Entire industries have seen revenues disappear overnight, and companies lucky enough to have reserves are tapping into them to cover basic salary costs. But this time, things look even worse.
Global demand for goods and services has collapsed, and some commentators expect the coronavirus crash to dwarf the last recession. The Government has announced significant nationwide measures to offset the negative impact of the shock – but it’s crucial that leaders across Yorkshire produce tailored plans to protect our local economies.
Across the Sheffield City Region (SCR), protecting smaller firms is key. Twelve per cent of the region’s businesses are small and medium-sized companies with fewer than 250 employees, and 88 per cent are microbusinesses with fewer than nine workers. Retail, construction, the creative sector and food and drink make up the vast majority of local firms.
In 2019, salaried employees account for 65 per cent of the total employees in the region – so a majority should benefit from the Government’s plan to cover 80 per cent of employees’ wages. But companies with large overheads, typical of the hospitality industry, are still likely to struggle.
For the eight per cent of SCR workers who are self-employed, things are even more uncertain. The Government finally produced a package of support last week, but it will be three months before they get the help they desperately need.
Even if they can get by until June with no income, there are serious questions about how many in our region will be eligible to make a claim. Will those working for companies but labelled as self-employed get support – or the creatives who contribute so much to our region’s economy? It’s crucial councils identify workers and businesses who are falling through the cracks of the support system and create a safety net that will help them navigate these uncharted waters.
This is about keeping industries afloat as well as stabilizing the local economy by providing the confidence it needs. The safety net is where civil society and public bodies can work together.
Recent crowdfunding initiatives involving large companies, charities and public bodies show that projects with clear goals and well-defined beneficiaries can help organisations to achieve their goals. On a local level, the Sheffield Scanner appeal raised £2m from the public for a new MRI-PET scanner to enhance medical research.
But, crucially, offsetting the negative impact of the shock in the short-term is only half the job. The other half is to understand its implications for our long-term growth prospects. The pandemic is breaking the international supply chains our economy relies on, as foreign markets and suppliers partially shut down to reduce the spread of the virus. An economic strategy based on exports may not be viable for our region as other countries cut their imports.
So, our local businesses will need to face the reality of a less globalised world, and learn to strike a balance between local and international, by reassessing their supply chains and markets to protect themselves in the case of a second outbreak.
If domestic markets become more important in the future, some industries could even stand to benefit. The service sector has huge potential for future growth – which is why it’s so important for the Government to help the likes of restaurants, pubs, estate agents and even IT firms through this crisis.
Advanced manufacturing as well as healthcare technologies, which Sheffield City Region really excels in, will also have opportunities for growth. In fact, we can expect that demand for advanced manufacturing products (such as ventilators) and healthcare technologies will last longer than just the duration of the current outbreak.
To be able to reap the opportunities that these sectors offer to the region, it is important to focus now on the skills that these sectors need for their future growth. That means local authorities strengthening and revamping plans to upskill local workers who might otherwise be facing unemployment.
Even more challenging is the future of city and town centres across Yorkshire. Retailers have been struggling and we should not be surprised if the current shock accelerates the rate at which shops and chains will close down. Councils need to manage this process carefully, reimagining our city and town centres to create jobs and make them attractive to the high-skill workforce we want to build in our region to fast-track future growth.
Those in power need to act now to protect our local economy and create a strategy for its future – not just to make sure it survives, but to help Yorkshire to come out of this crisis stronger by seizing the opportunities it presents.
Vania Sena is a professor of entrepreneurship at the University of Sheffield’s management school.
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