New report reveals economic impact of Coronavirus lockdown on regions

Food production is one of the least affected sectors of the UK economy
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A new report, UK Powerhouse, released by law firm Irwin Mitchell and the Centre for Economic and Business Research (Cebr),has revealed the daily impact of the coronavirus lockdown on the UK’s regional economies and highlighted which sectors are performing the strongest and protecting the UK from even greater damage.

The lockdown is estimated to be reducing total UK GVA per day by 34%, equivalent to £2.7 billion in absolute terms. However, certain essential sectors have seen very little impact on their output; Water supply, sewerage, waste management and remediation activities are currently still operation in the same capacity as before the lockdown.

The agricultural, forestry and fishing sector has also fared relatively well during lockdown, with an estimated loss of GVA of 14%. This sector can again be thought to be essential, providing food to the nation. Given the need for food supply in the country, this is a sector that is likely to remain somewhat close to output capacity, with some loss occurring due to a reduction in workers from abroad and illnesses from current workers.

The information and communication sector is estimated to be one of the strongest sectors under lockdown. Demand for telecommunication has surged significantly since February. Newbury-based Vodafone alone has reported a 50% rise in internet usage and traffic since the beginning of lockdown.

Key findings from the report show that GVA is estimated to be falling in the South East, which includes Oxfordshire and the Thames Valley, by 35% or £393m a day during the lockdown.

The report says that although the total of 35% of GVA per day is significant, it is one of the regions faring better, with only London retaining more of its GVA per day.

The West Midlands faces the second largest loss in GVA per day in the UK at 39%, equivalent to £245m. With an economy primarily driven by manufacturing. which has faced a significant demand slump since lockdown was imposed, it is not surprising to see the region face such large losses in GVA. Manufacturing alone in the West Midlands accounts for approximately one third of the loss in GVA per day.

The West Midlands also has little in the way of a professional service economy. Financial and insurance activities accounts for only 6% of the total share of pre-COVID GVA, compared to London where it accounts for 13%. This lack of professional service infrastructure means the region’s ability to work from home during lockdown is more limited.

For the South West, the picture is mixed. The region faces a GVA loss per day of 36%, equivalent to £185 million. This comes from a pre-COVID level of £510m in GVA per day.

Aside from Scotland, the South West has the greatest agricultural GVA per day of any region, and this sector is weathering the lockdown relatively well. In the South West, agricultural GVA has only fallen by 12%; £0.8m of GVA per day. But with accommodation and food services play a proportionally larger role in the South West economy, the closure of the leisure sector has had a significant impact on the local economy.

The report states that the UK is in a relatively good position to face lockdown, citing the fact that a significant share of the economy is comprised of the professional services sector; financial, insurance and business. These are sectors that can largely be operated remotely and thus people have been working from home albeit with some loss in productivity. Financial and insurance services have seen a fall in daily GVA of 18%, largely driven by productivity losses from the abrupt working from home and the impact of the virus on the financial markets.