The full scale of the economic impact of the Covid crisis upon the United Kingdom is still difficult to fully grasp. In the second quarter of 2020, the UK economy contracted by over 20%. For comparison, the worst quarterly reduction in GDP during the aftermath of the 2008 financial crash in the UK was 2.2%, in Q4 of 2008 itself. Even the great depression is of a different magnitude to what we’re currently experiencing – in 1931, the peak of the depression in the UK, the British economy contracted by 5% across the year. The scale of the economic contraction in the UK as the result of the Covid crisis, as in many countries across the globe, is on a whole different scale to what we’ve ever seen before.
To drill down a little further, the impact thus far has fallen hardest on small to medium sized enterprises, and correspondingly, the owners and operators of smaller businesses and their employees.
Percentage of companies currently trading, paused trading or ceased trading as compared to the start of the Covid crisis:
|Size of company (by no of employees)||Currently trading||Paused trading||Ceased trading|
|Less than 10||82.5%||14.4%||3.1%|
|10 – 49||95.7%||3.6%||0.7%|
|50 – 99||96.5%||2.7%||0.8%|
|100 – 249||98.3%||1.3%||0.4%|
In terms of how this has impacted employment, overall the picture is misleadingly comforting for the UK. The unemployment rate countrywide is 4.1% as of July 2020, which is astonishingly low, all things considering . Yes, furlough would have helped keep this number lower than it might have been, but still, 4% is healthier than you might imagine. The figures are impressive, so long as you dig down only generally and nationwide: unemployment was 3.85% at the end of 2019, so the impact of Covid so far on total unemployment is only to increase it by 0.3%. 76.5% of all people between 16 and 64 in the UK are in employment, which is actually 0.4% higher than this time last year.
The problem here comes when you drill down by age. For 18 to 24 year olds, employment decreased by 146,000 in Q2 of 2020, a record decrease for this age group in a single quarter. Employment numbers by age group is steady for almost every group apart from those under 25. This has me worried that this generation of young people are bearing the brunt of the Covid crisis economic fallout without this even being widely known, never mind something being done to ameliorate the problem.
We need small businesses and young people to be at the forefront of reversing the economic crisis – and if we think about this in sustainability terms, it becomes even more important. It will be small businesses in emerging sectors who will be the innovators in terms of making sure the economic recovery from the Covid crisis is green and sustainable; that 18 to 24 year old demographic will be the ones who in the near future will have to lead the charge toward net zero in the decades ahead.
This is a big problem that isn’t being talked about enough. How can we affect a green Covid recovery that helps small businesses as well as getting more young people back into employment? Project Cygnus is looking at ways to bring this all together.