In short, the answer is, better than expected. As Andrew Bailey, Governor of the Bank of England declared earlier this month, the country’s economy has been less damaged than initially feared.
Whilst we won’t know the full extent of impact of the pandemic on the local economy for some time to come (due to lags in the collection and publication of official data), we can look at national level data alongside local ‘real-time’ or ‘near-time’ indicators of economic health to get a good idea of the current state of play in the county.
So what is the national data telling us? Firstly, that economic output has bounced-back more swiftly than expected. The Bank of England’s latest estimates suggest that the UK’s economy is 5% smaller than what it was 18 months ago. Considering what the country has been through, this is a good outcome. Fewer jobs have been lost than expected, and companies have invested more in their businesses than had been anticipated. This has, in no small part, been due to the government’s support package for businesses. In particular, the furlough scheme, government-backed loans, and grants for those most affected by lockdowns.
National data also suggests that business confidence has returned to pre-pandemic levels. Largely due to the roll-out of the Covid-19 vaccination programme which has helped provide more long-term certainty, along with the UK’s exit from the EU earlier in the year, which again removed an element of uncertainty for businesses.
Local ‘real-time’ data is also on a positive trajectory. Over the last few months, we have seen mobility increase across the County, with travel to retail businesses and for recreation activities now only about 10% below pre-Covid-19 levels. This compares to 70% below normal levels during the two main national lockdowns.
In terms of the labour market, whilst there are still high numbers of residents not working (either unemployed, economically inactive or furloughed), volumes are dropping, as we see a surge in recruitment activity. Unexpectedly, this is leading to recruitment difficulties for some local firms, which could slow the speed of economic recovery. Two additional challenges local firms are currently facing are 1) the need to start re-paying Covid-19 related loans and 2) the third wave of the pandemic leading to high levels of staff having to isolate. We are by no means out of the woods yet.
The latest data, suggests that the Buckinghamshire economy may have weathered the storm slightly better than some other areas. Fewer firms have taken out loans than nationally and therefore fewer will be operating with unanticipated debt. Buckinghamshire has also benefited from the ‘zoomshock’, whereby over the last 18 months the County has had a larger workday population than pre-Covid, due to a high proportion of people who used to commute out of the County now working from home. This brings benefits in terms of increased local spending. This is likely to reduce as residents return to out-of-county workplaces, but homeworking levels are likely to remain higher than pre-Covid in the short to medium term at least.
Long-term, most segments of the economy are expected to return to near normal within the next year or so. In addition to government support, the speed of recovery is in part a result of businesses diversifying and innovating, and a big uptick in the adoption of digital solutions. The latter in particularly is likely to lead to higher levels of efficiency and productivity.
So, whilst we are still living in uncertain times, and many local businesses continue to face significant challenges, there is a light at the end of the tunnel, and it is shining more brightly that it has done for a while.
Buckinghamshire LEP is maintaining an up-to-date evidence pack to collate all the available data on local impact, which can be accessed here. The evidence is being used to inform immediate economic recovery activity and long-term strategic planning. In addition, the LEP is producing two monthly labour market reports (claimant count and job postings). These can be accessed here.