COVID-19 and its effects on businesses and workers

By Peter Warrington

In this document I hope to explore how COVID-19 has affected businesses and workers in Cambridgeshire as compared to other areas – Looking at the effects of less-footfall, business closures, unemployment and on the effectiveness of the Government’s support schemes.

Relevant events from my timeline

Here I pick out relevant events that have affected businesses and workers in Cambridgeshire and across the UK as a starting point for this research.

• 16^th March – Boris Johnson advises everyone in the UK against “non-essential” travel and contact with others, suggesting people should avoid clubs and theatres and work from home if possible, deaths reach 35¹

• 20^th March – Schools close² and the closure of public venues, such as pubs, restaurants, gyms, leisure centres, nightclubs, theatres and cinemas is announced.³ Furlough scheme is also announced.⁴

• 23^rd March – The national stay-at-home order is introduced⁵ The Government “Coronavirus Job Retention Scheme” is introduced providing loans of up to £5 million where interest payments are covered by the government for the first 12 months so that businesses are encouraged to keep workers in employment.⁶

• 20^th April – The Coronavirus Job Retention Scheme opens to apply for grants.⁷

• 15^th June – Most public facing retail is allowed to reopen.⁸ And passengers on public transport must now use a face covering.⁹

• 8^th July – The “Eat out to help out scheme” is announced, Government subsidising food and soft drinks at cafes, pubs and restaurants at 50% up to £10 per person. It was available from the 3^rd to the 31^st August.¹⁰

• 13^th July – Salons can reopen¹¹

• 17^th July – Boris announces plan for “significant return to normality” by Christmas¹²

• 24^th July – Face coverings must be worn in shops¹³

• 14^th October – “COVID-tier regulations come into force” Cambridge is in ‘Medium’ tier, meaning pubs and restaurants close at 10pm, and people can meet indoors or outdoors as long as they follow the rule of 6¹⁴

• 16^th November – “Landmark Cambridge Lion Yard nightclub Ballare shuts its doors for good after 40 years” – Cambridge News¹⁵

• 2^nd December – 3 tier system comes into effect and November lockdown ends, Cambridgeshire in tier 2 “high alert” – One household indoors¹⁶

• 17^th December – Cambridgeshire is moved into tier 3 ‘Very high’, meaning no pubs unless they operate as a restaurant with a ‘substantial meal’, meeting outside only in certain public places.¹⁷

• 26^th December – Cambridgeshire moves into Tier 4.¹⁸

• 30^th December - “Cambridge Market shut down as Covid spreads rapidly through city” – Cambridge News¹⁹

• 4^th January – Boris in a televised address, announces new restrictions amounting to a return to the “stay at home” order, including the move of schools to all online learning. Summer exams were also cancelled.²⁰

Cambridgeshire and employment

I use information here from my Cambridgeshire statistical indicators document.

Here I look at the effects of employment in Cambridgeshire over the COVID-19 outbreak and how it has affected the local labour market.

While Cambridgeshire was generally ranked highly in terms of employment, among some of the best ranked districts in England for employment²¹, figures suggest that Cambridgeshire has experienced 47.73% higher proportion of people claiming unemployment benefits at it’s peak than nationally, with a 165.49% in increase in the number of people claiming these benefits compared to before lockdown.²²

These findings lead me to wonder what has caused this disparity between Cambridgeshire and the rest of the UK, and by looking at Jobseeker’s allowance by occupation in Cambridgeshire as compared to the rest of the UK, it seems this disparity is due to a massive amount of job losses in the “Elementary Trades, Plant and Storage Related Occupations” sector, experiencing a increase from 40 to 1,255 people claiming jobseeker’s allowance in this sector in Cambridgeshire, a percentage increase of 285.6% compared to the rest of the UK.

In terms of specific redundancies, job losses in Cambridgeshire include from Cambridge university colleges Downing, Queens’ and Trinity who planned to let go 105 low-paid workers from its workforce, leading to criticism including from many groups such as the Unite union to form the “Cambridge against job cuts” campaign, pointing out that Trinity for instance has assets of over a billion pounds, and is one of the wealthiest universities in the country.²³

In addition, online travel agency Booking.com closed it’s Cambridge office on November 16^th 2020 citing the effect of COVID-19 on the travel industry, leading to the loss of 400 jobs, with one former employee saying they “feel a little bit betrayed” and that they “could have placed them on furlough”.²⁴

“Across Cambridgeshire, the full-time workers’ median weekly pay of £551.00 is higher than the England average of £512.70. Within the county pay varies considerably, (…) from a low of £424.50 in Fenland to a high of £618.90 in Cambridge City.”²⁵

Different government measures

The Coronavirus Job Retention (Furlough) Scheme

This was a measure introduced by the Government beginning 20^th April and backdated to the 1^st of March, which covered 80% of the wages of staff while they are kept on payroll, but are unable to work.

This was offered through HMRC to businesses of all sizes and as of February 2021 continues to be offered, having been extended to the 30^th of April 2021 from the initial end date of October 2020 to December 2020, then to March 2021 and finally April 2021. In August, the Government stopped supporting National Insurance Contributions as well as minimum pension costs.

• The office for budget responsibility estimated in its November 2020 report (before the extension to April) “that the total gross cost in 2020-21 for CJRS will be £62.5 billion”.²⁶

• As of the 13^th December, £46.4 billion worth of claims have been made

• With 9.9 million total jobs furloughed from a total of 1.2 million employers²⁷

• 31,100 jobs are estimated to have been furloughed in Cambridgeshire, representing roughly 4.8% of the local population compared to roughly 5.7% of the population nationally²⁸

The scheme has been generally been seen as an effective, if unprecedented measure to support businesses during COVID-19, the institute for Government for example noting that “over two-thirds of employees who have been supported by the CJRS have now left the scheme and returned to work” which it considers as evidence that “the policy achieved its intent: maintaining employer-employee links through the worst of the crisis, allowing businesses to bring workers back relatively easily as economic conditions improved.”²⁹

However, despite many of the successes of the scheme, some critics have claimed it has not been enough to help workers back into work and protect jobs well enough, pointing to delays in extending the scheme and its “one-size fits all” approach, as well as a substantial increase in redundancies from July 2020 by an estimated 242,000, including 29,000 in the east.^{30 31}

This scheme is closely related to the self-employed income support scheme which has been criticised for excluding support for the self-employed, for example those who do not have tax documents backdated far enough, with Labour for instance claiming millions have been excluded.³²

Eat out to help out

The eat out to help out scheme was announced by the government on the 8^th of July and ran through the 3^rd to the 31^st of August 2020, providing diners with a 50% discount of up to £10 subsidised by the Government in an effort to support the hospitality sector, along with a reduction in VAT for hospitality and tourism from 20% to 5%.

This was among a backdrop of a dramatic fall in footfall in pubs and restaurants where many businesses in the industry were letting go of staff while consumers were cautious of eating out.

However, the actual effectiveness of the scheme has been called into question – While UKHospitality described it as a “shot in the arm for consumer confidence in eating and drinking out of home” and it bringing 200,000 workers were bought out of furlough, many questioned whether this demand could be sustained³³, while the British Chambers of Commerce commented that it only had a “fairly marginal” impact on the sector.³⁴

In addition, there have been concerns the scheme drove a rise in infections, as shown in a University of Warwick paper that linked a rise in infections in areas that saw a high take up of the scheme that fell after the scheme ended. It adds that “A back of the envelope calculation suggests that the program is accountable for between 8 to 17 percent of all new local infection clusters during that time period.”³⁵

Cambridgeshire saw 892,000 meals claimed under the scheme in total, representing ~1.37 meals per person, while the UK as a whole saw 106,533,154 meals claimed for, representing ~1.60 meals per person.³⁶

Coronavirus Business Interruption Loan Scheme

The business interruption loan scheme was a level of financial support provided by the Government that provided loans of up to £5 million, guaranteeing 80% to the lender, and paying any interest and fees for the first 12 months.³⁷

It was supplemented by two other loan schemes, firstly the Large Business Interruption Loan Scheme, which provides a similar level of support but without coverage of interest and fees as long as they can show that “the loan will enable them to trade out of any short-term to medium-term difficulty resulting from coronavirus”.³⁸

Additionally, the Government provided the Bounce Back Loan Scheme which provided smaller loans of between £2,000 and up to 25% of their turnover up to £50,000. The Government then guarantees the whole loan and covers interest and fees for the first 12 months after which point the interest rate is set to 2.5%.³⁹

Local Restrictions Support Grant

These were grants given by local councils of £667 or £1,000 for each 14-day period businesses we closed due to local restrictions depending on their normal turnover.

Cambridgeshire’s buisness landscape

Graphs above show “Number of VAT and/or PAYE based enterprises in districts, counties and unitary authorities within region and country by broad industry group” data from the ONS.⁴⁰

As shown, Cambridgeshire’s business landscape is not all that dissimilar to that of the UK’s as a whole, however “22% of Cambridgeshire residents work in a professional occupation, compared to 18% nationally”⁴¹.

That being said, Cambridgeshire is often described as an economic centre for technology and science companies, leading to the so-called “silicon fen” area outside Cambridge, taking its name from the “Silicon Valley” area of California, being home to chip designer ARM and pharmaceutical giant AstraZeneca.⁴² These industries are therefore relatively shielded from many of the impacts of Coronavirus on business.