How will the economic impacts arising from the COVID-19 crisis be spread across the country? New analysis looks at the jobs predicted to be the most and least affected in the short- to medium-term and which places are expected to bounce back more quickly.
What is the likely economic fallout from the COVID-19 crisis, and how will this play out across the country? While this is difficult to answer currently, looking at which sectors are most likely to be affected (or indeed benefit), and where they are located, gives a sense of the likely geographic impact.
The following analysis looks at the geographic spread of the jobs predicted to be the most and least affected in the short- to medium-term and which places are expected to bounce back more quickly.
In the short to medium term, around a third of the jobs in cities and large towns are in industries that are expected to be severely affected. Figure 1 shows cities ranked by the estimated vulnerability of their economy to the direct economic impact of COVID-19 given their industrial structure. There are a number of points to note.
Firstly, every city has at least one in five jobs classified as either vulnerable or very vulnerable (shown by the magenta bars). This is because of the impact of the Government’s lockdown restrictions on local services businesses, such as retailers, restaurants and hairdressers. These businesses can be found across cities, whether they are greasy spoons or a restaurant in the Ritz, and the impact is uniform – many have had to temporarily close. Jobs in these local services businesses make up two thirds of all jobs estimated to be vulnerable or very vulnerable.
Secondly, there is no particular geography to the most or least affected cities. Crawley is estimated to be the most exposed, with over half of its jobs either in vulnerable or very vulnerable sectors. It is followed by Luton and Derby. The least exposed cities are the southern cities of Oxford and Worthing but also the northern city of Bradford (shown by the light and dark green bars).
The distinction across cities results from the exposure of their ‘exporting’ industries – that is those that serve regional, national or international markets, in contrast to local services businesses – to the crisis.
Crawley for instance – the most vulnerable city or large town according to our classification – has the highest share of employees in the aviation and aircraft manufacturing industry of any city. Around 18 per cent of its workforce is employed in the aviation industry and related sectors compared to an average of around 1 per cent across British cities. The result is that over half of all of Crawley’s jobs are at risk of being either furloughed or lost completely.
Luton and Derby also have high shares of employees in the aviation industries and employ more people in the automotive sector than in other parts of the country. The result is that just over 40 per cent of jobs are classed as vulnerable according to the methodology, placing them second and third respectively in the list.
Aberdeen’s industry in contrast is largely dominated by the oil and gas sector, which is also expected to suffer particularly from the current crisis. Around 11 per cent of Aberdeen’s employees are employed in this sector compared to the British average of less than 1 per cent.
 The methodology can be found in the info box at the end.
Figure 1: Estimated share of jobs exposed to the immediate effects of COVID-19
Source: BRES, Employment Count, 2018
This has implications for how quickly cities are likely to bounce back after the crisis. Exporting industries bring money into a local economy and are the engines for their growth. If a city’s exporting base comes through the crisis relatively unscathed, this puts it in a good position to grow once more, while creating demand for the local services businesses that have had to close or severely limit their operations during the crisis. This in turn puts them in a stronger position to bounce back.
One way to assess the potential resilience of a city – assuming lockdown will be fairly short lived – is to look at the extent to which its exporting base might be expected to be affected by the crisis. The vertical axis of Figure 2 shows the differences in exposure to COVID-19 from Figure 1 (the magenta bars). The horizontal axis shows the affected jobs in the exporting industry as a share of all exporting jobs of a city. The higher the value, the more affected the exporting base of a city and the more difficult it is likely to be for a place to recover.
Following the above, Crawley, Luton, Derby and Aberdeen might be expected to face the most severe challenges to recover. All have more than half of their exporting jobs at risk.
But there are also distinctions between places that have similar numbers of jobs as a result of the crisis. Two examples are Plymouth and Milton Keynes. They have around a third of all jobs vulnerable or very vulnerable to the downturn. But looking at the exposure of their exporting businesses shows that over half of Plymouth’s exporting jobs are exposed in addition to its local services jobs. Milton Keynes on the other hand may have 80 per cent of its exporting base still operating. And this is likely to allow it to bounce back more quickly.
Figure 2: Estimated share of total exporting jobs exposed to the crisis
Source: BRES, Employment Count, 2018
This analysis shows two things. The first is that the Government’s national schemes – such as the Jobs Retention Scheme or the Business Interruption Loan Scheme – will be drawn down to a much greater extent in some parts of the country than others (noting the latter will depend on awareness of the scheme amongst businesses as well as need).
The second is that, when the crisis passes, different approaches will be required in different parts of the country. In cities where export jobs have not been acutely affected, support should focus on helping local services businesses to find their feet again and serve the demand that should return. But in cities where the export base is more exposed, more sustained support will be required. Centre for Cities will set out in the coming weeks what this support should look like.
At the moment, the concrete economic effects of the Covid-19 -crisis are highly uncertain, which makes it difficult to draw a clear picture for its immediate impact on the labour market and different sectors of the economy. It is possible though to classify industries according to the existing understanding of the crisis and assumptions on how specific sectors may deal with the new challenges:
Building on these assumptions and information from those recent publications mentioned above, for this analysis, five-digit SIC sectors have been grouped into four different categories depending on their estimated labour-market vulnerability in the short to medium term. Vulnerability means the risk of strong labour market disruptions and laying-off workers permanently. This is to simplify as not every single business in these categories will be affected or behave as assumed.
 Both institutes expect Aviation, Tourism and Hospitality to be largely damaged. In addition, Brookings based on analysis of Moody’s expects mining/oil and gas, transportation, employment services as particularly exposed industries. Losses between 18 per cent and 27 per cent in share prices have been detected for companies operating in Fossil Fuels, Tourism and Leisure (incl. Air Travel) and Automotive and Parts.
 Sector reviews and forecasts can be found here: Manufacturing Outlook 2020 Q1.
|Expected economic effects||Sectors (broad categories)||Expected labour market effects|
|1||Unaffected or higher demand
Elevated demand for specific products due to the characteristics of the crisis (high demand in medical equipment or sanitary products) and changed consumer behaviour
Elevated or constant demand for public administration and third sector.
|Food and essential retail
Healthcare and related services
Chemicals, pharmaceuticals and medical equipment
New leisure activities (computer games, gardening, children’s toys)
Support business services such as cleaning services or delivery
Public administration and third sector
|Job creation more likely than job losses
Increase in wages may be expected in some industries (efficiency wages)
Reduced economic activity but reluctance to immediately lay off workers as there is a basic demand for goods/services and a will to keep a highly-skilled or specialised workforce
|Business services (business consulting, public relations etc)
Banking and financial services
Forestry and paper
IT services and telecommunication
Support business services such as call centres
Electronics and electrical equipment
Food manufacturing (incl. agriculture)
|Relatively constant labour market conditions but decreased wages due to pay cuts
Increased use of the Job Retention Scheme (JRS) due to generally reduced economic activities and uncertainty
Temporary-affected (often lower-skilled) sectors due to closed shops and a strong drop in demand but likely to recover as it is expected that consumers buy at a later stage or high labour intensity. Retail may partly switch to online shopping.
|Retail and wholesale (excluding food, drug or other “demanded products”)
Basic metals and metal products
Rubber and plastics
Machinery and equipment
Transport (without air and freight transportation)
Film and video production
|Sluggish or decreased demand for workers but limited lay-offs and larger use of the JRS|
Immediate negative effects but also expected long term damage and expected slow recovery for specific industries, especially for industries which are capital intensive and may face a change of demand due to changed behavior after the crisis.
|Fossil fuel producers and distribution
Automotive and parts (whole value chain, including tyres)
Tourism and business travel
Leisure (including sports activities and amusement parks, operation of arts facilities, etc)
Services that cannot performed at home or offered online, nor be postponed (hair and beauty salons)
|Negative long-term labour market effects to be expected
Increased use of JRS
Increase in lay-offs
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As a resident in Crawley unfortunately, I am working tomorrow during this presentation so cannot easily view it. Is it a recording going to be available on platforms such as You Tube ? I would be interested to watch it
Hi David – thanks for your interest in the event. You can catch it streaming on YouTube here: https://www.youtube.com/watch?v=cwdqAOiajhk&feature=youtu.be
As a small business owner in Stockport currently my two catering units are closed. I employ 6 staff, but only one is on PAYE as the others are part time, Students etc. If my business along side many others close the impact on the local economy will probably be greater than expected.
I presume most local employment data is related to HMRC PAYE returns and does not include workers like my own, and as you say this will be replicated up and down the country.
Our confidence in our business returning to normal is very low, when our business reopens I expect a long period of very low sales, leading to possible closure.