Published: 06:00, 04 July 2020
While forecasters predict the Covid-19 crisis will spark some of the highest unemployment rates in decades, business expert Professor Richard Scase explains why Kent is better placed to weather the storm...
With lockdown coming to an end, how will this affect the Kent economy for the rest of this year? There are reasons to be cheerful - the upturn could be faster and greater than many observers expect.
A stream of economic forecasts predicts a fall in national GDP for the rest of 2020. The Organisation for Economic Cooperation and Development says the slump for the UK will be 12% - the highest in Europe, compared with 7% in Germany and 6% in no-lockdown Sweden. In China there will be a fall of 2% and in the United States, 7%.
The predictions for UK unemployment for the rest of the year are dire. The estimate is that by December 14% of the workforce will be out of work - . Putting the figure more starkly, it equates to five million men and women. This is almost double the outfall of the 2008 financial crisis and about 50% higher than the peaks of the 1970s and 80s. It will be the biggest increase in the rate of unemployment since the 1920s.
But will the Kent economy buck the trend? There are good reasons to predict it will. It is a county of young, adaptive men and women that are flexible in their working practices. They are willing to move between jobs and to travel from place-to-place as employment opportunities change. They are resourceful and entrepreneurial - more so than workers in many other regions of the country. They are more likely to set up their own businesses and this is why Kent has such a dynamic, ever-changing small business sector that constantly adapts to changing market demands.
Lockdown in Kent has led to changes in household budget patterns. Families have been forced not to spend. A large consumer sector now has money to splash out. During lockdown they had to cancel their holidays abroad and put off buying goods and services they would normally purchase during the spring months.
This is important for the state of the Kent economy over the coming months. Households are now ‘liberated’ to spend again. They can now buy goods and services they had to postpone.
A simple example are garden centres. They were among the first to have their restrictions lifted. Since then they have experienced long queues and a surge in customer spending, with people making up for what they were unable to buy for their homes and gardens during lockdown.
For many of these traders, their turnover for the past couple of weeks has made up for the loss of sales during the lockdown months.
It is possible to see similar patterns appearing in other sectors of the local economy over the coming weeks and months Postponed haircuts, buying clothes for the summer months, celebrations of birthdays and other family celebrations can now return as part of normal household spending.
During lockdown, families were forced to defer buying ‘big-ticket’ items such as furniture, fabrics and refurbishing projects. The seasonal bi- or tri-annual trade-in of vehicles could not be done until lockdown was eased. Now this can all be revived.
Kent is heavily dependent upon consumer spend. If this pent-up demand happens, there is reason to expect this will lead to a speedy economic recovery, faster than in most other parts of the country. What will be key in this revival will be the respect for social distancing measures.
These will be vital for the revival of the retail, leisure and hospitality sectors. The announced reduction from two metres to one-metre social distancing will have a major impact on business activity. Evidence from other countries suggests this reduction increases the level of trading up to 80% of normal activity.
This is the difference between life and death for large numbers of shopkeepers, restaurant owners and other small businesses. These are the businesses that make up the backbone of the Kent economy. The proposed reduction from two to one-metre social distancing should prevent unemployment for literally thousands of men and women in the county’s small business economy.
The challenge is to enforce the one-metre social distancing rules in the pubs and bars that are key to the hospitality sector. Will staff be strict enough to enforce the rules? If not, will there be a second wave of coronavirus in the autumn with another government lockdown?
That really would be an economic disaster, pent-up consumer demand or not.
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