By Brendan Abbott, Head of Retail, Experian
The current official unemployment rate is currently around 4%. When we have supplemented official figures with additional factors, we have calculated the rate to sit closer to 6%. Through further modelling, we believe that the eventual unemployment rate will rise to near 9%.
To understand the likely scale and duration of the economic impact of Covid-19 on a regional and local level, there are a number of factors to consider. At Experian, by using our local area data, we have created an index that gives confidence in helping you to identify the areas of the country which are going to be most resilient to the recovery phase in our delayed reshaped recovery giving you confidence in your business decisions.
A key contributing factor is the sectoral make-up of each area. Retail, Accommodation, and Transport and Recreation are all likely to endure the greatest losses in the short term, while Construction and Manufacturing are set to suffer from investment projects being scaled back. The least exposed sectors include Health and Pharmaceuticals, Telecoms, Computing and Information Services, and Agriculture and Food Production.
The occupation mix of an area is also crucial. Working patterns across the UK have changed dramatically and for some occupations, working from home is now a viable arrangement, while for others it remains impossible. When looking at the occupation mix across the UK, we can also see who is vulnerable based on their ability for remote working.
Those in the younger and retired demographics have been disproportionately impacted, suggesting that the age composition of the population could provide an indication of an area’s vulnerability.
By mid-June 9.1 million British workers had been still furloughed – this continued to grow to 9.5 million by July 19th 2020. A significant proportion of this cohort are facing genuine uncertainty over the future of their jobs and earnings with many people who are still furloughed will be coming back into employment. Therefore having an view of which parts of the country are more is most exposed to furlough is a key factor.
The proportion of people who are now in unemployment highlights the pockets of vulnerability across local areas.
Identifying areas of resilience
Based on factors such as sectoral makeup, occupation mix, age composition, furlough take-up, unemployment and growth outlook, Experian has constructed a local index that aims to benchmark areas in terms of confidence and recovery profiles.
Using the index, local areas we deem most resilient in the next 18 months are:
Reigate and Banstead
Windsor and Maidenhead
Basingstoke and Deane
All of these are located in the greater South East. South Cambridgeshire, with its large public-sector presence, fast-growing business services base, growing working-age population, resilient housing market and high proportion of skilled workers is expected to weather the economic storm better than most other areas.
In contrast, areas dependent on tourism (such as Cornwall, Devon and Great Yarmouth to name a few), those exposed to vulnerable sectors (Sunderland with its reliance on the automotive sector) or those with higher levels of Covid-19 infections compare unfavourably in the league tables. Of the UK’s largest cities, Birmingham, has the weakest performance.
Edinburgh still performs relatively well in the rankings due to its healthy sector mix and large public sector employment.
Using this information can give you a greater understanding of where you might need to provide more support to customers – and where you can identify areas for growth.
Our chief economist, Chaudhri, Mohammed, shares a quick overview of the tool in our 10 minute webinar. https://bcove.video/2QJrZ83