The Prime Minister has promised to ‘level up’ the national economy — that was a big challenge even before the pandemic, but how has Covid changed that task?
After the most challenging of years, Cities Outlook 2021 assesses the scale of the impact of the Covid pandemic on urban life, on the Government’s promise to level up the economy, and the prospects for the future.
Cities and large towns went into the pandemic with different economic strengths and weaknesses, different levels and types of employment and different industries.
All these factors have affected the nature of the economic damage done by Covid — and will affect how places begin to recover once the pandemic is finally behind us.
Cities and large towns whose economies needed to level up before the crisis — those outside the Greater South East — now face the extra challenge of recovering from Covid.
But there is also a real new risk for some places in the South ‘levelling down’ because their dominant local industries have been particularly badly hit.
— Centre for Cities (@CentreforCities) January 25, 2021
Our analysis suggests that the economic impact of Covid on cities and large towns outside the Greater South East has made the task of levelling up at least four times harder.
Levelling up was a major task even before the pandemic. Levelling up should mean reducing the inequalities between different parts of the country by supporting places outside the Greater South East to be more successful economically.
Many aren’t reaching their potential — and that means people and businesses miss out on opportunities and the whole country misses out on the extra national wealth these cities and large towns could be providing.
Cities and large towns that were doing well before the pandemic now risk levelling down.
The amount of risk depends on the types of industries that make up their local economies. In London, while there has been a big impact on retail and hospitality in the centre, this appears to be linked to the large share of jobs that can be done from home. Once people will return to the office, London’s local services too should start to come back.
But in places reliant on sectors that have been hard hit by Covid — such as Crawley and Slough where aviation is important — recovering from the economic impact of the pandemic will be harder as Covid will have a longer term effect.
One thing the pandemic has not changed is that 80 per cent of the task of levelling up is in cities and large towns outside the Greater South East — the overall size of that challenge is much bigger thanks to Covid, but it remains an overwhelmingly urban task.
This depends on the type of businesses employing people in the local economy.
Local services businesses such as retail and hospitality sell only to their local market — the people who live in the local area. They have been hit hard by the restrictions needed to manage the pandemic but, once things return to normal, demand for these services should return.
Exporting businesses such as manufacturing, financial and professional services bring money into places from outside the local economy. The number and type of businesses that do this in a local area affect the overall strength of the local economy. Places with more of these kinds of businesses tend to have stronger economies and those with fewer tend to struggle and to be most in need of levelling up.
The impact of Covid in the longer term will depend on the degree to which exporting businesses in a city or large town have been affected by the pandemic and the degree to which they have been able to continue because employees can work from home.
Furlough — the Coronavirus Job Retention Scheme — has helped keep people employed during the pandemic. In a worst-case scenario where everyone on furlough (in October 2020) became unemployed, the task of levelling up the national economy would be eight times harder.
The extension of furlough to April 2021 has so far prevented this from happening, but what happens in future will depend on the trajectory of the pandemic, ongoing restrictions and, crucially, whether the Government continues the scheme while restrictions remain in place.
The Government needs to put local government — in the front line for levelling up and Covid recovery — on a strong and sustainable financial footing.
The Government needs to publish an Economic Recovery Strategy: