Rangewell’s analysis of economic data during the Coronavirus pandemic to assess the impact of the Government Support packages

Summary 

There is significant evidence to show that UK businesses were on ‘v’ shaped recovery courses when restrictions were eased in June. Since September, when tighter restrictions were implemented, this recovery has slowed.

As we exit the firebreaks and lockdowns, there are signs that the recovery from the Government's restrictions on trade will be faster than that of the spring closures, partly as fewer firms have been affected by the containment but also signs that the Government support measures have worked. We could be on course for a wonky ‘w’ shaped recovery. 

• All industries saw a dramatic drop in GDP at the start of the pandemic. Some sectors struggled to return to their February levels, while others saw their output bounce back to their pre-March levels by June. 
• As restrictions came into force throughout by the start of November, the percentage of businesses experiencing a decrease in turnover increased sharply. 50% of businesses experienced a lower turnover to what is normally expected for November. 
• If you compare June's and October’s drop in expected turnover, it had decreased from 65% in June to just 45% by the beginning of October. 
• There are signs that businesses are adapting. The proportion of online spending peaked during lockdown. Online sales rose across all sectors when compared with the same time a year earlier. 
• The proportion of online sales was at 27.5% of overall sales in September, compared with the 20.1% reported in February. Food stores nearly doubled their online proportions from February to September.
• All UK regions increased their online job adverts in November, with Wales showing the largest increase from 77% to 82% of its 2019 average. This coincides with the end of “firebreak” restrictions in Wales. The highest volume of job adverts compared with its 2019 average was in the East Midlands, at 89%.
• The government-guaranteed Covid business support loan schemes have delivered £65.5bn of finance businesses to 1.4 million UK businesses. 
• This includes 1.3 million of Bounce Back Loans worth £42.2billion, just under 78k loans worth £18.5billion through the Coronavirus Business Interruption Loan Scheme and 658 loans worth £4.8billion through the Coronavirus Large Business Interruption Loan Scheme.
• The application success rate remains high with Bounce Back Loans coming out on top with a 79% application success rate, 45% for Coronavirus Business Interruption Loan Scheme, while there is a 62% success rate for the Coronavirus Large Business Interruption Loan Scheme.
• The Devolved Covid Small Business Grants have been popular within the Manufacturing, Construction, Retail, Hospitality and the Arts sectors, while the Devolved Sector-Specific Grants have been utilised by the Transport and Hospitality sectors throughout the UK.
• By mid-November, those businesses who had not permanently ceased trading saw 60% of the workforce working at their normal place of work.
• The Arts and Hospitality sectors had the highest proportions of their workforce on partial or full furlough leave under the terms of the UK government's Coronavirus Job Retention Scheme. While heavy industries such as Manufacturing and Construction had the lowest amount of workforce still on either partial or full furlough leave. 
• The Government's Kickstart Job Scheme for young people has not been widely popular with businesses, with only 2% saying they will or have made use of the Scheme. The Construction industry has adopted the Kickstart Job Scheme more than any other sector but it has only been used by 3% of Construction firms.
• The Job Retention Bonus has not been as successful as the Treasury might have expected but the silver lining is that 80% of businesses reported they have not/or intend to use the Job Retention Bonus as they do not have furloughed employees. 
• Unfortunately, 14% of Hospitality firms say that their furloughed workers will be made redundant by the end of the year. 

Overview of business performance 

All industries saw a dramatic drop in GDP at the start of the pandemic. Some sectors struggled to return to their February levels, while others saw their output bounce back to the levels they were at in February by June. 

Monthly output as a proportion of February 2020 output; February 2020 output = 100%. Number of people with at least one positive COVID-19 test result (either lab-reported or lateral flow device), by specimen date. Source: Office for National Statistics, GDP monthly estimate: PHE Weekly Cases data, people tested positive, UK Whole.

By the start of November, 50% of businesses experienced a lower turnover to what is normally expected for this time of year. If you compare June's and October’s drop in expected turnover, it had decreased from 65% in June to just 45% by the beginning of October. 

However, as local and national restrictions came into force throughout October, by the start of November, the percentage of businesses experiencing a decrease in turnover increased sharply.

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS) 

The turnover and profitability data is significant as the ONS’s fortnightly profitability & turnover estimates seem to be following the same trends as the UK monthly GDP estimates. This is despite the fact that fortnightly profitability & turnover estimates are published much earlier than the official monthly GDP estimates.

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS) 

All UK regions increased their online job adverts in November, with Wales showing the largest increase from 77% to 82% of its 2019 average. This coincides with the end of “firebreak” restrictions in Wales. 

Northern Ireland, where recently “circuit breaker” restrictions have been extended, was the region with the smallest weekly increase in the volume of adverts despite it seeing its first increase in three weeks. 

London also had its first weekly increase in job adverts in three weeks. However, it remains the region with the lowest volume of job adverts compared with its 2019 average, at 55%. 

The highest volume of job adverts compared with its 2019 average was in the East Midlands, at 89%.

Source: Office for National Statistics, Coronavirus and the latest indicators for the UK economy and society

The proportion of online spending peaked during lockdown. Online sales rose across all sectors when compared with the same time a year earlier. 

The proportion of online sales was at 27.5% in September, compared with 20.1% reported in February. The proportion of online sales increased across all sectors with food stores nearly doubling their online proportions from 5.4% in February to 10.4% in September.

Department stores were the only stores to increase sales in September when compared with August. Feedback to the ONS from these stores stated that the online pre-ordering of a new range of gaming products helped boost their sales.

Government financial support

The government-guaranteed Covid business support loan schemes have delivered £65.5bn of finance to 1.4 million UK businesses. 

This includes 1.3 million Bounce Back Loans worth £42.2billion, just under 78k loans worth £18.5billion through the Coronavirus Business Interruption Loan Scheme and 658 loans worth £4.8billion through the Coronavirus Large Business Interruption Loan Scheme. In addition, the Future Fund has seen £875.8m worth of convertible loans approved for 874 companies.

The application success rate remains high with Bounce Back Loans coming out on top with a 79% application success rate, 45% for Coronavirus Business Interruption Loan Scheme, while there is a 62% success rate for the Coronavirus Large Business Interruption Loan Scheme.

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS) 

The Office of National Statistics reports that Manufacturing, Construction and Hospitality have been the most active sectors for the loan schemes, with 36%, 42% and 34% respectively reserving a Government-guaranteed loan.

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS) 

Covid Support Grants is a Devolved support package. The small business grant has been popular with the Manufacturing, Construction, Retail, Hospitality and the Arts sectors throughout the UK, while sector-specific grants have been utilised by the Transport and Hospitality sectors. 

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS) 

Employment support

By mid-November, those businesses who had not permanently ceased trading saw 60% of the workforce working at their normal place of work.

The Arts and Hospitality sectors had the highest proportions of their workforce on partial or full furlough leave under the terms of the UK government's Coronavirus Job Retention Scheme, at 34% and 22% respectively, while over 98% of heavy industries, such as Manufacturing and Construction, had the lowest proportion of their workforce on either partial or full furlough leave. 

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS) 

The Government's employment incentive schemes have not been widely popular with businesses, with only 29% using or intending to use the Job Retention Bonus and as low as 2% who intend to or have made use of the Kickstart Job Scheme. 

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS) 

The Construction industry has adopted the Kickstart Job Scheme more than any other sector, but only by 3% of firms.

The Job Retention Bonus has been most popular within the Hospitality sector with 47% using or intending to use the scheme. 

On why firms are not using the Job Retention Bonus, 80% reported they did/do not have furloughed employees, while 14% of Hospitality firms say that their furloughed workers will be made redundant before 2021.

Source: Office for National Statistics, Business Impact of COVID-19 Survey (BICS)