Economic Impacts of COVID19 Info Pack Updated 15

Economic Impacts of COVID-19: Info Pack - Updated 15. 12. 2020 SCC Economic Policy Team – Research & Intelligence

National Economic Overview

GDP Monthly Estimate, October 2020 • GDP grew by 0. 4% in October 2020, the sixth consecutive monthly increase, although GDP remains 7. 9% below the February 2020 level, with the pace of growth slowing. • In October, services growth saw 0. 2%, production 1. 3%, and construction by 1%. • Manufacturing had the largest contribution to increased GDP growth in October with the manufacture of transport equipment seeing increased demand. • Health also had a large positive contribution in October as there was an increase in the volume of activity. • Accommodation and food service activities acted as a large drag on growth in October as tightening coronavirus measures had an adverse impact on trade and a subsequent lack of demand. Monthly Index, January 2007 to October 2020, 2018 = 100

ONS GDP Statistics Q 3 2020 • ONS Q 3 data (July to September) indicates GDP grew by 15. 5% as lockdown measures were eased. • The level of GDP in the UK is still 9. 7% below where it was at the end of 2019. • While output in the services, production and construction sectors increased by record amounts in Quarter 3 2020, the level of output remains below Quarter 4 (Oct to Dec) levels. • The monthly path of GDP in Quarter 3 2020 reveals that there has been a slowdown of growth in August and September as momentum has eased through the quarter.

ONS GDP Statistics Q 3 2020 • Services output grew by 14. 2% in Quarter 3 2020, while production output increased by 14. 3%, and construction output expanded by 41. 7%. • The increase in services output in the third quarter was largely driven by 30. 7% growth in wholesale and retail trade and repair of motor vehicles and motorcycles, which has now recovered output to above its Quarter 4 (Oct to Dec) 2019 level. • Accommodation and food services also made a notable contribution to services growth, particularly in July and August because of the combined impact of easing restrictions and the Eat Out to Help Out scheme, which boosted consumer demand for restaurants and bars. • Manufacturing output grew by 18. 7% in Quarter 3 2020, following a record decline of 21. 1% in the second quarter. This reflects an increase in 12 out of the 13 manufacturing sub-sectors, most notably the manufacture of transport equipment, though output has still not recovered to the level seen before the impact of the coronavirus • In Quarter 3 2020, construction output increased by 41. 7%. However, the level of construction output remains 11. 5% below its level in Quarter 4 2019, following a 35. 7% decline in the previous quarter. The quarterly expansion reflects increases in both new work and repair and maintenance following the reopening of construction sites after the easing of lockdown restrictions.

Bank of England: Agents’ summary of business conditions Q 3 • This publication summarises intelligence gathered by the Bo. E between early August and early September. • Consumer Demand: Sales of consumer goods have picked up from lockdown lows, with sales in out-of-town shopping centres reported to stronger than town centres. • Consumer services turnover remained significantly lower than a year ago, reflected widespread cancellation of hospitality bookings, weak demand for air/rail travel, and entertainment venue closures. • Manufacturing: The majority of manufacturing contacts said they had restarted output although demand remains subdued, though many were operating below capacity in order to maintain social distancing. • Aviation sector output continued well below normal levels, reflecting the drop in-demand for commercial flights and less fleet maintenance. • Construction: Strong demand was reported in public sector work, in part supported by a government fund to encourage building, with housebuilding activity also resuming. although turnover is still expected to be lower than a year ago. • Corporate finance: Demand for credit from SME’s has softened, although overall levels of demand remain strong, mainly to cover working capital and cash-flow needs as businesses re-open. • Investment: Investment intentions remained significantly weaker than a year ago, with widespread reports of investment being postponed or cancelled to preserve cash. Investment tended to be limited to essential equipment or maintenance, rather than discretionary or strategic projects. • Employment & Pay: Companies in a number of sectors reported temporary pay cuts, though mainly at management level. Job losses are expected to be particularly severe in the hospitality, retail, aviation, automotive and oil and gas sectors as the CJRS is wound down. • Costs & Prices: Agents reported the likelihood of downward pressure on prices in some sectors as clients focused on cost-cutting.

Bo. E Monetary Policy Report, November Key Projections & Findings • Published on the 5 th of November, this report stressed the continued uncertainty of the UK’s economic situation. • The Bank’s base rate has been maintained at 0. 1%, with a further £ 150 bn of quantitative easing announced to reduce borrowing costs. • GDP is anticipated to contract by 11% in Q 4, with GDP not exceeding its 2019 Q 4 level until Q 1 2022. • Unemployment is projected to peak at 7. 75% in 2021 Q 2, before declining gradually throughout 2022 -23 as GDP recovers. • Consumption has increased markedly since April however, with retail sales rising above their level in February 2020. • The recovery in business investment is reported as being much weaker than consumption, as COVID related uncertainty has weighed on spending.

Labour Market Data

Labour Market Data • Hard data is now being released incrementally from the ONS in the form of monthly labour market data, with survey periods now coinciding 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 high-level 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 and local 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. • The ONS has now released data on the CJRS/SEISS schemes as of the 31 st of August, 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.

Labour Market Overview – December 2020 ONS Release Employment • Estimates for August to October 2020 show 32. 52 million people aged 16 years and over in employment, 280, 000 fewer than a year earlier, the largest annual decrease since January to March 2010. • The estimated employment rate for all people was 75. 2%; this is 0. 9 percentage points down on the year and 0. 5 percentage points down on the quarter. • The number of people temporarily away from work rose to almost 7. 9 million people in April 2020, but has fallen to 3. 7 million people in October 2020. Around 211, 000 people were away from work and receiving no pay due to the pandemic in October. Unemployment • Estimates for August to October 2020 show an estimated 1. 69 million people were unemployed, 411, 000 more than a year earlier and 241, 000 more than the previous quarter. • The estimated UK unemployment rate for all people was 4. 9%, 1. 2 percentage points higher than a year earlier and 0. 7 percentage points higher than the previous quarter. Economic Inactivity • Estimates for August to October 2020 show 8. 60 million people aged between 16 and 64 years not in the labour force (economically inactive), 4000 less than a year earlier and 2000 less than the previous quarter. • The estimated economic inactivity rate for all people was 20. 8%; this is down by 0. 1 percentage points on the year and largely unchanged on the quarter PAYE Data • Early estimates for November 2020 indicate that there were 28. 2 million payrolled employees, a fall of 2. 7% compared with the same period of the previous year and a decline of 781, 000 people over the 12 -month period. Compared with the previous month, the number of payrolled employees decreased by 0. 1% in November 2020 – equivalent to 28, 000 people.

Labour Market Overview – November 2020 ONS Release Redundancies • Redundancies increased in August to October 2020 by a record 251, 000 on the year, and a record 217, 000 on the quarter, to a record high of 370, 000. Claimant Count Data • he Claimant Count increased slightly in November 2020 to 2. 7 million. This represents a monthly increase of 2. 5% and an increase of 114. 8%, or 1. 4 million, since March 2020. Certain caveats must be remembered when considering claimant count data however: • 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. Vacancies • For September to November 2020, there were an estimated 547, 000 vacancies, which is a quarterly increase of 110, 000 vacancies and an increase of 203, 000 vacancies from the record low in April to June 2020. Despite the increase, vacancies remain below the pre-coronavirus (COVID-19) pandemic levels and are 251, 000 (31. 5%) less than a year ago.

Vacancies and jobs in the UK: December 2020 • Total jobs in the UK fell by an estimated 475, 000 in the UK in September 2020, the largest quarterly fall since June 1959. • Sectors have not been equally impacted during the coronavirus pandemic; most sectors have seen falls in the number of jobs from June to September 2020, however, some of the sectors have seen a rise in estimated jobs • Arts, entertainment and recreation is one of the worst affected sectors by the pandemic with an estimated 9. 7% fewer jobs in September 2020 compared to March 2020. • The estimated number of jobs in "Wholesale and retail trade; repair of motor vehicles and motorcycles", the largest sector, fell by 110, 000 from June to September 2020; driven by a fall in jobs in retail. • Manufacturing" was one of the sectors to have similar falls in jobs from March 2020 to June 2020 and June 2020 to September 2020, with jobs 3. 8% lower in September 2020 than March 2020. • Public administration and defence; compulsory social security" is the only sector to see an increase in jobs in both June 2020 and September 2020, with an estimated quarterly increase of 3, 000 jobs in September 2020.

Labour Market Headline Indicators in the South West – December 2020 • The SW’s employment rate stood at 76. 8% from August to October, a drop of 3. 2 percentage points when compared to November to January 2020 and a drop of 4 percentage points when compared to the same period last year. • The South West has also seen a significant drop in overall job numbers compared to the same time last year, with a fall of 100, 000 jobs overall. • The SW’s unemployment rate stood at 4. 6%, an increase of 0. 4 percentage points on the quarter and 1. 9 percentage points on the year. • In addition, the South West saw the largest increase in the economic inactivity rate compared with the same period last year, seeing an increase of 2. 5 percentage points on the year to reach 19. 5% overall.

Claimant Data Breakdown in Somerset Districts March- April-20 May-20 June-20 20 Rate 2. 3 4. 5 5. 6 5. 3 July-20 Aug – 20 Rate 5. 5 5. 7 Sep-20 Rate 5. 6 Oct-20 Rate 5. 3 Mendip No. of new Increas claimants e from Total No. of from March Nov – 20 March- Claimants as -20 to Nov. Rate Nov of Nov 20 2040 5. 4 +3. 1 3620 2. 8 4. 7 5. 6 5. 4 5. 5 5. 7 5. 3 5. 1 5. 3 +2. 5 1. 9 3. 8 4. 7 4. 6 4. 8 4. 7 4. 4 4. 5 +2. 6 2. 2 4 4. 9 4. 6 4. 8 5. 0 4. 7 4. 6 +2. 4 2. 3 4. 2 5. 1 4. 9 5. 1 5. 2 5. 0 4. 8 4. 9 +2. 6 2. 2 4. 3 5. 4 5. 1 5. 3 5. 4 5. 2 5. 0 +2. 8 3. 0 5. 1 6. 4 6. 2 6. 4 6. 3 +3. 3 Sedgemoor South Somerset West & Taunton Somerset South West United Kingdom Source: ONS claimant count by sex and age - not seasonally adjusted 3770 4285 4105 15, 785 169, 135 2, 631, 280 1755 2420 2195 8415 93, 445 1, 362, 660

Somerset Claimant Count by Age Band Mar – Apr – 20 20 Rate May 20 Rate June 20 Rate July 20 Rate Aug – 20 Rate Sep 20 Rate Oct – 20 Rate Nov 20 Rate No. of claim ants in Nov No of new claim ants Mar. Nov Cumu lative increa se Mar. Nov 16 -17 0. 2 0. 3 0. 5 0. 4 0. 3 0. 4 45 20 80% 18 -24 3. 8 6. 6 8. 9 9. 2 9. 1 8. 8 8. 5 8. 4 2985 1690 118% 25 -49 2. 7 5. 0 5. 8 5. 6 5. 7 6. 0 5. 7 5. 4 5. 6 8595 4505 110% 50+ 1. 6 3. 0 3. 6 3. 4 3. 6 3. 3 3. 4 4165 2285 122% 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. • South Somerset has seen the biggest increase in new claimant claims since March, with an additional 2420 claimants, albeit from a low base. • Sedgemoor has seen the lowest increase in claimants in Somerset, with 1755 additional claimants from Mar-Nov. • Crucially however, all Somerset districts have a claimant count rate below both the national average rate (6. 3), with SWT and South Somerset both being below the regional average (5. 0). • 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. 75%. • The biggest cumulative increase from Mar-Nov has been in the 50+ age bracket. • Importantly, the 18 -24 age bracket has seen 1690 new claimants since March, equating to a cumulative increase of 118% between Mar-Nov. 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.

The economic impacts of C-19 have been particularly hard on young people • Those in the 18 -24 age bracket have seen a decrease in the employment rate from 64% at the start of the year to 61% in Aug-Oct, an estimated drop of 206, 000 people. • In addition, the estimated number of people unemployed aged 18 -24 has increased by 169, 000 since Feb-Apr to Aug-Oct, with other age groups seeing more minimal changes by comparison. The youth unemployment rate (18 -24 yr old’s) hit 14. 2% from Aug-Oct, compared to 4. 9% for the rest of the UK. • These figures are reinforced by broader research by the Resolution Foundation, which found the proportion of 18 -24 yr. old’s who weren’t students to have been three times more likely to have lost their main job since C-19 began. • Indeed, a fifth of all workers making use of the CJRS are under the age of 25. • 18 -24 year old’s have also been the most susceptible to pay swings, over a third have had their pay reduced since before the outbreak. • 18 -24 year old’s who are not full-time students are also disproportionately likely to not be able to work from home, primarily due to a large proportion of this group working in sectors such as retail and other service occupations. • Those looking for jobs fresh from University have also struggled, with the number of graduate jobs advertised falling by 60. 3% in the first half of 2020. • In addition, from 23 rd March-30 th June, apprenticeship starts halved compared to the previous year.

Usage of the CJRS (furlough) across Somerset Area Mendip Sedgemoor SWT South Somerset South West UK Total no. on furlough (as of 31 st August) Take-Up Rate 6000 12% 4700 8% 6100 9% 6700 9% 23, 400 9% 243, 500 10% 3, 274, 900 11% Source: Coronavirus Job Retention Scheme Statistics Note: The Government has announced that the CJRS will be extended up until March 2021, with a review of employer contributions due to take place in January. Consequently, the low furlough rates documented here may rise again in coming months.

Whilst overall furlough rates have decreased, some sectors continue to be impacted worse than others • The sector with the highest proportion of its workforce eligible for furlough that were actually furloughed was arts, entertainment and recreation at 23% followed by accommodation and food services sector at 22%. • In all, 45% of employers in the arts, entertainment and recreation sector were using the furlough scheme at the end of August as were 41% of employers in accommodation and food services National Furlough Take-Up Rate by Industry (September 30 th) 23% 22% Arts, entertainment, recreation and other. . . Accommodation & food services Construction Real Estate Professional, scientific & technical Wholesale and retail; repair of motor vehicles Manufacturing Transport & storage (inc postal) Business administration and support services National Average • The wholesale and retail sector were responsible for the greatest total value of claims up to the end of September at £ 7. 7 billion. Information & communication • Accommodation and food services, and manufacturing were the two sectors with the next highest values of claims to date by the end of September, with £ 6. 5 billion and £ 5. 0 billion claimed respectively Health Waste and Recycling Mining, quarrying & utilities Agriculture, forestry & fishing Education Finance & insurance Energy Production Public administration & defence 11% 10% 9% 9% 9% 8% 8% 7% 5% 4% 4% 3% 2% 2% 1% 0% 0% 5% 10% 15% 20% 25%

2. 6 million claims have been made to the SEISS nationally, with the Construction Industry dominating overall claims SEISS second grant claims • • • Between 17 August and 31 August 2020, HMRC received 2. 0 million claims for the SEISS from a total potentially eligible population of 3. 4 million. These claims totalled £ 5. 1 billion with an average award of £ 2, 500 per claimant. Proportion of total value of claims to SEISS - 31 st August 7% Transportation and storage The construction industry has the largest population of individuals who were assessed for potential eligibility with over 1. 2 million and over 1 million of these were potentially eligible to apply. By 31 August construction workers had made 693, 000 claims for SEISS totalling £ 2. 1 billion; an average of £ 3, 100 per claimant. 6% Other service activities Professional, scientific and technical activities 5% Administrative and support service activities 5% Wholesale and retail trade; repair of motor. . . 5% 4% Human health and social work activities Self-employed individuals in the transportation and storage sector make up 8% of the potentially eligible population and made 196, 000 claims totalling £ 373 million. Administrative and support services also make up 8% of the potentially eligible population and have made 142, 000 claims totalling £ 253 million. The highest rates of being assessed as potentially eligible for SEISS were from individuals working in the construction industry (86%) and the transportation and storage sector (82%). Lower rates of being assessed as potentially eligible for SEISS were found for individuals working in real estate activities (29%), financial and insurance activities (41%) and agriculture, forestry and fishing (45%). 42% Construction Education 3% Arts, entertainment and recreation 3% Agriculture, forestry and fishing 2% Manufacturing 2% Accommodation and food service activities 2% Information and communication 1% Financial and insurance activities 1% Real estate activities 0% Public administration and defence; compulsory. . . 0% Source: HMRC, Self-Employment Income Support Scheme Statistics

Usage of the second SEISS grant across Somerset County and district/unitary Total eligible authority population Total no. of claims made Total value of claims made to Average Value of Take-Up 31/07/2020 Claims (£) Rate Mendip 8, 400 4300 10, 900, 000 2500 52% Sedgemoor 6, 900 3900 10, 600, 000 2700 57% Somerset West and Taunton 9, 100 4900 12, 600, 000 2600 54% South Somerset 9, 800 5100 12, 800, 000 2500 52% Somerset County 34, 200 18200 46, 900, 000 2600 53% 318, 000 178, 000 457, 000 2700 58% 3, 390, 000 2, 019, 000 5, 109, 000 2, 500 60% South West United Kingdom Source: ONS, Self Employment Income Support Scheme Statistics, June 2020

Age breakdown of national usage of 2 nd grant SEISS Scheme • Around 89% of individuals who were assessed for potential eligibility were between the ages of 25 and 64, with over 90% of claimants coming from this age group. • Take-up of the grant in these age-groups is at or above 61%, with the exception that those between 55 to 64 have a take up rate of 56%. 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 (43% have claimed), although they have the highest average claim value at £ 2, 800. The youngest age group have lowest average claim value at £ 1, 800. The total potentially eligible population and number of claims to 31 st August 2020 by age group Source: ONS, Self Employment Income Support Scheme Statistics, June 30 th 2020

SEISS 2 nd grant Usage by Selected Industries (National) • • The construction industry has the largest population of individuals who were assessed for potential eligibility with over 1. 2 million and over 1 million of these were potentially eligible to apply. By 31 August construction workers had made 693, 000 claims for SEISS totalling £ 2. 1 billion; an average of £ 3, 100 per claimant. Self-employed individuals in the transportation and storage sector make up 8% of the potentially eligible population and made 196, 000 claims totalling £ 373 million. Administrative and support services also make up 8% of the potentially eligible population and have made 142, 000 claims totalling £ 253 million. SEISS population & number of second grant claims made to 31 st August, by sector (for six biggest industries) Source: ONS, Self Employment Income Support Scheme Statistics, July 2020

SEISS 2 nd grant usage by gender (National) • Of 5. 04 million individuals who were assessed for potential eligibility, men make up around two-thirds (65%), and also make up a slightly higher proportion (68%) of the potentially eligible population. • By 31 August HMRC had received 1, 437, 000 claims from men totalling £ 3. 9 billion compared to 580, 000 claims from women for £ 1. 2 billion. Males have a higher take-up rate than females (62% compared to 54%) and their average grant value (£ 2, 700) is 35% higher than the average for females (£ 2, 000). The SEISS potentiality eligible population & second grant claims by Gender, 31 st August Source: HMRC, Self Employment Income Support Scheme Statistics, August 2020

ONS Business Insights & Impact on the UK Economy, 3 rd December Trading Status • Across all industries, 75% of businesses had been trading for more than the last two weeks, with 2% of businesses starting trading within the last two weeks after a pause in trading. • 8% of businesses had paused trading and did not intend to restart in the next two weeks. • 13% of businesses had paused trading but intended to restart in the next two weeks. 2% of businesses had permanently ceased trading. • The accommodation & food service industry and arts, entertainment & recreation industry had low percentages of businesses currently trading, at 46% and 61% respectively.

ONS Business Insights & Impact on the UK Economy, 3 rd December Financial Performance • Across all industries of businesses currently trading, 47% experienced a decrease in turnover compared with what is normally expected for this time of year. 8% experienced an increase in turnover compared with what is normally expected for this time of year. • There were four industries where more than 50% of businesses experienced a decrease in turnover. These were the accommodation and food service activities industry, at 79%; the arts, entertainment and recreation industry, at 73%; and the education industry (private sector and higher education businesses only), at 60%, and ‘other service activities’ at 59%. Workforce • Across all industries of businesses not permanently stopped trading, 15% of the workforce were on partial or full furlough leave, with an additional 31% of the workforce working remotely instead of at their normal place of work. • The arts, entertainment and recreation industry and the accommodation and food service activities industry had the highest proportions of their workforce on partial or full furlough leave under the terms of the UK government's Coronavirus Job Retention Scheme (CJRS), at 48% and 44% respectively. • The information and communication industry and the professional, scientific and technical activities industry had the highest proportions of their workforce working remotely instead of at their normal place of work, at 78% and 69% respectively.

ONS Business Insights & Impact on the UK Economy, 3 rd December Business Resilience • Across all industries, of businesses not permanently stopped trading, 31% had less than three months’ cash reserves and 35% had more than six months’ cash reserves. • ‘Other Services’ activities such as hairdressing and beauty treatments, and the accommodation & food industry had the highest percentage of businesses with less than 3 months’ reserves at 57% and 47% respectively. Confidence in business survival • In regard to confidence, 14% had low confidence that their business would survive the next three months. • 38% had moderate confidence that their business would survive the next three months. • The accommodation and food service activities industry and the ‘other services’ industry had the highest percentages of businesses that had no or low confidence that their business would survive the next three months, at 25% and 47% respectively.

Business Representative Organisation Intelligence

British Chamber of Commerce, Quarterly Economic Survey, Q 3 results from the BCC’s survey indicates that whilst most indicators have improved vis-à-vis historic lows reported in Q 2, they remain significantly lower than before the pandemic struck. The responses are comprised of 6410 businesses. The ‘-/+’ metrics refers to deducting the number of firms reporting a reduced metric from the number of firms reporting a positive metric. Domestic sales • The percentage of manufacturers reporting increased domestic sales stood at -15% compared to 59% in Q 2. • The percentage of service firms reporting increased sales stood at -25% compared to -64% in Q 2. Export Sales • The percentage of manufacturers reporting increased export sales fell stood at 026%, up from -52% in Q 2. The percentage of services firms reporting on the same metric stood at -31%, up from -55% in Q 2. Investment • -19% of manufacturers reported increased investment in training, up from -38% in Q 2. In services, this figure stood at -17% for Q 3, compared to -32% in Q 2. Cash Flow • -18% of manufacturers reported improved cash flow in Q 3 compared to -47% in Q 2. In services, 30% of firms reported improved cash flow compared to -56% in Q 2. Confidence • +7% of manufacturers reported an increase in confidence that turnover will increase in the next 12 months, a significant improvement from -31% in Q 2. Services confidence on the same metric had increased to +1% versus -36% in Q 2, another large increase. Source: https: //www. britishchambers. org. uk/media/get/BCC%20 QES%20 report%20 Q 3%202020 -3. pdf

FSB, South West Quarterly Small Business Index: Q 3 2020 The South West Small Business Index (SWSBI) shows how small firms in the region continue to be adversely affected by the pandemic and national lockdown, particularly in relation to general business conditions and employment intentions. Business Confidence in the South West (-31%) is slightly higher than the English region average of -33% with the North West (-37%), North East & Yorkshire (-37%) and the West Midlands (-44%) scoring the worst on the metric. Business Conditions In Q 3, over half (52%) of small businesses in the SW reported a decrease in revenue over the last 3 months. The overall net balance for revenue in the SW was -19%, well above the average across English reasons (-25%). Whilst 41% anticipate a decrease in revenue, 27% expect to see an increase. Employment Over the last three months, 18% had decreased staff numbers and 15% had increased employment levels. For the next quarter, 11% of businesses intend to increase headcount and 16% anticipate a decrease. Growth & Investment In Q 3, 40% of small businesses in the SW said their growth aspirations in the next 12 months were to grow either rapidly or moderately (defined as an increase in sales/turnover up to 20%). FSB, South West small business index, small business confidence levels. Source: SW Quarterly Small Business Index Q 3

SWMAS – South West Survey of SME Manufacturers Q 2 2020/21 (July, August, September) Survey data gathered from 19 th-30 th October from South West SME Manufacturers found: • Turnover & Profits: 52% of businesses reported a decrease in sales turnover the past six months, whilst 46% of businesses expect their sales turnover to improve in the next six months. These findings are somewhat mirrored in the 47% of businesses reporting a decrease in profits over the last six months, compared to 39% of businesses who expect to see an increase in profits over the next six months. • Capital Investment: Perhaps somewhat surprisingly, 34% of businesses reported an increase in capital investment over the past six months, compared to 24% of businesses who had reduced capital investment. A significant 42% of businesses anticipate an increase in capital investment over the next six months. • Employment: 39% of businesses reported a decrease in staff numbers over the past six months, whilst 35% do anticipate to increase staff numbers in the coming six months. • COVID & Britain’s exit from the European Union: 25% of businesses reported an estimated timeframe of 1 -5 years to reach pre-COVID levels of operation, whilst 23% reported consistent levels of trade (and therefore not requiring recovery) throughout the crisis. In regard to Britain’s proposed exit from the EU, 30% of businesses reported that the UK’s exit would hinder recovery, whilst 51% said they were unable to predict any impacts, suggesting a significant level of uncertainty.

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.

Survey Data

Great South West Coronavirus Business Impact Survey 2020 • A dedicated survey aimed at gathering intelligence in the South West from tourism and hospitality businesses has found that 5% of these businesses remained closed on the 4 th of July, with a further 33% of businesses now open but operating at 75% capacity or less. • 90% of businesses reported a decrease in their turnover for the Jan-July 2020 period compared to the same time last year, with the average percentage change in turnover for this period standing at -36%. • For the same period, it is estimated £ 2. 2 bn of anticipated business turnover has been lost in the great south west region. • Only 30% of businesses currently anticipate they will be able to survive beyond Summer 2021 without further support. A further 23% of businesses anticipate they will only be able to survive until the 31 st of March 2021. • 67% of businesses reported they wished to see the return of the small business grant scheme, with 40% wishing to see an extension to the business rates holiday.

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.

Sectoral Analysis

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. • In addition, this industry saw a large estimated fall of 65. 4% in vacancy postings from August to October 2019 and May to July 2020. Vacancies remain 53. 3% lower than a year ago. • The wholesale & retail trade initially struggled markedly as a result of lockdown measures, but has since recovered to above February 2020 levels, as a result of the reopening of car showrooms to the public as well as pent-up demand following lengthy closures. • National retail sales data for September shows a 1. 5% increase when compared to August, the fifth consecutive month of growth, resulting in an increase of 5. 5% when compared with February’s prepandemic level. The introduction of renewed lockdown restrictions in November however is likely to impact this recovery. 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 2 covering July, August and September) highlights that manufacturers concerns are mixed. 52% of businesses reported a decrease in sales, and 47% a decrease in profits over the last six months, with 39% of businesses reporting a reduction in staff numbers. • Despite this, 39% of businesses expected to see an increase in profits over the next six months, 35% anticipated an increase in staff numbers. 30% of businesses did however state that the UK’s exit from the EU would likely hinder recovery efforts. • Manufacturing grew by 11. 3% in rolling-three month growth rates to August, most notably with the manufacture of transport equipment increasing by 25. 6%.

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 slight increase in vacancy postings from August to October, increasing by 15. 1% compared to May to July. This remains 67. 1% down on the same time last year however, highlighting the extent to which restrictions have dampened demand. • Food and beverage services, which includes restaurants, cafés, takeaways, pubs, canteens and catering, fell back by 9. 8% during September 2020 following a 63. 9% rise in August • 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.

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. • Agriculture shrank by 7. 7% from February to April, before growing by 7. 7% from April to September. • 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. • This industry grew by 2. 9% (£ 369 million) in September 2020 compared with August 2020 because of increases in most sectors. Public other new work, infrastructure and public new housing were the only sectors not to see monthly growth in September 2020. • This is the fifth consecutive month of growth in all work since the record decline in April 2020 but is also the lowest monthly growth since then. The level of output in September 2020 remained 7. 3% (£ 1, 026 million) below the February 2020 level. • In Quarter 3 2020, construction output increased by 41. 7%. However, the level of construction output remains 11. 5% below its level in Quarter 4 2019, following a 35. 7% decline in the previous quarter. The quarterly expansion reflects increases in both new work and repair and maintenance following the reopening of construction sites after the easing of lockdown restrictions. • From August to October 2020, the construction industry saw the largest increase in vacancy postings, increasing by 57% compared to May-July.

Health & Social Care • Human health & social work activities accounted for 9. 3% of GVA in Somerset and 14. 9% of total employment in 2018. • In volume terms, healthcare consumption grew by 12. 2% in the third quarter after having fallen by 30. 3% in Quarter 2 2020. Within healthcare, elective surgery and GP services have shown strong recovery, while the volume of activity in other areas such as dental services remains low because patient capacity is reduced when following coronavirus safety protocols. • The industry saw an uptick in vacancy postings from August to October, increasing by 11% compared to May-July. • 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. • In addition, the health and social care sector is forecast by Oxford Economics to see some of the highest growth rates of any industry in Somerset in the medium term up to 2025.

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 Bo. E’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, 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.

EY ITEM Club Autumn Forecast • This work highlights UK economy grew by 17% over the summer months as restrictions were eased and consumer spending remained strong. • Despite this, the forecast estimates only 1% growth over the final quarter of 2020, with 6% growth in 2021 and 2. 9% in 2022, with the economy not fully recovering until 2023. • The UK’s planned exit from the EU compounds this pessimism, with growth in 2021 forecast at 4. 8% compared to 6% if no deal is agreed. • A significant increase in unemployment is likely, with the new job support scheme not as generous as the previous furlough scheme, with unemployment expected to peak at 7. 7% in mid-2021 before stabilising.

Oxford Economics Impact Scenarios for Somerset Headline Figures Oxford Economics forecasts: • An 8% contraction in Somerset’s GVA in 2020, along with 10, 000 job losses, with unemployment peaking at 5%. • A rise of 7. 4% GVA and 2. 5% in employment by 2021. Sector Analysis • Accommodation & Food sector projected to lose a substantial 3500 jobs in 2020 compared to 2019. The arts, entertainment and recreation industry is forecast to lose 1500 jobs in 2020 • Manufacturing is forecast to lose 2000 jobs in 2020, losing 10. 3% of total jobs by 2025. • In contrast, human health & social work jobs are forecast to grow by 1000 in 2020, and increasing by 7. 6% by 2025, the biggest of any industry. For a fuller discussion of this report, please refer to ‘Coronavirus Economic Impact Scenarios for Somerset GVA and job growth, baseline forecast Average annual % growth 10 8 6 4 2 0 -2 -4 -6 -8 -10 Forecast 2014 2015 2016 2017 2018 2019 2020 Jobs 2021 2022 2023 2024 2025 GVA Somerset Unemployment, Baseline Forecast ILO unemployment rate (% of the labour force) ILO unemployment (000 s) 16 8 Forecast 14 7 12 6 10 5 8 4 6 3 4 2 2 1 0 0 2014 2015 2016 2017 2018 ILO unemployment (000 s) Source: ONS, Oxford Economics 2019 2020 2021 2022 2023 2024 2025 ILO unemployment rate (% of the labour force)

• In regard to GDP forecasting, whilst the 2020 Q 2 drop was slightly steeper than Oxford Economics anticipated, a slow-recovery is assumed in both scenarios, with pre-pandemic levels not reached until Q 1 2022 and Q 4 2022 respectively. • It should be noted that the Oxford Economics forecast was published prior to Q 2 2020, and therefore had to base its forecast on less actual data than the OBR. 105, 0 95, 0 85, 0 75, 0 20192020202020212021202220222023202320242024202520252026 (Q 4)(Q 1)(Q 2)(Q 3)(Q 4)(Q 1)(Q 2)(Q 3)(Q 4)(Q 1) OBR Central OE Central Unemployment Forecast, 2019 -2026 8, 0 7, 5 7, 0 6, 5 6, 0 5, 5 5, 0 4, 5 4, 0 3, 5 3, 0 19 20 (Q 20 4) 20 (Q 20 1) 20 (Q 20 2) 20 (Q 20 3) 20 (Q 21 4) 20 (Q 21 1) 20 (Q 21 2) 20 (Q 21 3) 20 (Q 22 4) 20 (Q 22 1) 20 (Q 22 2) 20 (Q 22 3) 20 (Q 23 4) 20 (Q 23 1) 20 (Q 23 2) 20 (Q 23 3) 20 (Q 24 4) 20 (Q 24 1) 20 (Q 24 2) 20 (Q 24 3) 20 (Q 25 4) 20 (Q 25 1) 20 (Q 25 2) 20 (Q 25 3) 20 (Q 26 4) (Q 1) • These unemployment projections stand at a higher rate than Oxford Economics' projections prior to Q 2 2020, with unemployment spiking at a later date, primarily due to the insulating effects of Government support schemes. 115, 0 20 • Unemployment is then expected to fall at an incremental rate, reaching 4. 4% by the end of 2024. 100= 2019 Q 4 GDP Levels, Solid Line = Known Data Point at time of Publication • This fall in output is coupled to a projected steep rise in the unemployment rate, peaking at 7. 5%, or 2. 6 m people, in Q 2 of 2021. National GDP Forecast, 2019 -2026 ILO Unemployment Rate, Solid Line = Known data point at publication • The Office for Budget Responsibility in their November report estimated a drop in UK GDP of 11% in 2020. OBR Central OE Central

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.

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.