While meteorologists predict the Covid-19 crisis will trigger some of the highest unemployment rates of the past few decades, business expert Professor Richard Scase explains why Kent she’s in a better position to resist the storm …
With the end of the blockade, what effect will it have on Kent’s economy for the rest of this year? There are reasons to be happy: the recovery could be faster and bigger than many observers expect.
A flow of economic forecasts foresees a drop in national GDP for the rest of 2020. The Organization for Economic Cooperation and Development says that the UK’s slump will be 12%, the highest in Europe, compared to 7% in Germany and 6% in Sweden without blockade. In China there will be a drop of 2% and in the United States of 7%.
UK unemployment forecasts for the rest of the year are dire. The estimate is that the workforce will be out of work by December 14 -. Putting the figure more clearly, it equates to five million men and women. This is almost double the outbreak of the 2008 financial crisis and about 50% more than the peaks of the 70s and 80s. It will be the biggest rise in the unemployment rate since the 1920s.
But will the economy of Kent reverse the trend? There are good reasons to predict it. It is a county of adaptive young men and women who are flexible in their work practices. They are willing to move from job to job and move from place to place when job opportunities change. They are enterprising and entrepreneurial, more than workers in many other regions of the country. They are more likely to create their own businesses, which is why Kent has such a small and ever-changing industry that it constantly adapts to changing market needs.
The blockade in Kent has led to changes in household budget models. Families were forced not to spend. A large consumer sector now has the money to splash out. During the blockade they had to cancel holidays abroad and postpone the purchase of goods and services that they would normally purchase during the spring months.
This is important for the state of the economy of Kent in the coming months. Families are now “freed” to spend again. Now they can buy goods and services that they have had to postpone.
A simple example are garden centers. They were among the first to have restrictions lifted. They have since experienced long lines and a surge in customer spending, with people making up for what they were unable to buy for their homes and gardens during the blockade.
For many of these traders, their turnover over the past two weeks has made up for the loss of sales during the blocking months.
It is possible to see similar patterns appearing in other sectors of the local economy in the coming weeks and postponed haircuts, buying clothes for the summer months, birthday celebrations and other family celebrations can now return as part of normal family spending.
During the blockade, families were forced to postpone the purchase of “big-ticket” items such as furniture, textiles and renovation projects. It was not possible to make semi-annual or three-year commercial exchanges of vehicles until the blockade was simplified. Now everything can be revived.
Kent is heavily dependent on consumer spending. If this pent-up demand occurs, there is reason to expect this to lead to a rapid economic recovery, faster than in most other parts of the country. What will be the key in this awakening will be the respect for measures of social estrangement.
These will be crucial for the revitalization of the retail, leisure and hospitality sectors. The announced reduction from two meters to one meter of social distance will have a significant impact on commercial activity. Evidence from other countries suggests that this reduction increases the level of negotiation up to 80% of normal activity.
This is the difference between life and death for a large number of shopkeepers, restaurant owners and other small businesses. These are the businesses that form the backbone of the Kent economy. The proposed two to one meter social reduction should prevent unemployment for literally thousands of men and women in the county’s small business economy.
The challenge is to enforce the rules of social distance of one meter in pubs and bars that are fundamental for the hospitality sector. Will the staff be strict enough to enforce the rules? If not, will there be a second wave of coronaviruses in the fall with another government blockade?
It would really be an economic disaster, whether or not to repress consumer demand.
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