Insights
With the end of lockdown restrictions and reopening of businesses in July 2021, footfall and consumer spend are picking up across UK cities. During October, consumer spend was nearly as high as pre-pandemic, according to data from the Centre for Cities. Footfall is also rising but is yet to return to earlier levels. As places begin to recover, it’s important to ask what policy can do to support the recovery of local businesses and prepare them for the future.
In our final recovery workshop, we discussed the challenges that businesses are facing and what this implies in terms of business support. Valentine Quinio from the Centre of Cities started us off with an overview of changing consumer demand; Kevin Mole from the Enterprise Research Centre at Warwick spoke about access to finance; Capucine Riom from the Centre for Economic Performance outlined findings from their recent survey on changing business practices during the pandemic; and Henry Overman discussed supply chains issues and summarised some policy lessons.
So what did we learn?
Some local businesses that depend on office workers are still struggling
Since restrictions eased, larger cities in the UK are recovering more slowly than smaller cities. The slower recovery is partly due to homeworking. Footfall in larger cities such as London depends on weekday activity, which is highly dependent on office workers. With many office workers still working from home, some firms are struggling. One silver lining is that weekend activity is recovering more quickly than weekday activity, so people are going to the pubs and shops even if they’re not going to the office. Policymakers should consider the implications of working from home on businesses that depend on office workers, as footfall won’t fully recover until they return to the office.
Demand for finance and business support is going-up
Furlough schemes and loan guarantees have enabled many firms to weather the Covid-19 shock – and demand for finance and business support is likely to rise as businesses recover and the government scales back some of its financing schemes. Kevin Mole showed evidence that large numbers of firms have used these schemes – 48% of UK firms used the furlough scheme only, 16.4% used furloughs and loan guarantees and 3.6% used loan guarantees only. Of these businesses, some will need external finance to support their recovery but won’t apply for it, even if they qualify. To the extent that this leads to reduced investment and firm performance, Kevin argued that policymakers should put in place programmes that de-discourage borrowing among this group of firms.
Many firms are adopting technology and new business practices, but some will struggle to do so
The pandemic has substantially disrupted business activity, and this has encouraged many businesses to innovate. Capucine Riom presented survey data from July 2020 and July 2021, showing that more than 70% of firms surveyed adopted digital technologies during the pandemic. Of all technologies, remote working technologies were adopted the most. Before Covid-19, most firms reported that they never had remote work and now most have one or two days of remote work. To help businesses struggling to adapt to new ways of serving customers at the local level, and to new ways of working, policymakers can signpost firms to good sources of guidance and business advice.
Despite rising demand, issues remain on the side of supply
Lastly, supply chain issues from Brexit and the pandemic are exacerbating business challenges. The problem for local areas is that implementing policies to resolve these bottlenecks is difficult. Advice might help firms switch to different sources of supply, but policies related to credit and export promotion agencies tend to sit at national levels. And limited information on supply chains and linkages between firms prevents local areas from effectively targeting policy interventions. In the short-term, local areas should encourage firms to take up available programmes that address supply chain issues at the national level. In the long-run, Henry Overman suggested that business support policies might want to focus on developing more resilient supply chains – although the evidence base on how to do this is more limited.
Business advice in an uncertain world
Two key overarching messages emerged from the discussion. The first is that with so much uncertainty going on there is high ‘option’ value in waiting before making big decisions. The second is that in a challenging environment, and with things changing fast, there is a lot of value in local support helping their firms access resources that are out there. Sign-posting and other activities to encourage take-up of existing schemes is potentially a cost-effective way to help provide business with the support they need.
This event on business support was the last in a series of events about economic recovery from the impact of Covid-19. You can find more detail on all the events here.
