Supporting the recovery of hard-hit sectors

Published 19/05/2021   |   Last Updated 19/05/2021   |   Reading Time minutes

 

This article is part of our 'What's next? Key issues for the Sixth Senedd' collection.

The economic impacts of the pandemic have not been shared equally across all parts of the economy. With many sectors still facing significant challenges, what can the new Welsh Government do to support them?

The restrictions needed to curb the spread of COVID-19 have forced changes to the way we live, work, socialise and spend our free time. With huge numbers of businesses forced to close for long periods and others facing significant loss of trade, government has stepped in to furlough staff and attempt to support whole sections of the economy in a way never seen before.

But while this level of government support has no doubt had a significant positive effect in safeguarding jobs, the effects of the past year and the potential need for continued restrictions on some activities are likely to have a combined impact that will be felt for years to come. And just like the health impacts of COVID-19 have affected different groups of people in different ways, the economic impacts have not been shared equally across all sectors.

Which sectors have been hit hardest by the pandemic?

Some of the hardest hit sectors are those that depend on members of the public mixing together, indoors, in close proximity. All of which are activities that have been either severely restricted or prohibited in law for much of the past year. For example, the effects of these restrictions have fallen heavily on businesses and organisations in the culture sector (such as theatres and live music venues) and those in the non-essential retail, hospitality, leisure and tourism (NERHLT) sectors.

During lockdowns Welsh retailers have been losing £100 million a week in sales. While overall, last year saw the worst ever retail sales figures with shopper footfall decreasing by over 50%.

In 2020 the hospitality sector suffered a drop in sales of over 50% across the UK. The latest available figures for Wales show economic output in the ‘accommodation and food service activities’ sector fell by 76.3% in Quarter 2 (April to June) 2020 compared to the previous quarter.

Recent research found that around a quarter of businesses in the tourism sector in Wales lost over 80% of their normal revenue in 2020, while over half of the businesses in the sector have seen revenues fall by more than 60%. Highlighting the immense challenges faced by the sector, the research reports that only 43% of tourism businesses expect to survive for longer than the next six months.

Since March 2020, artistic performances with an audience have been prohibited in Wales. This is in contrast to England and many other European nations who have, at times, allowed performances to take place.

Along with restrictions that have struck at the heart of the way many cultural activities usually operate, UK Government employment support schemes have often not reflected the employment structure of the sector. Around half of the 80,000 creative workers in Wales are freelancers and at times these individuals have fallen through the gaps in support. A point recognised by the previous Welsh Government via the establishment of a Freelancer Fund.

How did the last Welsh Government support these sectors?

Since the start of the pandemic the Welsh Government has put together a support package for businesses worth more than £2 billion. This is on top of the vast sums that have come from the UK Government direct to businesses and individuals in Wales via the furlough and self-employment income support schemes.

Towards the end of the Fifth Senedd the previous Welsh Government’s specific support for NERHLT businesses and those in the supply chain, centred on successive rounds of grants to help businesses that had closed or been materially impacted as a result of lockdown restrictions.

In March 2021, the previous Welsh Government also announced an extension to the existing business rates holiday for the retail, leisure and hospitality sector so that more than 70,000 businesses in those sectors will continue to pay no rates at all in 2021-22.

In July 2020, the previous Welsh Government announced the creation of a Cultural Recovery Fund to provide essential support to the sector. By November 2020 over £63 million had been allocated to the Fund. And by March 2021 the Freelancer Fund had provided £18 million of support to 3,500 creative sector freelancers.

In March 2021, the Fifth Senedd’s Culture, Welsh Language and Communications (CWLC) Committee heard that the Welsh Government was “hoping to receive £24 million in consequential funding” following the UK Government’s announcement of additional support for theatres, museums and other cultural organisations in England.

The Committee also heard from Welsh Government officials that the additional funding announced by the UK Government “follows the road map” that it has set out for emerging from the current lockdown in England.

This raises an important question, that also applies to other sectors. That is, if the new Welsh Government follows a slightly different road map out of lockdown to that of the UK Government, and chooses to re-open some sectors at a different pace to England, how will this affect the level of financial support they will be able to provide?

Early decisions needed from the new Welsh Government

After considering what Welsh Government action will be needed to support economic recovery, the Fifth Senedd’s Economy, Infrastructure and Skills (EIS) Committee concluded that businesses which have felt the worst effects of the pandemic will need a “stronger and longer pandemic exit strategy than the rest of the economy”.

Similarly the Welsh Retail Consortium has stressed that the new Welsh Government “will need to make brave and bold choices” to help the retail sector “weather the storm”.

In policy terms, phrases like ‘brave and bold’ and ‘stronger and longer’ usually translate in practice to mean one thing: ‘expensive’. Other sectors, such as aerospace, manufacturing and steel, will no doubt also be looking for the new Welsh Government to bring forward interventions in the coming year that could be described in a similar way.

The new Welsh Government will have difficult choices to make in terms of where it prioritises any future support. The previous Welsh Government took 18 months after the last election before it set out its new approach to business support. The new Welsh Government however won’t have the same luxury of time. It will need to make these decisions very early on - pretty much on day one of taking office.


Article by Ben Stokes, Senedd Research, Welsh Parliament