Economic Impacts of COVID19 Info Pack Updated 19

Economic Impacts of COVID-19: Info Pack - Updated 19. 05. 2021 SCC Economic Policy Team – Research & Intelligence

National Economic Overview

GDP Monthly Estimate, March 2021 • GDP increased by 2. 1% in March 2021, the fastest monthly growth since August 2020. • March 2021 GDP was 5. 9% below that seen in February 2020 and was 1. 1% below levels seen in October 2020, the initial recovery peak. • Output in Services grew by 1. 9% in March, with schools re-opening and strong retail trade sales. • Output in the production sector grew by 1. 8% in March 2021, as manufacturing grew for a second consecutive month, at 2. 1%. . • The construction sector grew by 5. 8% in March 2021, driven by growth in both new work and repair and maintenance. • It is important to note that the monthly growth rate for GDP is volatile, and should be considered alongside quarterly growth rates where applicable. Monthly GDP Index, January 2007 to March 2021, 2018 = 100

ONS GDP Statistics Q 1 2021 • ONS Q 1 data (January to March) indicates UK GDP contracted by 1. 5%, following 1. 3% growth in Q 4 2020. • The level of GDP in the UK is still 8. 7% below where it was at the end of 2019. • Whilst both services and production output have contracted in Q 1, construction output grew over the quarter. • Household consumption decreased by 3. 9% in Q 1 2021, following a 1. 7% contraction in the previous quarter. This is 12. 8% lower than in Q 4 of 2019 pre-pandemic.

ONS GDP Statistics Q 1 2021 • Services output decreased by 2% in Q 1 and is 8. 7% below Q 4 2019 levels. • The largest contributor to this fall came from the Education industry, reflecting low school attendance between Jan-Feb due to mandated school closure. • Accommodation & Food services fell by 18. 2%, reflecting the impact of coronavirus restrictions that forced the closure of non-essential establishments such as hotels and restaurants. The coronavirus restrictions also impacted the wholesale and retail trade sector, which fell by 5. 9%. • Production output decreased by 0. 4% in Q 1, primarily due to a small (0. 7%) fall in manufacturing output. Manufacturing currently stands at 3. 4% lower than Q 4 2019 levels. • This drop has largely been driven by a decrease in manufacturing of transport equipment, which was partially offset by an increase in the manufacture of pharmaceutical products. • By contrast, Construction output increased by 2. 6% in Q 1, although output levels remain 3. 4% below pre-pandemic levels. • This is primarily due to recent increases in Construction output in March, primarily due to a noticeable increase in new private commercial work and private housing repair and maintenance.

Bank of England: Agents’ summary of business conditions Q 1 2021 • This publication summarises intelligence gathered by the Bo. E between mid-January and early February. • Consumer Demand: In-store sales for non-essential retailing continued to be affected by public health restrictions, although online sales continued to grow. Clothing & car sales remained weak. • Consumer services sales in February remained markedly weaker than a year ago, although domestic holiday bookings were strong. • Manufacturing: Output levels continued to be significantly reduced in industries supplying the food services sector, petrochemicals civil aviation and utilities. • Reports were also present of output growth being affected by non-tariff barriers to trading with the EU, with smaller firms reporting more severe disruption. • Construction: Output continued to be a lower than a year ago partly due to subdued demand from sectors affected by COVID-19, such as within office, hospitality and leisure developments. By contrast, logistics and warehousing developments were strong. • Corporate finance: Credit demand among small and medium-sized companies was reported to have increased in some cases as Covid-related restrictions came into effect. Contacts thought credit demand could rise further in the coming quarters as deferred payments, such as rent and tax, fall due in the first six months of 2021. • Investment: Investment intentions picked up modestly but remained weak overall, with plans mostly conditional on demand recovering over the coming months. • Employment & Pay: Employment intentions remained weak but are improving, although pay growth was subdued. Heavily impacted industries such as hospitality, leisure and non-essential retail remained concerned about the need for large-scale redundancies upon the phasing out of the CJRS. • A majority of contacts expected headcount to stabilise however, having already implemented job cuts. There were some reports of shortages of experienced professionals and specialist skills, in part due to a reluctance of employees to change jobs in an uncertain environment.

Bo. E Monetary Policy Report, February 2021 Key Projections & Findings • Published on the 4 th of February 2021, this report stressed the continued uncertainty of the UK’s economic situation as a result of continued COVID-19 public health restrictions and the UK’s new trading relationship with the European Union. • The Bank’s base rate has been maintained at 0. 1%, with £ 895 bn of quantitative easing to reduce borrowing costs for households and businesses. • GDP is anticipated to contract by 4% in Q 1 of 2021, about 12% below its 2019 Q 4 level. • Unemployment is projected to peak at 7. 75% in 2021 Q 2, before declining gradually throughout 2022 -23 as GDP recovers. • Consumer spending is anticipated to have fallen slightly in Q 4 of 2020, with public health restrictions hitting social spending ahead of the normally busy Christmas period. Household incomes are up on average by 1. 2%, suggesting a degree of pent-up demand, although business investment has remained weak, standing 19% lower in 2020 Q 3 than 2019 Q 4.

Labour Market Data

Labour Market Data • Hard data is always susceptible to a degree of ‘lag’, whereby survey periods have not yet caught up to a time period of interest. This is now the case with the new January 2021 lockdowns, with current data releases only covering the tail-end of 2020. In addition, much of the data, specifically key sectoral impacts, are often very highlevel in scope and do not always break down to a useful level of granularity for localised analysis. Survey lags are a particular issue at the local level, with most recent data often falling a year or so behind the present day. • Such lags often mean it is necessary to extrapolate more frequent national findings to the local level in order to provide timely analysis. Truly detailed and timely local analysis must often be gathered by specific surveys. • 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 October, 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 – March 2021 ONS Release Employment • The UK employment rate was estimated at 75. 2%, 1. 4 percentage points lower than before the pandemic (December 2019 to February 2020) but 0. 2 percentage points higher than the previous quarter. • The quarterly increase in employment was mainly driven by an increase in the number of full-time employees. The increase was partly offset by a decrease in part-time workers, and self-employed people also decreased. Unemployment • The UK unemployment rate was estimated at 4. 8%, 0. 8 percentage points higher than December 2019 to February 2020 but 0. 3 percentage points lower than the previous quarter. Economic Inactivity • The UK economic inactivity rate was estimated at 21. 0%, 0. 8 percentage points higher than December 2019 to February 2020 and 0. 1 percentage point higher than the previous quarter. PAYE Data • Early estimates for April 2021 indicate that the number of payrolled employees fell by 0. 9% compared with April 2020, which is a fall of 257, 000 employees. . In April 2021, 97, 000 more people were in payrolled employment when compared with March 2021. • The increase in payrolled employees between April 2020 and April 2021 was largest in the health and social work sector (a rise of 161, 000 employees) and smallest in the accommodation and food services sector (a fall of 275, 000).

Labour Market Overview – March 2021 ONS Release Redundancies • In January to March 2021 the redundancy rate decreased by a record 6. 9 per thousand on the quarter to 5. 5 per thousand. Claimant Count Data • The Claimant Count decreased slightly in April 2021 to 2. 64 million. This represents a monthly decrease of 1% but an increase of 25% on the year. In March 2020 the number of people claiming UC stood at 1. 27 million. 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 and jobs in the UK: May 2021 • The number of job vacancies in February 2021 to April 2021 remained almost 128, 000 below its pre-pandemic level in January 2020 to March 2020, with the worst affected industries being arts, entertainment and recreation, and accommodation and food service activities. • In February 2021 to April 2021, there were an estimated 657, 000 job vacancies, which is a growth of 8. 0% (48, 400) compared with last quarter, with most industries displaying increases, most notably in the accommodation and food service industry (up 99. 6%). • The other notable increase on the quarter was electricity, gas, steam and air conditioning supply, up 42. 1%, because of ongoing recruitment, leading this industry to have the highest ratio of vacancies to employee jobs. Source: ONS, Vacancies and jobs in the UK, May 2021

Labour Market Headline Indicators in the South West – May 2021 • Since the start of COVID-19, all regions’ counts of pay rolled employees has followed a similar pattern of steep decline followed by slight improvement in recent months. • In the South West, estimates for April 2021 state there were 2, 361, 849 payrolled employees, dropping from 2, 405, 707 in March 2020, a percentage decrease of 1. 82%. • The overall employment rate in the South West stands at 76. 7%, a fall of 2 percentage points from January to March 2020 but largely unchanged on the previous quarter. This employment rate is higher than the UK average of 75. 2%. • The unemployment rate stands at 3. 9% in the South West, below the UK average of 4. 8% but 0. 7 percentage points higher than the South West rate posted from January to March 2020. The South West unemployment rate has improved by 0. 6 percentage points on the previous quarter however. • The economic inactivity rate in the South West stands at 20%, 1. 5 percentage points higher than the January to March 2020 rate. Source: Regional headline labour market indicators for the South West. All figures are seasonally adjusted.

The economic impacts of C-19 have been particularly disruptive for young people • 12, 0 10, 0 8, 0 6, 0 4, 0 0 20 20 -A M pr 2 ar -M 020 a Ap y 20 2 r-J un 0 M 2 ay 02 -Ju 0 l Ju n- 202 Au 0 g 2 Ju l-S 020 e Au p 2 0 g. Oc 20 Se t 2 0 p. No 20 Oc v 20 t-D 2 ec 0 No 2 v- 020 Ja De n 2 0 c. Fe 21 Ja b 2 0 n. M 21 ar 20 21 0 ar Fe b Ja n- M b 20 2 Fe c- De v- Ja n 20 1 9 2, 0 ec • 14, 0 No • 16, 0 ILO Unemployment Rate • Youth Unemployment VS. Unemployment, October 2019 - March 2021, Non-Seasonally Adjusted t-D • The current unemployment rate for those aged 18 -24 stands at 11. 2% from Jan-Mar 2021, standing above the pre-pandemic level of 9. 9%. In the South West, the latest estimate for unemployment for 18 -24 year old’s stood at 10. 3%, with the last pre-pandemic estimate standing at 10. 3%. Recent ONS data suggests young people are staying in education and not looking for work, supported by the record economic inactivity rate of young people in full-time education. Whilst youth unemployment has consistently tracked higher than the aggregate unemployment rate, the over-representation of young people in vulnerable sectors such as accommodation and retail have led to a susceptibility to job losses or furloughing. Young workers in Somerset have also seen a significant uptick in the claimant count relative to the aggregate rate. 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. Oc • Youth Unemployment (16 -64)

Somerset claimant counts have risen sharply since March 2020 • • • There has been a steep rise in the claimant count across Somerset since March 2020, with 4. 7% of Somerset’s working age population claiming out-of-work benefits in May 2021. Somerset had consistently lower claimant rates than the national average before the crisis and this remains the case. Please Note: Claimant count figures do NOT provide a direct measure of unemployment and claimant conditionalities were relaxed in response to the COVID-19 crisis. Mar 20 May -20 July - 20 Sep - Nov 20 - 20 Jan - Mar 21 - 21 May Cumu - 21 lative Incre ase Mendip 2. 3 5. 5 5. 6 5. 4 5. 0 5. 3 5. 2 +2. 9 Sedgemoor 2. 8 5. 6 5. 5 5. 3 5. 0 5. 2 +2. 4 Somerset West & Taunton 2. 2 4. 8 4. 7 4. 6 4. 5 4. 4 +2. 2 South Somerset 1. 9 4. 7 4. 6 4. 7 4. 5 4. 3 4. 6 4. 4 +2. 5 Somerset 2. 3 5. 1 5. 0 4. 9 4. 7 4. 8 4. 7 +2. 4 South West 2. 2 5. 4 5. 3 5. 2 5. 0 4. 8 5. 1 5. 0 +2. 8 United Kingdom 3. 0 6. 4 6. 3 6. 4 6. 2 6. 5 6. 3 +3. 3 Claimant Count as a Proportion of Residents 7, 0 6, 0 5, 0 4, 0 3, 0 2, 0 1, 0 A Se ugu pt st em 20 b 1 Oc er 2 9 to 01 No be 9 ve r 2 m 0 De be 19 ce r 2 m 01 b 9 Ja er 2 nu 01 Fe ary 9 br 20 ua 20 r M y 20 ar ch 20 Ap 202 ril 0 2 M 020 ay 2 Ju 02 ne 0 2 Ju 020 ly A 2 Se ugu 020 pt st em 20 b 2 Oc er 2 0 t No obe 020 ve r 2 m 0 De be 20 ce r 2 m 02 b 0 Ja er 2 nu 02 Fe ary 0 br 20 ua 21 r M y 20 ar ch 21 Ap 202 ril 1 20 21 0, 0 Mendip Sedgemoor SWT Somerset South West United Kingdom Source: NOMIS, Claimant Count by Sex and Age (non-seasonally adjusted) South Somerset

Somerset Claimant Count by Age Band Mar – 20 Rate May 20 July- Rate 20 Rate Sep 20 - Rate Nov 20 Jan 21 - Mar 21 No. of - Rate claima nts in May No of new claima nts Mar. May Cumul ative increas e Mar. May 16 -17 0. 2 0. 5 0. 4 0. 3 35 10 40% 18 -24 3. 8 8. 6 9. 2 8. 8 8. 2 7. 9 7. 8 2790 1420 103% 25 -49 2. 7 5. 8 5. 7 5. 5 5. 3 5. 4 8380 4290 104% 50+ 1. 6 3. 4 3. 3 3. 4 4090 2210 117% Source: ONS claimant count by sex and age - not seasonally adjusted

Claimant Data Breakdown in Somerset Districts Area March-20 May-20 Rate 2. 3 5. 6 July-20 Rate 5. 5 Sep-20 Rate 5. 6 Nov – 20 Rate 5. 3 Jan – 21 Rate 5. 0 Mendip Increase from Total No. of Mar – 21 March- Claimants as of Rate Mar 2021 5. 3 +3. 0 3350 2. 8 5. 6 5. 5 5. 3 5. 0 5. 2 +2. 4 1. 9 4. 7 4. 6 4. 7 4. 5 4. 3 4. 6 +2. 7 2. 2 4. 9 4. 8 4. 7 4. 6 4. 5 +2. 3 5. 1 5. 0 4. 9 4. 7 4. 8 +2. 5 2. 2 5. 4 5. 3 5. 2 5. 0 4. 8 5. 1 +2. 9 3. 0 6. 4 6. 3 6. 2 6. 5 +3. 5 Sedgemoor South Somerset West & Taunton Somerset South West United Kingdom Source: ONS claimant count by sex and age - not seasonally adjusted 3760 4390 3980 15, 680 169, 511 2, 673, 654 No. of new claimants from March 20 to Mar-21 1970 1745 2525 2070 8310 96, 433 1, 425, 959

Key Points from Claimant Count Data • All districts have seen a significant increase in their claimant count rates since March 2020. • South Somerset has seen the biggest increase in new claimant claims since March 2020, with an additional 2285 claimants, albeit from a low base. • Sedgemoor has seen the lowest increase in claimants in Somerset, with 1580 additional claimants from Mar 2020 -Jan 2021. • Crucially however, all Somerset districts have a claimant count rate below both the national average rate (6. 2), with SWT and South Somerset both being below the regional average (4. 8). • 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 5. 2%. • The biggest cumulative increase from Mar 2020 -Jan 2021 has been in the 50+ age bracket. • Importantly, the 18 -24 age bracket has seen 1450 new claimants since March 2020, equating to a cumulative increase of 106% between Mar 2020 -Jan 2021. 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 susceptible to being closed under public health restrictions, 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.

Furlough numbers have decreased substantially from their peak, but renewed restrictions in January have reversed this trend somewhat • Provisional figures show there has been a decrease in levels of furlough between February and March 2021 with 4. 2 million on furlough at 31 March 2021, down from 4. 7 million on 28 February • Before this, the number of employments on furlough peaked at 8. 9 million on 8 May 2020. This figure fell to 2. 4 million at 31 October and then rose again to 4. 9 million employments on furlough at 31 January 2021 • The levels of furlough seen in these figures reflect the changes to restrictions on individuals, households and businesses across the UK since the autumn

Overall furlough rates have decreased as public health restrictions have been loosened, although some sectors continue to be impacted worse than others • Provisional figures show that all sectors have seen a reduction in levels of furlough between 28 February and 31 March 2021 • Furlough peaked in the wholesale and retail sector on 24 April 2020 at 1. 85 million employments on furlough. This decreased to 932, 500 at 28 February. Provisional figures show this declined again with 825, 600 employments on furlough at 31 March 2021 • Accommodation and food services peaked at 1. 65 million employments on furlough on 10 April. Latest figures show 1. 19 million employments on furlough at 28 February, decreasing through March to a provisional estimate of 1. 06 million at 31 March 2021 • The manufacturing sector had a peak of 911, 000 employments on furlough on 17 April. This decreased to 296, 700 employments on furlough at 28 February. Provisional estimates show that this figure dropped to National Furlough Take-Up Rate by Industry (31 st March 2021 Provisonal) Accommodation and food services Arts, entertainment and recreation Other service activities Wholesale and retail; repair of motor. . . Construction National Average Real estate Administrative and support services Transportation and storage Manufacturing Professional, scientific and technical Agriculture, forestry and fishing Information and communication Water supply, sewerage and waste Education Health and social work Mining and quarrying Finance and insurance Energy production and supply Public administration and defence; social. . . 55% 54% 39% 15% 14% 13% 13% 12% 11% 9% 8% 6% 5% 4% 3% 3% 2% 1% 0% 10% 20% 30% 40% 50% 60%

Usage of the CJRS and SEISS has remained high in Somerset at the start of 2021, although rates are dropping • • • As of the 31 st of March 2021, 33, 700 employments had been furloughed in Somerset (14% take-up rate), a significant drop from the 78, 300 employments furloughed at the end of July 2020 (a take-up rate of 30%). As of the 31 st of January 2021, 66, 600 self-employment claims had been made in Somerset to receive income support. This amounted to an estimated £ 187 million in support across the three SEISS grants. Accommodation & Food made up around 27% of all employments furloughed in Somerset on the 31 st of March, followed by Wholesale & Retail (19%), with Manufacturing a distant third (8%). Number of employments on furlough (31 st March 2021 Provisional) 9 080 Accommodation and food services Wholesale and retail; repair of motor. . . 6 550 Manufacturing 2 670 Arts, entertainment and recreation 2 120 Education 2 030 Professional and scientific and technical 1 850 Administrative and support services 1 830 Other service activities 1 810 Construction 1 490 Health and social work 1 200 Information and communication, . . . 1 190 Transportation and storage 1 070 Agriculture, forestry and fishing, Mining. . . 500 Public administration and defence; soci. . . 330 0 Source: HMRC, Coronavirus Job Retention Scheme Statistics 2 000 4 000 6 000 8 000 10 000

Usage of the CJRS (furlough) across Somerset Area Mendip Sedgemoor SWT South Somerset South West UK Total no. on furlough (as of 31 st March 2021 provisional figures) Take-Up Rate 8100 17% 7200 14% 9400 14% 9000 13% 33, 700 14% 345, 300 14% 4, 193, 900 14% Source: Coronavirus Job Retention Scheme Statistics Note: The Government has announced that the CJRS will be extended up until September 2021.

Usage of the self-employment income support scheme across Somerset Area SEISS 1 Number of Claims SEISS 2 SEISS 3 Total Number of Claims Total Value of all SEISS Claims Mendip 6, 100 5, 200 4, 700 16, 000 £ 44, 100, 000 Sedgemoor 5, 300 4, 600 4, 200 14, 100 £ 41, 300, 000 Somerset West and Taunton 6, 700 5, 900 5, 300 17, 900 £ 49, 800, 000 South Somerset 7, 100 6, 000 5, 500 18, 600 £ 51, 600, 000 25, 100 21, 700 19, 800 Somerset County Source: ONS, Self Employment Income Support Scheme Statistics, January 2021 66, 600 £ 186, 900, 000

ONS Business Insights & Impact on the UK Economy, 6 th May 2021 Headline Figures • The latest ONS Business Impact Survey from the period 19 th April to 2 nd May 2021, reported the percentage of businesses currently trading has increased from 77% in mid-April to 83% in late April 2021. • The proportion of businesses' workforce on furlough leave has fallen from 17% in late March 2021 to 13% in mid-April 2021, as a result of coronavirus restrictions continuing to be relaxed across the UK. • The wholesale and retail trade industry expects the highest percentage of its workforce to return from furlough to the normal workplace in the next two weeks, at 29%. • Of businesses not permanently stopped trading, 24% intend to use increased homeworking as a permanent business model going forward, while 28% are not sure.

ONS Business Insights & Impact on the UK Economy, 6 th May 2021 Industry Insights • The easing of public health restrictions has seen significant increases in the percentage of businesses trading; the other service activities industry (which includes hairdressing and other beauty treatment activities) has risen from 41% to 91%, in addition to the wholesale and retail trade industry has risen from 77% to 91%. • The accommodation and food industry continues to have a low total of businesses trading at 61%. • The percentage of businesses in key industries experiencing an increase in turnover shows encouraging signs as evidenced by: the accommodation and food service activities industry reporting rises from 13% to 17%. • the other service activities industry (which includes hairdressing and other beauty treatment activities) has risen from 15% to 27%. • In regard to proportions of the workforce on furlough leave, the art, entertainment and recreation industry proportion of workers on furlough has fallen from 53% to 40%, the wholesale and retail trade industry has fallen from 21% to 11%, and the accommodation & food industry furlough figures falling from 45% to 38%.

Business Representative Organisation Intelligence

British Chamber of Commerce, Quarterly Economic Survey, Q 1 2021 results from the BCC’s survey indicates a dampening of economic activity during public health restrictions implemented during Q 1. 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 -6% compared to -19% in Q 4 2020. • The percentage of service firms reporting increased sales stood at -18% compared to -24% in Q 4 2020. Export Sales • The percentage of manufacturing firms reporting increased export sales stood at -9%, largely unchanged on the 8% reported in Q 4 2020. • The percentage of services firms reporting increased export sales stood at -26%, a worsening from -22% in Q 4 2020. Investment • The percentage of manufacturing firms reporting increased investment in training stood at -3%, an improvement on the -10% reported in Q 4 2020. This compares to -6% in services businesses compared to -17% in Q 4 2020. Cash Flow • The percentage of manufacturing firms reporting improved cash flow stood at -17% compared to -15% in Q 4 2020. This compares to -26% for services firms, an improvement from -28% in Q 4 2020. Confidence • In manufacturing, confidence that turnover will increase in the next 12 months stood at a substantial 46%, a significant jump from 27% reported in Q 4 2020, and notably better than service sector confidence which stood at 24%. Source: BBC quarterly economic service

FSB, South West Quarterly Small Business Index: Q 1 2021 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 Business confidence in the South West has reached 39% in Q 1 of 2021, a substantial, positive swing from the -40% recorded in Q 4 of 2020. This is the first-time business sentiment has been positive in the South West since Q 2 of 2020. Business Conditions In Q 1 2021, over half (51%) of small businesses in the South West reported a decrease in revenue over the last three months, primarily due to the extreme reduction in demand fostered by the national lockdown implemented in January. Sentiment toward revenue over the next three months however is positive, with 52% of businesses expecting an increase in revenue. Employment Regarding staffing levels, 15% of South West businesses reported decreasing staff levels in Q 1, whilst 10% had increased employment levels. Importantly, 69% of businesses reported staffing levels remaining at the same level despite the challenges of the pandemic. Business Challenges The greatest reported challenges to business growth in the South West were reported as being ‘general economic conditions’ as the UK recovers from the pandemic (63%), consumer demand (35%) and acquiring appropriately skilled staff (33%) . Source: SW Quarterly Small Business Index Q 1 2021

SWMAS – South West Survey of SME Manufacturers Q 3 2020 (October, November, December) Survey data gathered from 11 -22 nd January 2021 from South West SME Manufacturers found: • Turnover & Profits: 42% of businesses had seen sales improve over the past six months, whilst 40% had seen decreases. 50% of businesses expected sales turnover to improve over the next six months. 40% of businesses had seen their profits shrink over the past six months, although 44% of businesses anticipated profits to increase over the coming six months. • Capital Investment: 40% of businesses reported an increase in capital investment over the past six months, compared to 17% of businesses who had reduced capital investment. A significant 43% of businesses anticipate an increase in capital investment over the next six months. • Employment: 38% of businesses reported a decrease in staff numbers over the past six months, whilst 41% do anticipate to increase staff numbers in the coming six months. • Trading arrangements with the EU: 40% of businesses do not expect new trading relationships with the EU to damage COVID recovery plans. Despite this, 53% of businesses reported a negative impact when importing products from the EU, and 61% reported negative price changes within supply chains. However, only 10% reported a negative impact on general sales, with 10% even reporting increased general sales as a result of the new trading regulations.

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. • From Oct-Dec 2020, the industry saw an 8. 5% increase in vacancy postings when compared to the previous quarter, although vacancy postings were down by 45. 7% on the same time last year. • 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 December shows a 0. 3% increase when compared to November, resulting in an increase of 2. 7% when compared with February’s pre-pandemic level. Indeed, retail sales increased by 2. 9% on the year, although clothing stores and department stores contracted by 25. 1% and 5. 2% respectively. 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 3 covering October, November, December 2020) highlights that manufacturers concerns are incredibly varied. 42% of businesses reported an increase in sales over the past six months, although 40% reported a reduction in turnover the same period. • Whilst 38% of businesses reported a decrease in employment numbers over the past six months, although 41% reported an intention to increase staffing numbers in the coming six months. • New trading regulations with the EU have presented a mixed picture, with 61% of businesses reporting negative impacts on supply chain prices, and 53% reporting difficulties with importing products from the EU. • Despite this, 54% of businesses reported no change on exporting products as a result of new regulations, with 80% reporting no impact on sales to date. 26% of businesses did report a negative impact on enquiries from EU customers however.

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 decrease in vacancy postings from October to December 2020 on the previous quarter, contracting by 8. 5%, with vacancies down by 68. 9% on the same time in 2019. • The accommodation & food industry grew by 25. 2% in December 2020, following a 44. 5% in November 2020. Output is therefore significantly down, 55. 6%, on February 2020 levels. • 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.

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 grew by 0. 7% in Q 4 of 2020, with this growth primarily driven by a 0. 3% increase in December 2020, despite October and November growth rates being negative. • Annual GDP contracted by 9. 4% across 2020 in the agricultural sector. • 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 surrounding the new trading regulations between the EU-UK represent a continued source of uncertainty for some sub-sectors within the industry.

Construction • Construction accounts for 7. 26% of Somerset’s GVA and 11. 8% of Somerset’s total employment. • Total construction output decreased by 12. 5% in 2020 compared with 2019. This is the first annual fall in output since 2012 when it fell 7. 2%, and the largest since 2009 when it fell by a record 13. 2%. • The annual fall in 2020 was because of decreases in both new work, and repair and maintenance, which fell by 15. 2% and 7. 5% respectively, both of which were also the largest falls since 2009. • From October to December 2020 construction vacancies increased by 21. 7% when compared to the previous quarter, with vacancies being up by 8. 3% on the same time last year, one of the best performing industries in relative terms.

Health & Social Care • Human health & social work activities accounted for 9. 3% of GVA in Somerset and 14. 9% of total employment in 2018. • Human health and social work activities grew by 2. 4% in December 2020 because of an increase of 3. 2% in human health. This was driven by a significant increase in testing and tracing activity while other health volumes were flat, leaving human health activities 0. 1% below February 2020 levels. • From October to December 2020, the industry was the largest sector in regard to overall vacancy postings, accounting for 22. 2% of all vacancies • 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.

• 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.