Economic Impacts of COVID19 Info Pack Updated 25

Economic Impacts of COVID-19: Info Pack - Updated 25. 08. 2020 SCC Economic Policy Team – Research & Intelligence

Business Intelligence

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

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

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

National Economic Overview

ONS GDP Statistics Q 2 2020 • ONS data for Q 2 (Apr to June) estimates GDP to have fallen by a record 20. 4%, marking the second consecutive quarterly decline after a 2. 2% fall in Q 1. This is the largest quarterly contraction since quarterly records began in 1955. • There have been record quarterly falls in services, production and construction output in Quarter 2, which have been particularly prevalent in those industries that have been most exposed to government restrictions • Services output decreased by 19. 9% in Quarter 2 2020, while production output fell by 16. 9%, and construction output contracted by 35. 0%

ONS GDP Statistics Q 2 2020 • The fall in services output reflects falls in the vast majority of industries, most notably accommodation and food services, wholesale and retail trade and repair of motor vehicles, human health and social work activities, and education. • Although there was some pickup in May and June, the levels of output were still well below the February level before the main impacts from the pandemic were felt, resulting in the largest quarterly fall in services output on record. • Output of accommodation and food services fell 86. 7%, while output of wholesale and retail trade and repair of motor vehicles fell 20%. • Manufacturing output fell by 20. 2% in Quarter 2 2020, signalling its fifth consecutive quarterly contraction. The most notable contraction was the manufacture of transport equipment, which fell by 49. 1% following widespread factory shutdowns during the lockdown period. • Construction output fell by 35. 0% in Quarter 2 2020, reflecting declines in both new work, and repair and maintenance. Most notably, private new housing declined by 51. 2% as housebuilding activity was affected by various social distancing measures that were put in place in response to the coronavirus pandemic.

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

Survey Data

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

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

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

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

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

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

Labour Market Data

Labour Market Data • Hard data is now being released incrementally from the ONS in the form of the August Labour Market Overview, 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 or industry breakdowns. • The ONS has also been utilising so-called ‘experimental statistics’ to provide faster indicators on social and business attitudes to the Virus, but as outlined above these are unreliable compared to standard ‘hard-data’ releases. • Hard data on regional industry jobs will not become available until either September or October with the release of the Workforce Jobs and Annual Population Survey, which will both cover Q 2. • The ONS has now released data on the CJRS/SEISS schemes as of the 30 th of June, which covers the extent of usage of these schemes at the local level, with sector specific data also being produced but only pertaining to the national level. • In regard to forecasting, whilst such studies can be useful, they are premised on scenarios which are inherently based on a significant degree of uncertainty. Projections by contrast, rely on past economic trends to generalise about future economic behaviour, which is useful for baselining economic activity but not incredibly helpful for gaining more information on COVID specific impacts. • In addition, the ONS has commented on the difficulty of collecting reliable data in this challenging time, with typical survey methods facing barriers to data collection due to many businesses having temporarily pausing trading and therefore being uncontactable, the increase in remote working, as well as social distancing measures, are all hampering traditional survey collection practices.

Labour Market Overview – August 2020 ONS Release Employment • Estimates for April to June 2020 show 32. 92 million people aged 16 years and over in employment, 113, 000 more than a year earlier but 220, 000 fewer than the previous quarter. The employment rate stood at 76. 4%, 0. 2% down on the previous quarter. • Looking more closely at the decreases in employment over the quarter by age, those aged 16 to 24 years decreased by 100, 000 to 3. 72 million, while those aged 65 years and over decreased by a record 161, 000 to 1. 26 million. • April to June showed a record quarterly decrease in self-employment growth, 238, 000 fewer on the quarter. Unemployment • Estimates for April to June show 1. 34 million unemployed, a rate of 3. 9% largely unchanged on the previous quarter. The estimated number of unemployed aged 16 -24 increased by 41, 000 on the year to 543, 000. • Approximately 300, 000 are temporarily away from work and not being paid. In addition, people who say they want a job but are not actively searching, in addition to those who do not want a job but either do not believe jobs are available or are not yet looking increased by 383, 000 on the quarter. This total figure for are inactive but may begin to seek work/temporarily away from work without earnings stands at 2. 13 million. Economic Inactivity • Economic inactivity has increased by 82, 000 on the previous quarter, standing at a rate of 20. 4%, 0. 2% higher on the quarter. Those who are economically inactive but who want a job increased by 218, 000 on the quarter. Hours Worked & Pay you earn Data • Between January to March 2020 and April to June 2020, total actual weekly hours worked in the UK decreased by a record 191. 3 million, or 18. 4%, to 849. 3 million hours. • Early estimates for July 2020 from PAYE RTI indicate that the number of payroll employees fell by 2. 5% compared with March 2020. In July, 730, 000 fewer people were in paid employment when compared with March 2020 and 114, 000 fewer when compared with June 2020.

Labour Market Overview – August 2020 ONS Release Redundancies • Redundancies increased by 30, 000 on the year and 27, 000 on the quarter to 134, 000. While this is the highest level since February to April 2013, the level remains well below that seen during the 2008 downturn. Claimant Count Data • Between June 2020 and July 2020, the Claimant Count increased by 94, 400 (3. 6%) to 2. 7 million (Figure 12). Since March 2020, the Claimant Count has increased by 116. 8%, or 1. 4 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 • Estimated vacancies for May to July 2020 were 274, 000 fewer than in the previous quarter, February to April 2020 (where the responses for the first two months are prior to the start of coronavirus social distancing measures), and 453, 000 fewer than a year earlier. • For May to July 2020, there were an estimated 370, 000 vacancies in the UK, which is 10% higher than the record low in April to June 2020. The increase was driven by small businesses (less than 50 employees), some of which reported taking on staff to meet coronavirus (COVID-19) guidelines.

Claimant Data Breakdown in Somerset Districts March-20 Rate 2. 3 April-20 Rate May-20 Rate June-20 Rate 4. 5 5. 6 5. 3 July-20 Rate 5. 5 Increase No. of new from March- Total No. of Claimants claimants from July as of July March-20 to July-20 +3. 2 1980 3750 Mendip 2. 8 4. 7 5. 6 5. 4 5. 6 +2. 8 1985 4000 Sedgemoor 1. 9 3. 8 4. 7 4. 6 4. 7 2620 +2. 8 4485 South Somerset West & Taunton 2. 2 4 4. 9 4. 6 4. 9 +2. 7 2. 3 4. 2 5. 1 4. 9 5. 1 +2. 8 4320 2410 9180 16, 550 Somerset 2. 2 4. 3 5. 4 5. 1 5. 3 104, 300 +3. 1 179, 990 South West 3. 0 5. 1 6. 4 6. 2 6. 4 +3. 4 1, 411, 265 2, 679, 885 United Kingdom Source: ONS claimant count by sex and age - not seasonally adjusted

Somerset Claimant Count by Age Ban d April Rate May Rate June Rate July Rate No. of claimants in July No. of new claimants Mar-July Cumula tive % increase Mar. July 1617 0. 3 0. 5 0. 4 50 25 100% 1824 6. 4 8. 3 8. 5 8. 9 3320 1950 131% 2549 4. 9 5. 8 5. 5 5. 8 8690 4505 119% 50+ 3. 0 3. 7 3. 4 3. 5 4125 2345 125% 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 2620 claimants, albeit from a low base. • Mendip has seen the lowest increase in claimants in Somerset, with 1980 additional claimants from Mar-July. • Crucially however, all Somerset districts have a claimant count rate below both the national average rate (6. 4), with SWa. T and South Somerset both being below the regional average (5. 3). • 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. 6% • The biggest cumulative increase from Mar-July has been in the 18 -24 age bracket. • Importantly, the 18 -24 age bracket has seen 1950 new claimants, equating to a cumulative increase of 131% between Mar-July. Crucially, the proportion of the 18 -24 working age population making a claim is 9%, the highest of the covered age groups. This age bracket represents 8. 7% of the total working age population compared to the much larger 25 -49 bracket, highlighting the difficulties this age group have faced. • Given that young people are disproportionately likely to work in low-pay sectors, which additionally have been most likely to shut down over lockdown, this age bracket should constitute a key consideration of future analysis. • The ONS has stressed however that this count cannot be necessarily attributed solely to unemployment. Changes to the eligibility of UC to encompass a larger proportion of the workforce as part of the Government’s Covid response may have played an important role in the increase in figures.

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

Usage of the CJRS (furlough) across Somerset Area Mendip Sedgemoor SWa. T South Somerset South West UK Total no. on furlough (as of 31 st July) Take-Up Rate 17, 800 34% 16, 700 30% 20, 900 31% 22, 900 31% 78, 300 32% 808, 900 32% 9, 601, 700 32% Source: Coronavirus Job Retention Scheme Statistics Note: The chancellor announced on the 8 th of July a ‘job retention bonus’ of £ 1000 to employers who retained a furloughed employee to the end of January 2021, on the condition workers are earning over £ 520 per month.

Usage of the SEISS across Somerset County and district/unitary 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 6, 000 17, 600, 000 2, 900 72% Sedgemoor 7, 000 5, 200 16, 300, 000 3, 100 75% Somerset West and Taunton 9, 100 6, 700 19, 600, 000 2, 900 74% South Somerset 9, 800 7, 100 20, 700, 000 2, 900 72% Somerset County 34, 200 25, 000 74, 100, 000 3, 000 73% 318, 000 239, 000 707, 000 3, 000 75% 3, 402, 000 2, 604, 000 7, 576, 000 2, 900 77% South West United Kingdom Source: ONS, Self Employment Income Support Scheme Statistics, June 2020

Age breakdown of national usage of SEISS Scheme • Around 83% of individuals who were assessed for potential eligibility were between the ages of 25 and 64, with around 90% of claimants from this age group. Take-up of the grant in these age-groups is at or above 76%. 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 (61% have claimed), although they have the highest average claim value at £ 3, 300. The youngest age group have the second lowest take up rate (70%) and the lowest average claim value at £ 2, 100 Total potentially eligible population (000 s) Total no. of claims made to 30/7/20 (000 s) 127 89 664 Proportion of total eligible population Proportion of total number of claims made Take. Up Rate 4% 3% 70% 512 20% 77% 800 629 24% 79% 853 676 25% 26% 79% 703 537 21% 76% 221 136 6% 5% 61% 34 26 1% 1% 75% 3, 402 2, 604 100% 77% Age Group 16 -24 25 -34 35 -44 45 -54 55 -64 65+ Missing All Source: ONS, Self Employment Income Support Scheme Statistics, June 30 th 2020

SEISS Usage by Selected Industries (National) • • 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 July construction workers had made 884, 000 claims for SEISS totalling £ 3. 1 billion; an average of £ 3, 500 per claimant. Self-employed individuals in the transportation and storage sector make up 8% of the potentially eligible population and made 225, 000 claims totalling £ 490 million. Administrative and support services also make up 8% of the potentially eligible population and have made 198, 000 claims totalling £ 409 million. Industry Description Accommodation and food service activities Agriculture, forestry and fishing Construction Human health and social work activities Manufacturing Transportation and storage Wholesale and retail trade; repair of motor vehicles and motorcycles Total no. of Proportion of potentially claims total eligible total number total value of eligible made to population of claims made population 2 31//203 made to date (000 s) 83 62 2% 2% 2% 108 63 3% 2% 2% 1, 062 884 31% 34% 41% 5% 4% 4% 158 2 10 78 60 2% 2% 2% 267 225 8% 9% 6% 190 140 6% 5% 5% Source: ONS, Self Employment Income Support Scheme Statistics, July 2020

SEISS 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 July HMRC had received 1, 842, 000 claims from men totalling £ 5. 8 billion compared to 759, 000 claims from women for £ 1. 7 billion. Males have a higher take-up rate than females (79% compared to 71%) and their average grant value (£ 3, 200) is 39% higher than the average for females (£ 2, 300). The SEISS potentiality eligible population & number of claims by Gender Source: ONS, Self Employment Income Support Scheme Statistics, July 2020

ONS Business Impact of Coronavirus Survey (BICS) Data, 13 th of August Release Trading Status • Of the 5, 733 businesses that responded (out of a sample size of 24, 464) to Wave 10 of BICS, 94% of businesses reported currently trading as their current trading status, while 6% reported that they had temporarily closed or paused trading. • Of businesses who reported to have started trading in the last 2 weeks, the arts, entertainment and recreation sector reported the largest percentage, at 16%. This was followed by the accommodation and food services sector at 14%. • The arts, entertainment and recreation sector and the accommodation and food service activities sector also reported the largest percentages of businesses that indicated they had paused trading but were intending to restart in the next two weeks, at 8% and 5% respectively. • The wholesale and retail trade sector, the education sector (private and higher education businesses only), and the accommodation and food service activities sector reported the largest percentages of businesses indicating that they were intending to shut some business sites in the next three months, at 5% for all three sectors.

ONS Business Impact of Coronavirus Survey (BICS) Data, 16 th July Financial Performance • Of businesses continuing to trade, the sector that had the highest percentage of their businesses reporting that their turnover increased was the wholesale and retail trade sector, at 20%. • Of businesses continuing to trade, the industries with the highest percentages of their businesses reporting that their turnover decreased by more than 50% were the arts, entertainment and recreation sector and the accommodation and food service activities sector, at 47% and 33% respectively. Workforce • Of businesses who had not permanently stopped trading, 14% of the workforce had been furloughed under the terms of the UK government’s Coronavirus Job Retention Scheme (CJRS) (apportioned by employment size). • The arts, entertainment and recreation sector and the accommodation and food service activities sector had the highest proportions of furloughed workers, at 46% and 31% respectively. • Across all industries the remainder of the workforce were either working remotely (38%) or at their normal place of work (44%). • The information and communication sector had the highest proportion of their workforce working remotely, at 80%, followed by the professional, scientific and technical activities sector and the education sector, at 67% and 75% respectively. • Across all industries, apportioned by workforce size, less than 1% of the workforce had been made permanently redundant for all businesses not permanently stopped trading.

Business Resilience • The arts, entertainment and recreation sector and the accommodation and food service activities sector had the highest percentages of businesses indicating they had no cash reserves at 8% and 7% respectively. • The accommodation and food service activities sector also had the highest percentage of businesses indicating they only had cash reserves to last between zero and six months, at 56%, followed by the construction sector at 53%. • Conversely, the information and communication sector and the education sector reported the highest percentage of businesses indicating they had cash reserves to last more than six months, at 49% and 50% respectively.

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.

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)

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.

Bo. E Monetary Policy Report, August Key Projections & Findings • UK GDP is expected to shrink by 9. 5% this year, which would be the most significant decline in 100 years, but still smaller than the Bank’s initial projection of a 14% contraction. • Growth is projected to rebound in 2021 with 9% growth, followed by 3. 5% growth in 2022, with pre-COVID size reached by 2021. • Unemployment is expected to reach 7. 5% by the end of the year, with upward pressure on the unemployment rate generated through the unwinding of Government support schemes such as the CJRS. • Encouragingly, indicators suggest that spending has recovered somewhat from April’s trough, with household consumption in July less than 10% below its level at the start of the year. • Despite this, survey evidence does suggest 30 -40% of households have experienced falls in income due to C 19, with the self-employed reporting the largest impacts on income.

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

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

Sectoral Analysis

Sectoral Analysis – 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 reduction of 57, 000 vacancies on the quarter from May to July (-57%) and minus 91, 000 vacancies on the year. • The wholesale & retail trade has struggled markedly as a result of lockdown measures. Rolling three -month growth rates from April to June indicate that nationally the sector shrank by 20%. The sector did contribute the most to services growth in June however, in particular due to the motor vehicles industry recovering to three-quarters of its Feb 2020 level. • National retail sales data indicates 13. 9% growth in June 2020 compared to May, as non-food and fuel stores continue their recovery. Food stores and non-store retailing both reached new high levels since the start of the pandemic, with volume food sales 5. 3% higher, and non-store retailing 53. 6% higher, than February. All GVA estimates taken from ONS, Regional Economic Activity by Gross Value Added (Balanced) - GVA(B) in current prices.

Manufacturing • Manufacturing amounts to 11. 8% of total FTE jobs in Somerset, significantly higher than the national average of 8. 1%. In addition, manufacturing plays a very strong role in relation to district employment, around a fifth (18. 3%) of employment in South Somerset arises from manufacturing and just under 15% in Sedgemoor. Manufacturing also stands as the single biggest contributor to Somerset’s GVA at 13. 32%. • The latest edition of the SWMAS South West Barometer (for Q 1 covering April, May and June) highlights that manufacturers are highly pessimistic concerning their future sales trajectory in the next 6 months, with 42% anticipating a reduction in sales, and 41% anticipating a reduction in profit. • Regarding employment, 36% reported a reduction in staff numbers in the past 6 months and 52% anticipated further reductions in employee numbers in the next 6 months. • 30% of respondents described their business as ‘surviving’, whilst 28% described their business as in the ‘recovery’ phase. • 80% of respondents had made use of the furlough scheme, whilst 18% had made redundancies, . Encouragingly however, 22% of respondents reported up-skilling existing staff in some way. • Manufacturing contracted by 20. 2% nationally from April to June, with the most notable contraction in the manufacture of transport equipment (-49. 1%) due to many factories being closed. • Manufacturing did however grow by 11% in June, with 11 of 13 sub-sectors increasing after large falls in March/April, however this is still 14. 2% lower than the Feb 2020 level.

Tourist Industries • Accommodation and food service activities accounts for 9. 2% of employment in Somerset and 3. 92% of GVA • Somerset visitor economy is worth £ 1. 3 bn annually and 28, 000 FTE jobs. Loss of visitor nights April, May, June leads to an estimated loss of £ 178. 8 million to the accommodation sector. • Visit Exmoor: Reports that tourism impacts 50% of all employment on Exmoor, with accommodation alone accounting for 31% of jobs across Exmoor. If distancing measures are continued over July, August and September it is estimated a further £ 195. 80 million could be lost. • The accommodation & food service activity sector saw a reduction of 37, 000 vacancy postings in May-July on the previous quarter, a reduction of 67. 9%. • In accommodation and food as a specific industry, this field saw the largest contraction in three-month growth rates from April to June, shrinking by 86. 7% nationally. The sector increased its output by 6. 7% from May to June. • Visit Somerset report that cash flow is king for the visitor economy, and the forthcoming peak season (April-Aug) is going to be vital. However, social distancing is going to make re-booting the visitor economy an enormous challenge, with social distancing mandating an estimated operational capacity of 30% that is thought to be unviable. • At the same time, they also report that there may be significant public health implications (incl. on NHS capacity) or increased visitation rates, due to the spread of the virus in a region that has thus far seen comparatively fewer cases/deaths. • Visit Britain/Visit England’s ‘domestic Covid-19 Tracker’ has identified the South West, as the top destination for those people who are planning a UK holiday this year in light of the COVID-19 crisis, including those considering a replacement for a cancelled overseas or domestic holiday. These ‘replacement’ holidays however are most likely to occur from October onward, with rural and costal the top location type. • Visitor Somerset Intelligence: Closure of Major Shopping Centre in Mendip for 3 months could cost an estimated £ 24 million stripped from regional centre turnover, employs over 1000 staff. • Note: On the 8 th of July the Chancellor announced a VAT cut from 20% to 5% from the 15 th of Juy to 12 th January 2021 for restaurants, hotels and attractions. • Additionally, a ‘eat out help out’ scheme was introduced which offers 50% discount for every diner, up to £ 10 a head, from Monday to Wednesday through August in participating restaurants, pubs and cafes.

Agriculture, Forestry & Fishing • Agriculture contributed 2. 46% to Somerset’s GVA, compared to around 0. 7% nationally. This sector accounts for an estimated 4000 jobs, or 4. 8% of all employment in Somerset. • Agriculture shrank by 4. 8% nationally from April to June. Despite this, the industry did grow by 2. 7% in June. • 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 shrunk nationally by 35% from April to June, a record fall. The largest contributors to this fall were private new housing & private commercial (-51. 2% & -33. 4%). • Construction grew by 23. 5% in June with this increase driven by new housing, in particular private new housing. Output remains 24. 8% lower than February 2020, however. • The latest national BICS survey results found the construction industry to have suffered significant reductions in turnover, 23. 3% of businesses reporting reductions between 20 -50%. • The construction industry also reported the second highest percentage of industries that have less than 6 months cash reserves, at 53%.

Health & Social Care • Human health & social work activities accounted for 9. 3% of GVA in Somerset and 14. 9% of total employment in 2018. • This industry shrank by 27. 2% nationally in the three-month rolling rate from April to June, primarily as a result of reduced activity in elective operations and fewer accident and emergency visits • Despite this, the latest BICS survey indicates that a substantial 48% of businesses in this industry have reported turnover has remained unaffected. • Locally, this sector has also seen significant job posting activity both on the Emsi database, as well as in DWP returns. Whilst this data is ‘noisy’ and highly variable, it does provide an indication of underlying demand trends.

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