey, June 2020 • 138 responses collected between 20 th May – 10 th June, representing over 10% of the total estimated business count on Exmoor. • 88% of responding businesses were micro-businesses employing less than 10 people. • Almost two-thirds of businesses have temporarily ceased trading, with a fifth trading in part through movement to online platforms. • At this stage, just 1% of businesses reported having to permanently cease trading. • 89% of accommodation providers had temporarily ceased all trading, in addition to 83% of businesses providing food & drink services. • 89% of businesses reported an adverse economic impact, with 66% reporting a severe impact. • 85% of businesses identified ‘lost business because of orders/customs/contracts’ as a key issue, with 46% identifying cashflow as an issue. • 71% of businesses had accessed the grant schemes for retail, hospitality and leisure, with 33% making use of the CJRS. Approximately 70% of respondents reported receiving business support/advice from a range of channels, including LA’s. and trade associations. • 70% of businesses highlighted ongoing social distancing restrictions as a key impediment to recovery, with 54% citing loss of seasonal income and 45% citing market shrinkage or confidence as barriers to recovery. • A more detailed report pertaining to the baseline Exmoor economy published in June can be accessed here.

Labour Market Data

Labour Market Data • Hard data is now being released incrementally from the ONS in the form of the July Labour Market Overview, with survey periods now beginning to coincide with the main economic impacts of lockdown measures imposed in the wake of the Covid-19 outbreak. Much of the data however, specifically key sectoral impacts, are still very highlevel in scope and do not always break down to a useful level of granularity for localised analysis. • The ONS is currently producing a fortnightly Business Impact of Coronavirus Survey (BICS) covering turnover, workforce, prices and trade, but this data to date has relied on small samples sizes and excludes regional or industry breakdowns. • The ONS has also been utilising so-called ‘experimental statistics’ to provide faster indicators on social and business attitudes to the Virus, but as outlined above these are unreliable compared to standard ‘hard-data’ releases. • Hard data on regional industry jobs will not become available until either September or October with the release of the Workforce Jobs and Annual Population Survey, which will both cover Q 2. • The ONS has now released data on the CJRS/SEISS schemes as of the 30 th of June, which covers the extent of usage of these schemes at the local level, with sector specific data also being produced but only pertaining to the national level. • In regard to forecasting, whilst such studies can be useful, they are premised on scenarios which are inherently based on a significant degree of uncertainty. Projections by contrast, rely on past economic trends to generalise about future economic behaviour, which is useful for baselining economic activity but not incredibly helpful for gaining more information on COVID specific impacts. • In addition, the ONS has commented on the difficulty of collecting reliable data in this challenging time, with typical survey methods facing barriers to data collection due to many businesses having temporarily pausing trading and therefore being uncontactable, the increase in remote working, as well as social distancing measures, are all hampering traditional survey collection practices.

Caveats of Labour Market Data • The nature of the COVID crisis has led to a renewed interest in labour market statistics, particularly measures pertaining to unemployment. Interesting, and at times confusing trends have emerged in this data, with the claimant count surging since March, whilst the unemployment rate has remained largely static. • Claimant count data, which has served to function as a timely indicator of underlying labour market conditions, should be interpreted with caution for two key reasons: • 1. Firstly, the crisis occurring in the middle of the roll out of UC has dramatically increased the pace of those making a claim to the new system, with those previously only claiming child tax credits, housing benefit, and claimants awaiting a health assessment are now all being captured under claimant count figures. • 2. Easement of usual work-search conditions in UC means many new UC claimants have not had their work status accurately updated if they are making use of either the CJRS or SEISS, with this error not being able to be corrected until an individual has had their data fed through DWP's admin system. This can take a few months, and has meant a high proportion of those appearing in the claimant count are still working, furloughed, or SEISS recipients. • By contrast, the ILO (international labour market organisation) measure of unemployment is likely understating any increase in unemployment. This is due to the fact that to be classed as unemployed under this definition one has to be out of work but actively searching for work. Due to the hard nature of the lockdown in previous months, with vacancies falling precipitously, many of those who would usually be classed as 'unemployed' simply moved to 'economic inactivity', meaning they were not actively seeking work. • Such nuances underscore the fact that the reliability of usual sources of unemployment data is at this moment highly volatile, and should be interpreted with a significant degree of caution.

Labour Market Overview – July 2020 ONS Release • Estimates for March to May 2020 show 32. 95 million people aged 16 years and over in employment, 199, 000 more than a year earlier but 126, 000 fewer than the previous quarter. • The estimated employment rate for all people was 76. 4%; this is 0. 3 percentage points up on the year but 0. 2 percentage points down on the quarter. • While the Labour Force Survey (LFS) estimate of self-employment is showing record decreases (down 178, 000 on the quarter to 4. 85 million), the number of employees in employment continues to increase for March to May 2020 (up 97, 000 on the quarter to 27. 95 million). • Estimates for March to May 2020 show an estimated 1. 35 million people were unemployed, 55, 000 more than a year earlier but 17, 000 fewer than the previous quarter, equating to an unemployment rate of 3. 9%, largely unchanged on the quarter. • Importantly, despite the lack of overall increase in the number of unemployed, the estimated number of people unemployed aged 16 to 24 years increased by 47, 000 on the year while other age groups remained steady. • Unemployment figures remaining steady seems counter-intuitive given decreases in employment numbers overall. arger than usual proportion of those leaving employment are not currently looking for a new job and therefore becoming economically inactive, rather than unemployed. In addition, an increased number of respondents who were previously unemployed have moved to economic inactivity in March to May 2020, suggesting that some who were previously unemployed are no longer looking for work. • Between May 2020 and June 2020, the Claimant Count decreased by 28, 100 (1. 1%) to 2. 6 million (Figure 8). Since March 2020, the claimant count has increased by 112. 2%, or 1. 4 million. • The ONS has stressed however that this count cannot be necessarily attributed solely to unemployment. Changes to the eligibility of UC to encompass a larger proportion of the workforce as part of the Government’s Covid response may have played an important role in the increase in figures.

Labour Market Overview – July 2020 ONS Release • March to May 2020, total actual weekly hours worked in the UK decreased by 175. 3 million, or 16. 7%, to 877. 1 million hours. This was the largest annual decrease since estimates began in 1971, with total hours dropping to its lowest level since May to July 1997. • The “accommodation and food service activities” industrial sector saw the biggest annual fall in average actual weekly hours; down 12. 0 hours to a record low of 16. 0 hours per week. • Latest figures show a fall in payroll employees in recent months. Early estimates for June 2020 from PAYE RTI indicate that the number of payroll employees fell by 2. 2% compared with March 2020. In June, 649, 000 fewer people were in paid employment when compared with March 2020 and 74, 000 fewer when compared with May 2020. • For April to June 2020, there were an estimated 333, 000 vacancies in the UK, 59. 9% fewer than a year earlier 58. 1% fewer than the three months to March. • Contributing most strongly to the quarterly movement were the “wholesale, retail trade and repair of motor vehicles” industrial sector down 92, 000 (70%) and the “accommodation and food service activities” industrial sector down by 78, 000 (91. 1%), both record quarterly falls. • Total pay in real terms fell for the first time since January 2018, falling 0. 4%. • Pay is now growing at a slower rate than inflation, at negative 1. 3% for total real pay, the lowest rate since April to June 2014. Regular pay growth in real terms is also negative, at negative 0. 2%.

Claimant Data Breakdown in Somerset Districts March-20 Rate April-20 Rate 2. 3 4. 5 May-20 Rate 5. 6 June-20 Rate 5. 3 Increase from March-June +3. 0 5. 4 +2. 6 No. of new claimants Total No. of Claimants as from March-20 to June of June -20 2005 3585 Mendip 2. 8 4. 7 5. 6 1885 3900 Sedgemoor 1. 9 3. 8 4. 7 4. 6 2570 +2. 7 4435 South Somerset West & Taunton 2. 2 4 4. 9 4. 7 +2. 5 2. 3 4. 2 5. 1 5. 0 +2. 7 4130 2220 8680 16, 050 Somerset 2. 2 4. 3 5. 4 5. 2 +3. 0 100, 415 176, 105 South West 3. 0 5. 1 6. 4 6. 3 +3. 3 1, 356, 855 2, 625, 475 United Kingdom Source: ONS claimant count by sex and age - not seasonally adjusted

Somerset Claimant Count by Age Band March Rate April Rate May Rate June Rate No. of claimants in May No. of new claimants Mar-June Cumulati ve % increase Mar-June 1617 0. 2 0. 3 0. 5 0. 4 45 20 80% 1824 3. 7 6. 4 8. 3 8. 6 3190 1820 132% 2549 2. 6 4. 9 5. 8 5. 6 8690 4600 112% 50+ 1. 6 3. 0 3. 7 3. 4 4125 2245 119% Source: ONS claimant count by sex and age - not seasonally adjusted

Key Points from Claimant Count Data • All districts have seen a significant increase in their claimant count rates since March, however May-June figures did show a slight fall in all districts. • South Somerset has seen the biggest increase in new claimant claims since March, with an additional 2570 claimants from Mar-June, equating to a 138% increase. • Sedgemoor has seen the lowest increase in claimants in Somerset, with 1885 additional claimants from Mar-June, a 94% increase. • Crucially however, all Somerset districts have a claimant count rate below both the national average rate (6. 3), with SWa. T and South Somerset both being below the regional average (5. 2). • By age, the 25 -49 bracket has seen the largest no. of new claimants, however this age bracket does make up a significant 36. 7% of Somerset’s working age population. Subsequently, the proportion of this age bracket claiming is only around 2. 96% • The biggest cumulative increase from Mar-May has been in the 18 -24 age bracket. • Importantly, the 18 -24 age bracket has seen 1820 new claimants, equating to a cumulative increase of 133% between Mar-Junel. Crucially, the proportion of the 18 -24 working age population making a claim is 8. 6%, the highest of the covered age groups. This age bracket represents 8. 7% of the total working age population compared to the much larger 25 -49 bracket, highlighting the difficulties this age group have faced. • Given that young people are disproportionately likely to work in low-pay sectors, which additionally have been most likely to shut down over lockdown, this age bracket should constitute a key consideration of future analysis. • The ONS has stressed however that this count cannot be necessarily attributed solely to unemployment. Changes to the eligibility of UC to encompass a larger proportion of the workforce as part of the Government’s Covid response may have played an important role in the increase in figures.

Support for young workers • As highlighted in the preceding slide, young workers have been disproportionately affected by the economic fallout from COVID-19. • To ameliorate this problem, on the 8 th of July the Chancellor announced a variety of measures to support young people, including: • £ 2 bn ‘kickstart scheme’ to pay for six-month work placements for 16 -24 year olds on universal credit • £ 1000 grant per trainee for employers who take on new trainees aged 16 -24 in England. • £ 2000 grant per apprentice under 25 hired, £ 1500 for those over 25, for six months beginning in August. • £ 101 m to fund studies for 18 -19 year old’s in England unable to find work. • A job-finding support service for those out of work for less than three months, costing £ 40 m. • £ 32 m over two years for a National Careers Service to provide advice on work and training.

Usage of the CJRS (furlough) across Somerset Area Mendip Sedgemoor SWa. T South Somerset South West UK Total no. on furlough (as of 30 th June) % of workforce furloughed 17, 200 27. 69% 15, 800 25. 03% 19, 700 27. 51% 22, 000 27. 50% 74, 600 26. 95% 771, 400 27. 61% 9, 373, 900 29. 05% % of workforce furloughed calculated through dividing total workforce figures provided in ONS Business Register and Employment Survey 2018 Source: Coronavirus Job Retention Scheme Statistics Note: The chancellor announced on the 8 th of July a ‘job retention bonus’ of £ 1000 to employers who retained a furloughed employee to the end of January 2021, on the condition workers are earning over £ 520 per month.

Usage of the SEISS across Somerset County and district / unitary authority Mendip Sedgemoor Somerset West and Taunton South Somerset County South West UK Total potentially eligible population Total no. of claims made to 30/6/20 Total value of claims made to 30/6/20 (£) Average value of claims made to 30/6/20 (£) Take-Up Rate (of those eligible) 8, 400 5, 900 17, 300, 000 2, 900 71% 6, 900 5, 100 15, 900, 000 3, 100 74% 9, 100 6, 600 19, 300, 000 2, 900 73% 9, 800 6, 900 20, 200, 000 2, 900 71% 34, 200 24, 600 72, 800, 000 3, 000 72% 318, 000 236, 000 694, 000 2, 900 74% 3, 399, 000 2, 553, 000 7, 416, 000 2, 900 75% Source: ONS, Self Employment Income Support Scheme Statistics, June 2020

Age breakdown of national usage of SEISS Scheme • Around 90% of claimants are aged between 25 and 64 and take-up of the grant in these age-groups is at or above 75%. No one age group dominates and claims are evenly spread. • The take up rate is noticeably lower for those who are aged 65 and over (60% have claimed), although they have the highest average claim value at £ 3, 300. The youngest age group have the second lowest take up rate (68%) and the lowest average claim value at £ 2, 100. Total potentially eligible population (000 s) Total no. of claims made to 30/6/20 (000 s) Proportion of total eligible population Proportion of total number of claims made Take. Up Rate 127 86 4% 3% 68% 664 502 20% 76% 800 617 24% 77% 852 664 25% 26% 78% 702 527 21% 75% 221 132 6% 5% 60% 34 25 1% 1% 74% 3, 399 2, 553 100% 75% Age Group 16 -24 25 -34 35 -44 45 -54 55 -64 65+ Missing All Source: ONS, Self Employment Income Support Scheme Statistics, June 30 th 2020

SEISS Usage by Selected Industries (National) • • Total no. of Proportion of potentially claims total eligible total number total value of eligible made to population of claims made population 2 30/6/203 made to date (000 s) The construction industry has the largest potentially eligible population with over 1 million selfemployed individuals Industry Description potentially eligible to apply. Accommodation and 83 61 2% 2% 2% By 30 June construction food service activities workers had made 867, 000 Agriculture, forestry claims for SEISS totalling 108 59 3% 2% 3% and fishing £ 3. 1 bn; an average of 1, 062 867 31% 34% 41% Construction £ 3, 500 per claimant. 10 Human health and Self-employed individuals in 158 5% 4% 4% 0 social work activities the transportation and 78 59 2% 2% 2% Manufacturing storage sector make up 8% of the potentially eligible Transportation and 267 221 8% 9% 6% population and made storage 221, 000 claims totalling Wholesale and retail £ 481 m. Administrative and trade; repair of motor 190 137 6% 5% 5% support services also make vehicles and up 8% of the potentially motorcycles eligible population and have made 193, 000 claims totalling £ 399 m Source: ONS, Self Employment Income Support Scheme Statistics, July 2020

SEISS Usage by Gender (National) • Between 13 May and 30 June 2020, HMRC received 2, 553, 000 claims for the Self. Employment Income Support Scheme (SEISS) from a total potentially eligible population of 3. 4 million. These claims totalled £ 7. 4 bn with an average award of £ 2, 900 per claimant. • Men make up two-thirds of the potentially eligible population. By 30 June, HMRC had received 1, 805, 000 claims from men totalling £ 5. 7 bn compared to 745, 000 claims from women for £ 1. 7 bn. Males have a higher take-up rate than females (78% compared to 70%) and their average grant value (£ 3, 200) is 39% higher than the average for females (£ 2, 300). • Importantly, the construction industry which has relied heavily on the SEISS scheme is comprised heavily of a male workforce (82. 4%). Source: ONS, Self Employment Income Support Scheme Statistics, July 2020

ONS Business Impact of Coronavirus Survey (BICS) Data, July 30 th Release Trading Status • Of the 5, 851 businesses that responded (out of a sample size of 24, 493) to Wave 9 of BICS, 93% of businesses reported continuing to trade as their current trading status, while 7% reported they had temporarily closed or paused trading. • Of all responding businesses: • 86% had been trading for more than the last two weeks • 6% had started trading again within the last two weeks after a pause in trading • 2% had paused trading but intend to restart trading in the next two weeks • 5% had paused trading and do not intend to restart in the next two weeks

ONS Business Impact of Coronavirus Survey (BICS) Data, 16 th July Financial Performance • Of businesses continuing to trade, the sector that had the highest percentage of their businesses reporting that their turnover increased was the wholesale and retail trade sector, at 22%. • Of businesses continuing to trade, the industries with the highest percentages of their businesses reporting that their turnover decreased by more than 50% were the arts, entertainment and recreation sector and the accommodation and food service activities sector, at 43% and 42% respectively. Furlough • Of businesses who had not permanently stopped trading, 19% of the workforce had been furloughed under the terms of the UK government’s Coronavirus Job Retention Scheme (CJRS) (apportioned by employment size). • The arts, entertainment and recreation sector and the accommodation and food service activities sector had the highest proportions of furloughed workers, at 64% and 45% respectively. • Across all industries the remainder of the workforce were either working remotely (39%) or at their normal place of work (38%). • The information and communication sector had the highest proportion of their workforce working remotely, at 76%, followed by the professional, scientific and technical activities sector and the education sector, at 74% and 73% respectively. • Across all industries, apportioned by workforce size, less than 1% of the workforce had been made permanently redundant for all businesses not permanently stopped trading.

Business Resilience • The water supply, sewerage, waste management and remediation activities sector and the accommodation and food service activities sector had the highest percentages of businesses indicating they had no cash reserves, at 9% and 8% respectively. • The accommodation and food service activities sector also had the highest percentage of businesses indicating they only had cash reserves to last between zero and six months, at 55%, followed by the arts, entertainment and recreation sector and the construction sector, at 52% each. • Conversely, the information and communication sector and the education sector reported the highest percentage of businesses indicating they had cash reserves to last more than six months, both at 49%

Economic Modelling

Economic Modelling ‘Health Warning’ HEALTH WARNING! Significant caveat to all economic modelling work, is that the outputs are only as useful as the assumptions you input, in this instance, based on things like: • The spread of the virus, locally and internationally • The sequencing, or timeline for lifting restrictions on movements and social distancing • The interventions made by Govts (incl. us) both in terms of response and recovery • The potential reshaping of local and international supply chains • The consequent industry impacts (e. g. that x industry will see x% decline) All of these are fundamentally unknowable. The reality is that we are in a period of significant uncertainty and can only really rely on the best guesses of experts like the OBR, OECD and others, who themselves are at pains to stress the challenges.

Economic Modelling: How it works Allows us to: 1. Take national scenarios (like OBR’s) and show what that might mean at a local level based on comparative industrial structure e. g. if there is an x% decline in manufacturing output or jobs nationally, what might that mean locally, say in South Somerset where this industry is bigger? 2. Use assumptions about sectoral impacts (again like the OBR ones), and look at impacts locally on output, wages, and jobs, both in that sector, but across the wider economy on the basis of known interdependencies (i. e. direct and indirect suppliers in supply chain, plus induced impact on spending locally). • Often based on historic trajectory it is possible to create projections, but this assumes things will continue as they have been doing (not very useful in this instance therefore!) • Govt also produce info on the interdependencies across industries (i. e. their interlinkages and supply chains) at the national level, which we can use locally to look at interdependencies based on our own economy and industrial make-up. It is using this functionality that we can model possible impacts of ‘shocks’ to the economy, like coronavirus.

Office for Budgetary Responsibility Modelling • On the 14 th of April the OBR published a reference scenario premised on a threemonth lockdown period followed by 3 months of partial lockdown measures to estimate potential effects stemming from the crisis. • The OBR expects real GDP to fall by 35% in the second quarter of this year. This 35% decrease is calculated as an average of the likely impact on different sectors, weighted according to the size of each sector in the national economy. • Utilising this reference scenario, the Centre for Progressive Policy has estimated the impact of this sectoral contraction for individual local authorities.

Centre for Progressive Policy – Possible LA Level Impact on Economic Output in Q 2 2020 • The South West is likely to experience a more significant contraction than the national average (37%). • Sedgemoor and Mid Devon districts, fall within the top 20% of the country with the biggest expected decline in GVA. • Somerset West and Taunton see the smallest decline in output (30%).

Centre for Progressive Policy, ‘Back from the Brink’ New analysis from the CPP suggests that: • 76% of LA’s will not recover their expected level of output pre-crisis for 5 years. • Across all LA’s, earnings will fall by an average of £ 1600 over 5 years. • BUT crucially, some of the areas hardest hit initially may not be the worst-off long term, based on: • Industrial structure • Pre-existing employment levels • Previous recovery trajectories • Resilience levels for all Somerset districts rated as ‘moderate’. Resilience here refers to a combination of variables including: initial impact of lockdown measures, time taken to recover from the 208 recession, unemployment levels, and average skill levels. • Areas classified as ‘moderate’ resilience are expected to recover in line with the national average, After five years, these areas are estimated to have lost an average of 8% of GVA, with average earnings expected to fall by £ 1700 between 2019 -2022.

Centre for Progressive Policy, ‘Back from the Brink’ • Regionally, the South West is projected to contract -5. 7% over five years, fairing second best only to the South East. • A meaningful, lasting recovery accompanied by continued resilience will require adaptability and investment in skills. • One of the CPP’s tests for recovery involves a ‘right to retrain’, coupled with skilling up workers on the furlough scheme. • This policy stance would involve an active job matching service link to sectors, , in addition to longer term investment to modify the composition of the skills base of the workforce, in order to counter structural unemployment.

Published on the 7 th of May, the Bo. E published a reference scenario that assumes: • Tight social distancing restrictions remain in place until early June, and are then gradually lifted over the course of 4 months Bank of England – Monetary Policy Report • Fiscal support measures, such as the coronavirus job retention scheme (JRS) remain in place, but are unwound as the lockdown eases. With these variables in mind, the Bo. E forecasts a 14% fall in national GDP for 2020, taking £ 300 bn off the size of the economy, the equivalent of £ 9000 for every family (remembering that falls in income will be cushioned by the JRS, along with other fiscal measures)

• In the reference scenario outlined, unemployment reaches 9% by Q 2, the highest rate in 25 years, with around 3 million unemployed. • This rate drops back below 4% however over the next three years. Further Findings from Bo. E Report – 09. 05. 2020 • In regard to specific sectors, manufacturing demand was generally weak particularly for those supplying automotive, aerospace and house building sectors. Similarly, construction output also fell sharply. Graphics produced by Resolution Foundation

RSA • Analysis by the RSA based on latest furloughing data from the ONS calculates that 1 -in-3 jobs in some local authorities could be at risk. • Within the top 20 LA's most at risk by % of jobs that could potentially be lost, West Devon (32%), Cornwall (31%), Cotswold (31%), South Hams (31%), East Devon (31%), Torbay (30%), Torridge (30%), 7 fall within the South West Region. • By contrast, areas with the highest proportion of jobs in the knowledge economy are least at risk. These are heavily concentrated in Oxbridge, London, and the capital's commuter belt, although Exeter does make it into the bottom 20 of areas least at risk (23%).

University of Exeter: Review of the Economic Impacts in the Heart of the South West and Cornwall & Isles of Scilly LEP Areas • High levels of dependence on shutdown sectors (accommodation, food & drink, leisure, travel and non-essential retail) suggests that our region will be particularly hard hit. • Coastal towns that rely on tourism face the prospect of having to survive ‘three winters’ if visitors are required to stay away this summer, dampening prospects of a quick recovery. • High streets are another area of potential vulnerability, with the move to online shopping being accelerated, Exeter has lost over 15% of its population this spring due to students returning home. • Real estate and construction: the difficulty of continuing to work safely has closed many projects. The longer-term prospects are also uncertain as the sector, which is always vulnerable during downturns, may have to adapt to more enduring consequences of the crisis arising, for example, from the near total collapse in the residential property market during lockdown. • Manufacturing too has been hard hit, the fortunes of individual enterprises being determined by the resilience of demand in their marketplace and their ability to carry on production with staff safely distanced. Manufacturers supplying the mass transit and air passenger sectors face a particularly uncertain future.

Somerset’s economic output is projected to fall by 37% across all sectors, slightly more than the national average (35%), due to the scale of output loss in the Manufacturing sector and a smaller increase in the economic contribution of Health and Social Activities than is seen elsewhere.

Sectoral Analysis

Sectoral Analysis - Overview • Forecasters expect a significant contraction in UK GDP this year, reflecting a reduction in the demand for goods/services, and impacts on the ability of businesses to supply those products. • It is expected that there will be lower levels of production in response to the lower demand for goods and services in the UK, which will be reflected in falling sales and in turn business closures. • Some industries will be particularly vulnerable. Travel, hospitality, tourism and face-to-face retail services are especially vulnerable due to the need to work at close quarters. • The construction industry is also expected to be impacted by containment measures that have affected labour availability, as it will be unlikely that a significant proportion of these workers will be able to work from home. • It is expected that the most adversely affected parts of the manufacturing industry will be those that are exposed to global value chains, those that are labour-intensive and/or those that are more export-intensive, given the expected slowdown in the global economy.

Labour Market Sectoral Analysis • The largest loss of actual hours worked comparing January-March 2019 to the same period in 2020, was in the accommodation and food services industry (-11. 8%), with the smallest drop in the human health/social work activities (-0. 4%). • The construction industry had the second largest reduction in average actual hours (-5. 8%), closely followed by education (5. 4%), with manufacturing also seeing reduced hours (-4. 6%). • In regard to vacancy postings by industry, comparing February to April 2019 to the same period in 2020, accommodation and food service activities have seen a reduction of 41. 5%, arts entertainment and recreation a decrease of 30. 9%, manufacturing -26. 8% and construction -24. 9%. Labour market economic analysis, quarterly: June 2020, ONS

Sectoral Analysis – Wholesale & Retail Trade/Repair of Motor Vehicles • As of 2018, Wholesale & Retail accounts for approximately 17. 1% (39, 000 FTEs) of employment in Somerset and 12. 51% of GVA. • Those working in these sectors will be unable to work from home and may be disproportionately affected. National data on weekly earnings by industry, made available by ONS, shows that those employed within ‘Wholesaling, Retailing, Hotels & Restaurants’ earn on average £ 366 per week; compared to an average of £ 544 per week for the economy as a whole – this is 33% less on average. Whilst the experiences within parts of ‘Wholesaling, Retailing, Hotels & Restaurants’ vary greatly, this suggests that the lowest earners are at the greatest risk. • According to the ONS’s latest release, 7. 9% of the Wholesale & Retail workforce has been furloughed in those businesses who have not permanently stopped trading. 86. 6% of workers in the sector now either working remotely or in their normal place of work. • Similarly, the Resolution Foundation forecasts that Retail (alongside accommodation services) will be one of the hardest hit sectors, with ‘active employment’ (those workers who have not been furloughed and continue to work) dropping by just over 2 million in this sector by Q 2. Employees in hospitality and retail are 50% more likely to be furloughed than average. • In addition, this sector has seen a reduction of 92, 000 vacancies in April-June on the previous quarter, a reduction of 70%. • Crucially, typical weekly earnings in Retail/Wholesale stand at £ 323 a week, with typical weekly pay across the whole economy £ 455 a week. Lower pay is inherently tied with lower levels of saving, making this sector particularly vulnerable to large-scale income shocks. All GVA estimates taken from ONS, Regional Economic Activity by Gross Value Added (Balanced) - GVA(B) in current prices.

Manufacturing • Manufacturing amounts to 11. 8% of total FTE jobs in Somerset, significantly higher than the national average of 8. 1%. In addition, manufacturing plays a very strong role in relation to district employment, around a fifth (18. 3%) of employment in South Somerset arises from manufacturing and just under 15% in Sedgemoor. Manufacturing also stands as the single biggest contributor to Somerset’s GVA at 13. 32%. • The latest edition of the SWMAS South West Barometer (for Q 1 covering April, May and June) highlights that manufacturers are highly pessimistic concerning their future sales trajectory in the next 6 months, with 42% anticipating a reduction in sales, and 41% anticipating a reduction in profit. • Regarding employment, 36% reported a reduction in staff numbers in the past 6 months and 52% anticipated further reductions in employee numbers in the next 6 months. • 30% of respondents described their business as ‘surviving’, whilst 28% described their business as in the ‘recovery’ phase. • 80% of respondents had made use of the furlough scheme, whilst 18% had made redundancies, . Encouragingly however, 22% of respondents reported up-skilling existing staff in some way. • The Bo. E agents’ summary report for Q 2 has highlighted that the aerospace industry has been heavily affected by economic disruption, which has led to redundancies in some cases. • Food producers have also been hit by loss of food service business and a drop in demand for pre-packaged food, with contacts estimating it could take two to three years for food service demand to return to pre-pandemic levels.

Tourist Industries • Accommodation and food service activities accounts for 9. 2% of employment in Somerset and 3. 92% of GVA • Somerset visitor economy is worth £ 1. 3 bn annually and 28, 000 FTE jobs. Loss of visitor nights April, May, June leads to an estimated loss of £ 178. 8 million to the accommodation sector. • Visit Exmoor: Reports that tourism impacts 50% of all employment on Exmoor, with accommodation alone accounting for 31% of jobs across Exmoor. If distancing measures are continued over July, August and September it is estimated a further £ 195. 80 million could be lost. • The accommodation & food service activity sector saw a reduction of 78, 000 vacancy postings in April-June on the previous quarter, a reduction of 91. 1%. • Visit Somerset report that cash flow is king for the visitor economy, and the forthcoming peak season (April-Aug) is going to be vital. However, social distancing is going to make re-booting the visitor economy an enormous challenge, with social distancing mandating an estimated operational capacity of 30% that is thought to be unviable. • At the same time, they also report that there may be significant public health implications (incl. on NHS capacity) or increased visitation rates, due to the spread of the virus in a region that has thus far seen comparatively fewer cases/deaths. • Visit Britain/Visit England’s ‘domestic Covid-19 Tracker’ has identified the South West, as the top destination for those people who are planning a UK holiday this year in light of the COVID-19 crisis, including those considering a replacement for a cancelled overseas or domestic holiday. These ‘replacement’ holidays however are most likely to occur from October onward, with rural and costal the top location type. • Visitor Somerset Intelligence: Closure of Major Shopping Centre in Mendip for 3 months could cost an estimated £ 24 million stripped from regional centre turnover, employs over 1000 staff. • Another retail outlet store with over 400 staff has had difficulty securing a six figure loan from its bank, faces losses of £ 1. 5 million over the next 3 months and potential closure of business • A coach company that employs 130+ staff has seen significant loss of private hires leading to severely reduced revenue and furloughing of vast majority of staff. • Note: On the 8 th of July the Chancellor announced a VAT cut from 20% to 5% from the 15 th of Juy to 12 th January 2021 for restaurants, hotels and attractions. • Additionally, a ‘eat out help out’ scheme was introduced which offers 50% discount for every diner, up to £ 10 a head, from Monday to Wednesday through August in participating restaurants, pubs and cafes.

Agriculture, Forestry & Fishing • Agriculture contributed 2. 46% to Somerset’s GVA, compared to around 0. 7% nationally. This sector accounts for an estimated 4000 jobs, or 4. 8% of all employment in Somerset. • The Agricultural industry has faced a fairly unique set of challenges during the Covid-19 pandemic. • As the NFU has pointed out, many farmers have been unable access grant support due to agricultural property not being rateable or Government backed loans being unavailable due to state aid rules. • In addition, uncertainty around a no-deal Brexit still remains which threatens the overall resiliency of this sector.

Construction • Construction accounts for 7. 26% of Somerset’s GVA and 11. 8% of Somerset’s total employment. • The latest national BICS survey results found the construction industry to have 14. 8% of the workforce returning from furlough in the last two weeks, the third highest. • 17. 1% of the industry’s workforce remain on furlough leave however, with 80. 3% of the construction workforce now working remotely or in their normal place of work. • Sites are reopening in some parts of the UK, but output is still significantly lower than a year ago due to weak private sector demand. The outlook for commercial work over the next two years appears bleak, with enquiries & orders collapsing. Housebuilding is resuming slowly however, with public sector projects also holding up.

Health & Social Care • Human health & social work activities accounted for 9. 3% of GVA in Somerset and 14. 9% of total employment in 2018. • As might be expected, this industry has displayed significant resilience over the course of the pandemic primarily due to the high demand for health & social care services. • According to the latest BICS survey, only 6. 8% of workers nationally in this industry had been furloughed. 4. 6% of workers in this industry have returned from furlough leave in the past two weeks. • This industry shrank by 24. 2% nationally in the three-month rolling rate from March to May, although the industry’s contribution to services growth did turn positive for the first time since March, growing by 0. 07%. • Locally, this sector has also seen significant job posting activity both on the Emsi database, as well as in DWP returns. Whilst this data is ‘noisy’ and highly variable, it does provide an indication of underlying demand trends.

The new ‘normal’ • The impacts of the coronavirus have served to highlight long-term fault lines in the UK economy. • Continued high-street decline: As documented in the sectoral analysis, the Retail industry is one of the most vulnerable to the effects of an extended lockdown. The sector’s importance for the lower-paid, along with the time needed to repurpose the high-street towards work/leisure, makes this a high priority. • Declining work-related migration was already a trend before the Corona crisis, with net EU migration falling since 2016. The new migration policy measures envisioned by the Government post-Brexit will likely exacerbate this trend, with a reduction in seasonal workers likely to effect changes in the agricultural sector’s available labour pool. • Despite predictions of the death of the traditional office-working space, it is important to remember only 1 -in-20 were working from home when the crisis originally hit. Crucially, lower earners are also disproportionately less likely to be able to work from home, Typical weekly pay for those in shutdown sectors is £ 348 compared to £ 707 for those who have been able to work from home. • Younger workers have been disproportionately more likely to lose their jobs in this crisis, with recessions generally tending to impact those leaving education and attempting to enter the labour market. • The slack created in the labour market due to a rise in unemployment is likely to reduce aggregate earnings growth which had just reached pre-2008 crisis levels in December 2019. • Some trends may go into reverse, such as the rise in self-employment. The tax-gap between selfemployed and employees has previously been large, but the Chancellor has suggested that the significant measures introduced to stave off the worst of economic corona related effects may require a more equal tax system to equalise the treatment of the two groups. • Some research has been conducted on the potential for the economic downturn precipitated by Coronavirus to generate a green recovery. The Government has committed to introducing a ‘green homes grant’, providing households in England up to £ 5000 to make homes more energy efficient. • In addition, the Government has announced £ 1 bn of grants to public sector bodies to improve energy efficiency, with an additional £ 50 m being put towards a social housing decarbonisation fund which aims to improve the energy efficiency of socially rented homes.