Businesses in London and Wales bear the brunt of Covid restrictions

4 years ago
  • New ‘Covid-19 Business Tracker’ commissioned by E.ON measures economic indicators including demand for government support schemes and GDP
  • Lockdown impact worst in April, with industries stabilising slightly over summer
  • Signs from Wales, North West and East Midlands – where restrictions have been tougher for longer – show businesses are proving more resilient than first lockdown
  • Business energy use dropped drastically in first lockdown with many expecting a return to usual levels, if not higher

Businesses in London were most impacted by the Covid-19 pandemic, with the reduction in commuters and visitors as a result of the pandemic hitting the city hard, a new report1reveals.

Commissioned by E.ON, the Centre of Economics and Business Research (CEBR) created the Covid-19 Business Impact Tracker, an analysis of 20 separate indicators – including demand for government support schemes, GDP and workplace footfall – to reveal how businesses have coped with tougher trading conditions as a result of the pandemic. 

The Covid-19 Business Tracker started with a baseline score of 98 at the beginning of the year while under normal economic conditions. That number fell to a low of just 19 in April as the country went into the first national lockdown. Despite signs of recovery in recent months, the second lockdown has stalled recovery and flattened numbers to a national average of around 52 between August and October.

Data indicates London appears to be feeling the longer-term effects most significantly – averaging a score of 47 over that late summer and early autumn period. 

Wales saw the biggest decline in business activity in October, dropping five points on the Tracker, from 54 to 49, as it headed into its ‘firebreak’ lockdown in the month before England entered its second lockdown. Promisingly, while Wales has not returned to pre-Covid levels, the economic impact was not as significant as in the first lockdown which saw a fall from 95 points in February to 17 points in April. This could provide a strong sign for businesses across the rest of the UK as they emerge from their second four-week stint of restrictions. 

There are other signs of businesses showing greater resilience to restrictions – areas such as the North West and the East Midlands, which were subject to tougher local rules over the months before the second nationwide lockdown, have stabilised as the year has gone on, according to the Tracker. 

As measures during the second lockdown have not been as extensive, with indications many businesses have also adjusted to working remotely or changed their product offering to better suit social distancing, the report predicts businesses nationwide will not see such a significant low of 19 points again. 

The report also reveals businesses see a downturn in energy use caused by lockdown as a short-term trend. While many businesses are still operating at reduced capacity, improved Covid testing and developments of vaccines have prompted hopes of a full reopening of the economy in 2021 – with most businesses expecting to return to usual levels of operations and energy consumption, if not higher.

Commenting on the report, Michael Lewis, CEO of E.ON UK, said: “This research shows that despite challenging operating conditions, companies across UK industries have shown incredible resilience during the pandemic. While the landscape remains complex, energy use provides a useful insight into how companies are adapting. 

“It’s understandable that businesses have focused on the immediate threat but as we hopefully emerge from the worst of the pandemic companies must now invest in a green economic recovery, not only to protect their bottom lines but to help alleviate the next looming catastrophe: the climate crisis. This research shows that both government and the energy industry must also find a way to remove some of the barriers – notably cashflow and payback periods on investments – and work together with businesses to deliver a recovery which makes economic and environmental sense.”

The Covid-19 Business Tracker shows that some industries were impacted more than others. More than one in five (22%) businesses in the arts, entertainment and recreation sector paused trading in October and, as the worst impacted sector, it is no surprise that a third (34%) of businesses in the industry saw their turnover fall by more than half. Accommodation and food services businesses were affected nearly as hard, with a fifth (18%) reporting they paused trading in October. 

As part of the report, ten businesses across the country and covering a wide range of industries, including manufacturing, hospitality and food production were interviewed to understand how Covid had impacted their business generally, as well as looking at how the crisis has affected energy use and energy efficiency plans. 

All ten had made use of government support schemes such as furlough and the business rates holiday and all saw staff work from home where possible. Manufacturing businesses shut down completely during the first lockdown, meaning they reported a significant drop in energy use as less power was needed for running machinery, lighting offices and powering computers. 

Those interviewed were mindful this would drive costs higher but at this time they are not looking at improving their sustainability. Business leaders relayed that upfront costs, combined with issues around renting rather than owning business space – lack of landlord approval and leases that are shorter than payback periods – were the biggest barriers to installing such measures in businesses. 

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