East Midlands Economic Data Repository
The Economic Impact of the Coronavirus Pandemic for Leicester

The Economic Impact of the Coronavirus Pandemic for Leicester

This paper, published in June 2020, analyses the likely effect of the coronavirus pandemic on the Leicester economy. It also make some recommendations for policy making at a local level. The full paper is available on SSRN.

The coronavirus pandemic represents an unprecedented shock to the economy and is likely to have profound implications for Leicester. We estimate that only around a third to a half of employment in the city can continue as normal during lockdown conditions. And around a third of employment is in highly vulnerable sectors. There will inevitably be, therefore, a large rise in unemployment in the city, leading to higher levels of poverty. The effect is likely to be particularly pronounced in the young who are disproportionally employed in vulnerable sectors.

Our policy recommendations focus on supporting the economy through inclusive growth. At a time of high unemployment, when much of the focus will be on getting people into work, it is perhaps more important than ever to remind ourselves that any job is not necessarily better than no job. Some have argued that the coronavirus crisis will provide an opportunity to ‘press the reset button’ in terms of employers’ responsibilities to their employees, the quality of work, and the wider community. However, we fear that another outcome, particularly in a low wage economy like Leicester, could be a ‘race to the bottom’ in which some firms will seek to survive by cutting costs. The practical implications of that might include a reduction in training, including apprenticeships for young people, increased use of zero-hour contracts, agency work and casual labour, as well as laying off staff.

There can be no denying that businesses are facing tough decisions about operations and staffing during lockdown. Government initiatives such as the Coronavirus Job Retention Scheme, Self-Employment Income Support Scheme and Coronavirus Business Interruption Loan Scheme offer options, but still leave many gaps. Ultimately, however, the way out of this crisis is not going to come from a race to the bottom. Businesses, particularly large and medium, need to help employees and the local economy wherever possible. It is especially vital to support the young. The Education and
Skills Funding Agency (ESFA), for example, is implementing new measures towards enabling apprenticeships to continue and complete or to break and resume later as and when possible. One concern would that some employers will look to recoup the costs of the Apprenticeship Levy by moving more of their adult training into apprenticeships, which would increase problems of ‘deadweight’ as well as reduce opportunities for young people.

It is vital that policy at a national and regional level puts in place positive measures to protect the future of young people so that they avoid the well-documented ‘scarring’ effects of unemployment. The new environment also raises key questions as to whether more employers will embrace a corporate social responsibility agenda, as part of a new ‘social contract’, and look to be part of the solution to these challenges. If ever there was a time to test these waters, now is such a time.