Regional impacts of the coronavirus pandemic

There has already been a great deal of commentary about the impact that the COVID-19 pandemic could have on jobs and businesses.

These impacts are already significant. And whilst the root cause of the economic ‘shock’ will be temporary, some of the consequences for our economy could be long-lasting.

Whilst, quite rightly, public health is the primary concern for policy makers right now, we have also seen wide ranging economic measures from the Chancellor to act as a bridge for individuals and businesses to get through this difficult time.  The aim of these measures is to not only support families and businesses in the short-term, but to invest in the long-term future of the economy for once we are through this.

However, it is also likely that the impacts will not be evenly spread across different sectors of the economy or different types of employment. This will mean that particular areas of Scotland, where particular industries or ways of working dominate, may be more vulnerable to experiencing long-term impacts.

In this blog, we explore the potential differential regional impacts for communities in Scotland.

Tourism related activity

One of the most heavily impacted sectors is the hospitality industry, given the government advice from Monday last week not to go to pubs and restaurants, and the subsequent closure of all premises on Friday night.

On top of this, in recent days we’ve seen further restrictions on travel to rural areas for fear of overwhelming local health services should the virus spread.

As you might expect, the percentage of the local workforce employed in tourism related sectors (such as accommodation, food and leisure activities) varies across the country – with the largest percentage in Argyll and Bute, Scotland’s largest cities and the Highlands & Islands.

Chart 1: Percentage of employment in tourism related sectors, 2018

chart 1

Source: Scottish Government Growth Sector Database

What is also important to appreciate is that ‘Accommodation and Food’ Service businesses in rural areas tend to be smaller companies (small guest houses, cafes, tour operators etc), and therefore may be less resilient to a disruption in their activity. The more rural an area, the more dominant smaller operators are – see Chart 2.

Chart 2: Percentage of employment in accommodation and food services by size of business and rurality, 2018

chart 2

Source: Scottish Government Businesses in Scotland

We have already seen a range of measures to support tourism related businesses across the country. But the disproportionate impact upon Scotland’s rural communities – including their ability to bounce-back in the future – suggests that further targeted geographical measures may be needed in the future.

Self-Employment

Another regional aspect of all this is the type of businesses that operate in different parts of the country.

On Friday, the Chancellor outlined a range of measures to support businesses to continue to employ people, with support for 80% of wages for a period of time.

However, there have been fewer measures announced to support the self-employed, with (to date) the focus being on the provision of Universal Credit to support people impacted.

This issue will again impact differentially in different parts of Scotland. The chart below shows again that it is rural areas of Scotland which are most exposed: over a fifth of workers in Dumfries and Galloway and Argyll and Bute are self-employed.

Chart 3: Percentage of employment classed as self-employment, 2018

chart 3

Source: Scottish Government Regional Employment Patterns

 

Conclusion

Rural communities are particularly exposed to the economic impacts of the measures put in place to reduce the spread of the coronavirus. Smaller business, in impacted sectors, and greater prevalence of self-employment mean that the impacts may be larger in these communities.

There are already long-term challenges impacting on the outlook for rural areas in Scotland, such as an ageing population and heavy dependence on a relatively small number of industries. We will all be affected by the impact of the pandemic. But as this crisis unwinds, appreciating and responding to differences across the country will be crucial.

Authors

The Fraser of Allander Institute (FAI) is a leading economy research institute based in the Department of Economics at the University of Strathclyde, Glasgow.

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