While we don’t yet know the exact extent of the damage, there can be little doubt that the ongoing coronavirus crisis is taking a heavy toll economically. The two per cent dip in GDP in the first quarter of the year is certain to be followed by a much greater fall in the subsequent three months, and Chancellor Rishi Sunak last week warned that the UK faces a ‘severe recession, the like of which we haven’t seen’.
Looking beyond these concerning headlines and as we start to move into the recovery phase, local economies are going to need business sectors which can emerge from lockdown more or less unscathed, and which are fit to face the new reality: one which is likely to be influenced and affected by the pandemic for some time to come.
The good news is that East Anglia's business landscape is populated by a good number of such sectors led by dynamic and resourceful individuals; the challenge now will be how we as a business and wider community support them in leading the overall economy back to health for all our benefits.
Our county’s economy is structurally less volatile than many. The county didn’t experience as big a crash in 2008 as many (nor was the bounce-back so marked), and the evidence would suggest that we will have to some extent been cushioned this time around as well (without ignoring the high personal and commercial cost to some). This is largely because the types of industry which dominate our local economy are robust – with some exceptions.
Food and drink production and retail is a big driver of economic activity, and this is a sector which has been able to carry on throughout the crisis. With the issue of food security and self-sufficiency climbing up the political agenda, the food and drink industry is well placed to continue its leading role as a foundation in rebuilding the wider economy.
Energy is more of a mixed picture. The collapse in the oil price – driven in large part by events in the Middle East, but exacerbated by falling demand due to the virus – has severely affected a sizeable section of the offshore industry. At the same time, Covid-19 has had relatively little effect on the renewables sector. The overall trajectory remains in this direction, and a three month slowdown will, in its long-term development, not be material.
In some ways the virus may be a boost here: popular sentiment may drive the political will to accelerate the direction of travel towards renewable sources of energy (although long established habits are hard to break and in rural communities the alternatives are more limited).
Tourism is a huge part of the East Anglian economy, and with overseas travel looking impossible for the foreseeable future, there is a big appetite in the sector to take advantage of a new staycation boom. But there are some big practical and emotional issues to overcome. How can accommodation providers offer a safe experience? Will people want to travel while the hospitality sector is still a long way from opening up? And – crucially – will understandable nervousness in local communities lead to an antipathy towards visitors, acting as a brake on recovery?
No such worries for the tech sector, which has been able to carry on more or less as normal, although concerns remain around long-term customer resilience. This is an industry where flexible working and working from home is already well-established. The Covid-19 crisis has brought about renewed demand for automated and remotely based customer interaction, although as we emerge from lockdown, there is likely (eventually) be a renewed appetite for face-to-face human interaction. Those tech companies with market-ready products will thrive; the financial situation may perhaps make it more difficult for those at earlier stages of product development.
Construction is often cited as a major driver of the economy, and it is good to see sites back at work. But anecdotally they are being held back by supply chain issues and concerns about how safe operating procedures can be combined with distancing measures. Newly reopened estate agents are reporting a backlog in demand, but this needs to be viewed cautiously; the housing market is so reliant on the strength of the overall economy and consumer confidence, and could easily be dampened by rising unemployment, job insecurity and lender caution in assessing mortgage applications.
All too vividly, and at times tragically, the virus has shone the light on the healthcare sector, and care homes in particular. East Anglia has a relatively high average age of population, and demand for all health and care services is likely to remain high. In some communities it is this feature that has led to concern around visitor numbers, and taken together with continued shortages of carers and cost pressures, there are some significant challenges to be addressed collectively.
Finally, the understandable focus on Covid-19 has pushed that other great issue – Brexit – off the front pages, but it is still very much there. For sectors such as food and drink, and adult social care, the historic reliance on overseas workers raises the question of whether there will be enough labour capacity to allow a real drive for recovery. For other sectors there remains the risk of supply chain disruption and uncertainty around cost levels which may impact just as we see sustained recovery - or in the worst case scenario a resurgence of the pandemic as we head into winter.
We shouldn’t underestimate the size of the challenge ahead, but we should be heartened by the fact that our economy is structured in such a way that we have (as in past crises) a better chance than many regions of overcoming the challenges we will continue to face.