While a recovery is under way, limitations, ambiguity and complexity as a result of the pandemic and the war in Ukraine – which is also driving higher airline costs – might still prevent some passengers from travelling abroad this year.

A priority for policy-makers should now be to restore travel connections, to protect an industry worth 11.3 million jobs. Prior to the pandemic, the sector contributed almost $9.2 trillion (£7.6 million) to the global economy.

The global tourism industry, as it recovers from the effects of Covid-19, might have contributed $8.6 trillion (£7.1 trillion) to the world economy this year, according to data from the World Travel and Tourist Council (WTTC). That would be just 6% less than before the pandemic struck.

This forecast came just before the Russian invasion of Ukraine in February 2022 and was contingent on the vaccine and booster rollout continuing at current rates and restrictions to international travel being eased.

Currently, the recovery of the travel industry risks being delayed by 12-24 months to 2024 because of factors such as persistent inflation, high energy prices, labour shortages at airports, and lockdowns in China. The partial rebound this year is being driven mainly by the lifting of travel restrictions in many locations. Starting from June 2022, the United Nations World Tourism Organization (UNWTO) reported that there were no Covid-19-related restrictions in place in 45 locations, 31 of which are in Europe.

As more places reduce or remove travel restrictions, and the demand pent up during the pandemic is released, the expectation is that there will be a steady recovery, supported by the summer holiday season in the Northern hemisphere.

Before the war, international travel increased by 182% during the first three months of 2022, compared with the same period last year, according to the most recent UNWTO World Tourism Barometer.

Around 60% of international arrivals in the first three months of this year were registered in March alone, indicating that the recovery in the tourism sector was gaining momentum.

According to the same UNWTO data, the first quarter of 2022 saw over four times as many foreign arrivals (+280%) in Europe as in the first quarter of 2021. This increase was mostly due to high intra-regional demand. Arrivals in the Americas increased by 117% in the same three months.

Despite these encouraging signs, the global economy is projected to falter in the second half of 2022. Several forecasters have recently revised trade and GDP figures downward worldwide.

The war in Ukraine represents a threat to the recovery of the global economy and to the tourism industry itself. Besides causing travel problems and increasing country-risk in Europe, the conflict is also driving up already high oil prices and inflation. It is also causing further disruption to global supply chains.

This may suppress demand through higher costs of travel and accommodation. Indeed, with expanding operations and increasing fuel prices, travel costs will go up in 2022. Prices for kerosene surged to an average of $74.50 (£61.70) per barrel in 2021, and it is anticipated that they will rise to $77.80 (£64.41) per barrel in 2022. As a result, international tourism remains 61% below 2019 levels, based on the latest available (June) UNWTO data. In particular:

• Arrivals in the Americas and Europe are still 46% and 43% below pre-pandemic levels, respectively.

• Although there was significant growth in the Middle East (+132%) and Africa (+96%) in the first quarter of 2022 compared with the same quarter last year, arrivals were still 59% and 61% below 2019 levels, respectively.

• Asia and the Pacific saw the smallest growth among international destinations, remaining 93% lower than in 2019. This is largely because China has still not completely re-opened to international tourism, as well as further virus flare-ups that have required localised lockdowns.

How has international travel been affected by Covid-19?

International tourist arrivals

Between January and October 2020, the pandemic triggered a 70% decline in international tourist arrivals compared with the same period in 2019. This was caused mainly by people not wanting to spend money on flights or not being allowed to fly due to government restrictions.

Although the sector is recovering, tourist arrivals were still below pre-pandemic levels between January and March 2022 (see Figure 1).

Figure 1: Change in international tourist arrivals since 2019 (year-on-year percentage change)

Source: UN World Trade Organization (UNWTO)

As demand in Europe started to rebound, the industry struggled to keep up, particularly in the UK, as airports could not hire enough staff to meet passenger traffic that was higher than expected. While the UK is currently facing a tight labour market with more vacancies than job-seekers in the service sector, the travel industry has been hit particularly hard due to the high number of layoffs during the pandemic.

Number of commercial flights

One significant effect of the removal of travel restrictions has been the increase in the number of commercial flights in 2022. By the end of 2020, commercial flights were down 41.7% compared with 2019, having plunged initially by 74%, according to Flightradar24.

During the first seven months of 2022, flight traffic continued to follow seasonal trends in line with a gradual recovery from the previous years, although commercial flights in July remained about 16% below 2019 levels (see Figure 2). This is higher than the air traffic seen in July 2021, where commercial flights were about 34% lower than pre-pandemic levels.

Figure 2: Number of commercial flights (seven-day moving average)

Source: Flightradar24

Hotel occupancy rates

Hotel occupancy rates (the percentage of occupied rooms at any given time compared to the total number of available rooms) have been recovering steadily. The proportion of people staying in hotels fell dramatically across all regions in 2020, with an average drop of nearly 50%.

Before the war in Ukraine, hotel occupancy rates and room revenue were projected to approach 2019 levels in 2022. Occupancy was projected to hit 63.4%, exceeding the 44% reached in 2020.

As of 11 April 2022, the UK's rolling 28-day occupancy was 87% of what it was in 2019. The next-highest occupancy indexes were recorded by Poland (84.5%) and Ireland (81.3%), according to the STR. In the former case, the increase in occupancy has been, in part, the result of housing refugees during the early stages of the invasion of Ukraine.

Industry profits

After a $51.8 billion (£42.9 billion) loss in 2021, net industry losses are predicted to fall to $11.6 billion (£9.6 billion) in 2022. But while the peak of the crisis has passed, the net industry loss is over $200 billion (£166 billion) from 2020 to 2022 (see Table 1).

Table 1: Travel industry demand, capacity and profits

Source: International Air Transport Association (IATA)

The only region registering positive net profits is North America. Overall, the industry’s capacity and demand remain below pre-pandemic levels, with the highest losses recorded in Africa, the Middle East and the Asia-Pacific region – the last mainly driven by China’s slowdown.

Is a recovery under way?

Revenues

In 2022, revenues from international travel increased by 4% in real terms from 2020. The strongest outcomes were seen in the Middle East and Europe, where earnings increased to almost 50% of pre-pandemic levels. The increase follows a drop of about $1 trillion (£828 billion) in revenue from foreign travel in 2021, on top of the trillion lost during the first year of the pandemic.

Confidence

As long as the virus is contained and destinations continue to relax or lift travel restrictions, 83% of tourism professionals predict better prospects for 2022 compared with 2021. But the prolonged closure of a few significant outbound markets, namely in Asia and the Pacific, as well as the uncertainty brought on by the war, might postpone a full recovery of global tourism this year.

Just under half of UNWTO experts (48%) now see a potential return of international arrivals to 2019 levels next year, while a slightly smaller percentage suggest this could happen in 2024 or later (44%).

Passengers

The rebound in air travel intensified with the start of the summer holiday season in the Northern hemisphere. Compared with May last year, total traffic increased by 83.1%, driven mainly by international traffic, although remaining about 31.3% below pre-pandemic levels. Compared with May 2021, international traffic increased by 325.8% in May this year. In particular, between May 2021 and a year later:

• Traffic on Asia-Pacific airlines increased 453.3%. While the majority of travel restrictions in Asia are being lifted, the main exception remains China. Here, domestic travel plunged by 73.2% from the previous year, as a result of its zero-Covid-19 policy.

• Traffic for Europe increased by 412.3%, although uncertainty and high energy costs due to the war in Ukraine will have a direct influence on certain locations.

• Middle Eastern airlines saw traffic increase by 317.2%.

• Traffic for North America increased by 203.4%.

• Latin American traffic increased 180.5%, with some routes, such as those to and from Europe and North America, performing better than expected.

Drivers of the international recovery

Global demand

Global demand is anticipated to increase to 61% of pre-crisis levels in 2022 – 20 percentage points higher than in 2021. The recovery is being driven by domestic demand, with most countries now imposing fewer travel restrictions.

One of the main components of the global demand for travel will be pent-up savings. But persistently higher inflation globally is resulting in a sizeable hit to household spending in real terms, as incomes fail to keep up with prices. In the UK, the number of households that have run down their savings is set to double by 2024, according to research by the National Institute of Economic and Social Research (NIESR). This suggests that savings-driven demand for travel might be limited or absent for some income brackets due to soaring bills.

Overall, international demand is recovering but at a slower rate than previously forecast. IATA expects that by 2022, global demand for travel will be only 44% of what it was pre-pandemic.

Vaccinations

With a few exceptions, rapid progress in vaccine administration – particularly among advanced economies – has resulted in a gradual re-opening of borders. It will take longer for tourism to be revived fully, particularly in regions where vaccine distribution has been slower, such as in low- and lower-middle income countries. This will also be the case where vaccine efficacy is lower against new variants (such as certain developed economies in the Asia-Pacific region, including China).

What else do we need to know?

The effects of Covid-19 on the travel industry provides an opportunity to reconsider the future of tourism and accelerate longstanding priorities such as addressing climate change and promoting a renewable energy transition (Organisation for Economic Cooperation and Development, OECD, 2021).

Governments must encourage the structural changes required to transform the sector in line with future health and environmental challenges. This should include implementing digital solutions that make it safer and simpler for consumers to travel, such as using artificial intelligence and data-sharing, implementing enhanced harmonised biometric standards for identity verification and travel eligibility, as well as prioritising digital border management through e-visas and e-gates.

At the same time, international cooperation and multilateral agreements should continue to ensure that COVAX-supplied Covishield vaccines are accessible evenly and widely , which will help to avoid double standards that risk penalising low- and low-middle-income countries even further.

In response to the pandemic, the G20 in Rome has issues several recommendations for the future of tourism. These are based around seven interrelated policy areas: safe mobility; crisis management; resilience; inclusiveness; green transformation; digital transition; and investment and infrastructure. Addressing these will require international organisations to use the full extent of their resources to restore travellers’ confidence, while helping the tourism industry to adapt and survive.

Where can I find out more?

• G20 Rome guidelines for the future of tourism.
• Global Economic Outlook – Fraying at the Edges: NIESR’s Global Economic Outlook No. 361, Summer 2022.
• Organisation for Economic Cooperation and Development (OECD): Preparing the tourism workforce for the digital future.
• UNWTO World Tourism Barometer: May 2022.

Who are experts on this question?

• Corrado Macchiarelli (NIESR)
• David Roberts (ONS)
• Dawn Holland (NIESR)
• Donald Houston (University of Portsmouth)
• Simeon Djankov (LSE)

Author: Corrado Macchiarelli

Editor's note: This is an update of an Economics Observatory article originally published on 22 April 2021.

Picture by Heychli on iStock

The post Update: How is Covid-19 affecting international travel and tourism? appeared first on Economics Observatory.

The events of recent weeks have led to comparisons with the 1970s when the country saw nationwide strikes that resulted in millions of lost working days (Office for National Statistics, ONS). But is this an accurate parallel to draw?

Current disputes draw on comparable problems – high prices and stagnant wages – to the strikes in the 1970s and similar groups of workers are involved. False narratives of the 1970s, articulated by current critics of trade unions, distort understanding of the present problems. Unions then and now are wrongly portrayed as greedily advancing selfish pay claims that cause inflation.

The current disputes

The current industrial action mainly involves trade union members employed in delivering public services. They work for councils and publicly owned bodies, for example, in healthcare. Others are in private companies that provide services that are not open to market competition, such as the railways.

These workers operate within the ‘foundational economy’, which is responsible for maintaining the vital infrastructure and operational elements of everyday life. Without their work, the economic and social wheels of the country grind to a halt.

The gender, ethnic and age diversity of these workers varies from some existing stereotypes of strikers as relatively privileged older, white men. This socially diverse profile is reinforced when we consider that most employees in the foundational economy were identified as key workers during the pandemic. The recognition of these jobs has perhaps strengthened expectations of future reward that have not been fulfilled.

The immediate cause of the current disputes is the rising cost of living, particularly related to increasing food and energy prices. The doubling of domestic gas and electricity prices since the start of 2022 was accompanied by an increase in petrol prices of over 25% from January to late June. Further price escalation is almost certain. Inflation in the UK, at 9.1%, is at its highest rate for 40 years. Analysis of household expenditure estimates by the National Institute of Economic and Social Research (NIESR) indicates that household bills now exceed income in 60% of UK homes.

As a result, it can be argued that strikes in pursuit of wage claims are not the drivers of inflation, as some UK government ministers have claimed. But rather that they are a collective response to the broken relationship between employment and economic security.

In-work poverty – defined as when an individual’s income, after housing costs, is less than 60% of the national average – has grown incrementally since the 1980s. In the UK, this already affected one in eight workers before the recent cost of living crisis emerged (Joseph Rowntree Foundation, 2022). The New Labour government tried to alleviate this with tax credits and other wage subsidies after 1997. The Conservative-led coalition government scaled these back radically from 2010, while reducing support for low-income family housing costs.

The Institute for Public Policy Research (IPPR), reporting in May 2021, saw these two factors as driving the general increase of in-work poverty. Double-earner households, one full-time and the other part-time, were twice as likely to be in poverty in 2019/20 (12%) than in 1996/97 (6%) (IPPR, 2021). This is likely to have contributed to the rapid escalation of food bank usage by wage-earning households reported in the press.

Two important structural forces shape this in-work poverty. First, the loss of around four million jobs in manufacturing, metals and mining, which resulted from the anti-inflationary policies adopted by Margaret Thatcher’s Conservative government after its election in 1979.

Second, trade unions were politically marginalised. Thatcher’s governments and their Conservative successors made it progressively easier for employers to ‘derecognise’ unions. Trade union density – the portion of the workforce represented by unions – fell from around 50% in 1979 to around 30% in 1997. In 2021, the figure stood at around 23%, although in the public sector, it remained at around 50% of workers. The strikers in 2022, drawn from this unionised minority, are operating from a position of weakness rather than strength. They have limited alternatives when seeking to have their voices heard. The government’s reluctance to support workers has been further underlined by the apparent abandonment of the Conservative Party’s 2019 commitment to produce an employment bill that would protect workplace rights lost as a result of Brexit.

Disputes in the 1970s

Strike activity measured in working days lost was higher in the UK in the 1970s than in any other decade in the period after the Second World War (Office for National Statistics, ONS). In 1972, the first of two peak years, 23.9 million working days were lost. This was mainly driven by a seven-weeks long national strike of 280,000 coal miners, followed by a further three-weeks long strike in 1974, which contributed to the electoral defeat of Edward Heath’s Conservative government.

This established the narrative of privileged male trade unionists exerting illegitimate political influence through relentless industrial action. Most coal was bound for electricity generation in power stations, so the miners were central protagonists in the UK’s foundational economy of the 1970s.

Strikers in the second half of the decade were likewise mainly drawn from this segment, with national strikes of healthcare and council workers, firefighters, dockers and lorry drivers, among others. Strikes of manufacturing workers tended, by comparison, to be either localised or short-lived.

Foundational economy strikers in the 1970s, as in the 2020s, were diverse in ethnic, gender and generational terms. Union density among women workers rose from 31% in 1970 to 40% in 1980. Workers of African and South Asian heritage were prominent in strike movements in manufacturing industry, notably the famous campaign for union recognition among photo-processing employees at Grunwick in London in 1976-77, and with healthcare, council services and transport, especially during what became known as the winter of discontent of 1978-79.

The winter of discontent dominates political memories of the 1970s. 1979 was the second and largest peak year of days lost to strikes in that decade, at 29.5 million. Only around half of these days, about 15 million, were actually lost in the pay bargaining year of 1978/79. The other half were in the following pay bargaining year of 1979/80 when 31 million days were lost, driven by a national strike in the steel industry. This is an important detail. Many reflections on the winter of discontent consciously or unwittingly double its economic significance by repeating the error that it cost around 30 million lost working days.

Strikes in the 1970s were mainly shaped, as in the 2020s, by economic insecurities that stimulated workforce demands for increased wages. Coal miners in the 1970s were seeking to arrest a declining relative position. In the 1960s, the workforce had been cut by more than half, as the UK accelerated towards a mixed-fuel economy.

The national coal strikes of 1972 and 1974 were prefigured by lengthy and large unofficial work stoppages in 1969 and 1970. The sudden fuel shock of 1973-74, when oil prices quadrupled, strengthened the bargaining position of miners, but also intensified inflationary pressures that were already rising rapidly. The peak rate of inflation approached 25% in 1975, compared with 9.1% today.

It was the Labour government’s attempt to control inflation after 1975 that underpinned many of the strikes that followed. Wage rises were controlled by annual fixed percentage increases. Total cash increases therefore grew more slowly for lower-paid workers. They viewed the downward squeeze on their wages as unjust, especially when set against less restrictive measures on dividends and profits.

The Labour government was, of course, sympathetic to unions. It strengthened statutory provision against workplace inequalities of gender and ethnicity, and established the Health and Safety Executive. It also attempted to transform authority in workplaces with an agenda for industrial democracy. This would have included worker-directors in companies with more than 1,000 employees.

Business opposition blocked this, in league with the Conservative Party and the anti-union national press. Strikes therefore remained the only meaningful expression of workers’ voice in the 1970s, as in the 2020s, a signal of collective weakness rather than strength.

Conclusion

Strikes are expensive expressions of workforce voice and acts of last resort. This discussion of current and historic strikes shows that they tend to be a sign of weakness, arising where workers are not being listened to, as much as they are a sign of strength.

The current strikes are clustered in the unionised parts of the workforce. Those involved are occupationally diverse and of varied ethnic, gender and generational backgrounds. They are mainly providing vital services and can be understood as operating within what is termed the foundational economy.

Critics of these striking workers seek to misrepresent and delegitimise them through mobilising a stereotyped view of the past, focusing on the 1970s, the peak decade of industrial action in post-Second World War Britain.

But the 1970s to which these critics return did not exist much beyond the front pages of anti-trade union newspapers. Then, as now, strikers were diverse in their background, attempting to protect precarious living standards in a period of rising economic insecurity.

Where can I find out more?

• No longer managing: the rise of working poverty and fixing Britain’s broken social settlement: Report by Clare McNeil, Henry Parkes, Kayleigh Garthwaite and Ruth Patrick for the Institute for Public Policy Research.
• Government's solutions don't go far enough:  TUC article by Suha Abdul.
• Mick Lynch media mania – the appeal of workers’ power: article by Ewan Gibbs.

Who are experts on this question?

• Jim Phillips
• Alan Manning
• Alex Bryson

Author: Jim Phillips

Picture by atlantic-kid on iStock

The post Industrial action: is the UK going back to the 1970s? appeared first on Economics Observatory.

Last Saturday, the Scottish men’s rugby team beat England in the Six Nations for the second year in a row. This week at the Economics Observatory, we’ve been continuing our exploration of how Scotland matches up against the rest of the UK in terms of its economic performance. As part of our series on the economic issues at the heart of the Scottish independence debate, two new pieces encourage readers to take a longer-term view and consider how the nation’s past will shape future policy decisions.

Scotland’s economy was changed fundamentally by deindustrialisation in the second half of the 20^th century. Between 1951 and 2021, over 70,000 mining and quarrying jobs disappeared, and more than half a million people stopped working in factories and workshops (see Figure 1).

Figure 1: Scottish manufacturing employment

Source: Population Census 1901; Digest of Scottish Statistics 1953; Population Census 2001; Scottish Government, Scotland’s Labour Market: People, Places and Regions – background tables and charts (2021)

Ewan Gibbs (University of Glasgow) looks at how the experience of deindustrialisation has shaped political debates in Scotland. His article emphasises how economic disorientation contributed to the 1962 breakthrough of the Scottish Nationalist Party (SNP) in West Lothian – a county that was suffering acutely from mine closures.

Attempts by the UK government to maintain manufacturing employment in Scotland – such as supporting the Linwood car factory in Paisley – initially managed to secure some cleaner, safer and better-paid jobs. But even tax breaks and grants from Westminster couldn’t prevent eventual closure of the factory in 1981.

These changes were railed against at the time and the SNP cited the steel industry as an archetypal example of the UK government’s failure to realise Scotland’s industrial potential. Declining industry was at the core of the 2014 independence campaign in Scotland and remains a contentious issue today.

When the discovery of North Sea oil made people in Aberdeen some of the richest in the UK, it was easier for campaigners to accuse central government of stifling Scotland’s bright economic future. Now though, drill activity is declining and this characterisation is less clear (see Figure 2).

Figure 2: PAYE employment (2014 = 100)

Source: ONS

Institutions and countries often struggle to adapt to economic change. This ‘path dependency’ may help to explain some of the economic questions around Scottish independence. It may affect the current state of inequality in Scotland – a topic explored by Stuart McIntyre (University of Strathclyde), Graeme Roy (University of Glasgow) and David Waite (University of Glasgow) in an article on what levelling up might mean for Scotland.

They highlight how Scotland as a whole performs reasonably well compared with the rest of the UK. It is the fourth most productive region in terms of gross value added per head (a measure of output) (see Figure 3). But within Scotland, there are some significant gaps – just as there are between the North and South of England. Jobs and income vary widely between areas like Edinburgh and East Ayrshire, with many rural areas falling well behind the bustling cities.

Figure 4: Gross Value Added (GVA) per head

Source: ONS

The impact of deindustrialisation is still evident in the high correlation between the locations of industry in the 20^th century and the more deprived parts of Scotland today. In Glasgow, employment in manufacturing fell from over 400,000 jobs in the early 1950s to under 150,000 by the mid-1980s. This is thought to contribute to ‘the Glasgow effect’, where life expectancy in parts of the city is significantly lower than comparable areas of the country, even after controlling for deprivation.

Scotland’s distinctive rural regions also face their own challenges, including poor access to infrastructure and public services. The country has a third of the UK’s landmass but only a tenth of the population.

The UK government’s 2021 budget has committed £170 million to levelling up in Scotland, but power-sharing makes its distribution difficult. While Westminster controls most broad macroeconomic and taxation powers, it is the Scottish government that actually controls many of the policy tools (such as education and training) which economists think will make a difference to addressing regional inequalities.

In the past, it has been the devolved governments that have handled spending similar to the levelling-up funds, such as the European Union’s structural funds. But this time, the UK government will work directly with Scottish local authorities to decide where to spend the money. There are concerns that Westminster operating the new UK Shared Prosperity Fund could cause competitive (rather than cooperative) economic policy.

Scotland’s industrial history casts a long shadow over its economic future. The success of levelling up in the Scottish regions most in need of targeted policy support depends on understanding this history. And the debate as to whether Scotland is best placed to meet these challenges inside or out of the Union will continue.

Author: Ben Pimley (University of Bristol)

Picture by Julie Adams on Unsplash

The post Scotland’s past and future appeared first on Economics Observatory.

What does the evidence say?

According to the data, the number of employees in the North East, North West, East Midlands and Northern Ireland has risen above pre-pandemic levels (see Figure 1). This coincides with the re-opening of shops and restaurants – areas of the economy hit hard by lockdown measures. But employment in London is still 3.2% below pre-pandemic levels (see Figure 1). With the exception of the East Midlands, the regions seeing employment recovery have long been a subject of policy discussion. Their employment rates are 2-5 percentage points lower than the employment rate in London. But the new data suggest the employment gap might be closing.

Figure 1: Payrolled employees, percentage change since February 2020, June 2021

Source: ONS

Another popular indicator of the state of the labour market, which avoids the complication of seasonal trends, is its change in employees from the same time a year ago – known as ‘annual employment growth’. Before Covid-19, payroll data shows annual employment growth in these regions either falling behind or just skimming the UK average. Figure 2 shows a striking reversal of this trend since the pandemic hit. Annual employment growth in these regions is now outpacing the UK average. Meanwhile, London, which has historically driven the UK’s employment growth, is the only region in the UK showing negative annual employment growth (see Figure 2).

Figure 2: Payrolled employees, percentage change since February 2020, June 2021

North East

Source: ONS

North West

Source: ONS

East Midlands

Source: ONS

Northern Ireland

Source: ONS

London

Source: ONS

London’s poor performance could reflect the uneven impact of travel restrictions on certain jobs and workers concentrated in the capital. One example of this is tourism-related jobs: since travel restrictions were announced in March 2020, the number of employees working in this industry has fallen by almost one-quarter. This affects London disproportionately, with the city accounting for 54% of the UK’s inbound spending.

Covid-19, together with Brexit, has also taken a heavy toll on immigration, which has fallen 87% since March 2020. Again, this affects London particularly badly, due to the relatively high portion of migrants making up London’s population (37%, compared with 14% for the UK as a whole).

How reliable is the evidence?

Payroll data has limitations. For example, it does not include self-employed workers. It may therefore be unable to capture the full impact of the pandemic. For instance, the number of workers joining self-employment hit a two-decade record low in the fourth quarter of 2020 and shows little sign of recovery. To account for this, we can look at the more conventional measures of labour market activity from the ONS Labour Force Survey (LFS). The LFS surveys households on their employment status, allowing them to identify as self-employed.

Looking at the LFS data, these regional patterns are different. When we compare the LFS employment figures (March-May 2021) to the pre-pandemic (February 2020) data, employment in every region has fallen, not just in London (see Figure 3). The headline of employment recovery may therefore be overly optimistic.

Figure 3: Total in employment, percentage change since February 2020, March-May 2021

Source: ONS

What’s next for the UK?

Not only is employment recovery more modest than it seems, but the UK will face a new challenge in September as the Government’s furlough and self-employed schemes end. These policies have supported more than one-third of the working population. While they likely saved many viable jobs, they also may have propped up jobs with no future in a post-Covid world – known as ‘zombie’ jobs. Policy to get people back into work over the coming months is therefore crucial. The government has introduced the ‘Kickstart’ scheme which subsidises employers to hire young unemployed workers, and the ‘Restart’ scheme, which offers skills training to those in long-term unemployment. Whether these schemes can prevent an unemployment crisis is yet to be seen.

Where can I find out more?

• This data release from the ONS provides more detail on the latest trends in UK employment
• Previous releases are also available here.

Who are experts on this question?

• Jonathan Wadsworth, Royal Holloway, University of London
• Stuart McIntyre, University of Stratchclyde
• Andrew Aitkin, NIESR
• Tim Hatton, University of Essex

Author: Kate Lucas

The post Levelling up: Has Covid-19 reduced the regional employment gap? appeared first on Economics Observatory.

The rise in demand has been significant – use of the internet doubled in 2020 and adults in the UK are now spending more than 25% of their waking day online.

As our reliance on the internet and our mobile phones has grown, the effective functioning of our digital infrastructure has become ever more vital. While the official digital economy – made up of information technology and communications firms – accounts for only a small fraction of the total, almost all businesses now depend on digital for their operation.

Overall, in spite of increased demand, the infrastructure has maintained a good level of service and has been mostly resilient to failures. Many services have significantly improved in recent years – for example, 69% of residential broadband lines are now superfast, an increase of 10 percentage points since 2018.

While stories of the odd breakdown or Radio 4’s chronic inability to set up good lines may persist – the efforts of a lot of engineers have mostly worked. I have not used cash for months or seen TV news in decades, in spite of more time than ever on a screen – digital money carried on the internet and digital content have taken over. A third of us now watch online video content more than traditional TV, so it is perhaps unsurprising that subscription services accounted for more than half of online video revenue in 2019, at £1.7 billion.

Digital infrastructure does not just enable us to work remotely or provide us with entertainment: it has facilitated changes across our daily lives – ordering milk, checking that birdsong or identifying a flower can all be done through our devices and take seconds.

Keeping us connected like this takes serious infrastructure. Often, this is invisible and under-appreciated, but it is arguably the most important infrastructure we have. We need many different types of infrastructure to live and work, such as utilities and roads, but most deliver much the same service as they have for many years. But communications infrastructure delivers literally millions of times the data it did 30 years ago – it is almost impossible to imagine what roads that did this would look like.

According to the latest survey by Ofcom (the UK’s regulator of the communications sector), communications infrastructure delivers more than 300 GBytes per month per user (this is what is actually delivered, not what could be). This is around 20 times higher than the corresponding value for 2011.

These personalised signals now probably add up to more data than is delivered all the TVs in the UK from traditional broadcasts, even counting each TV separately (even though they are showing the same signal – so Netflix is not so big a change as you imagine).

Of these data, 99% is delivered by the fixed line network and only about 1% by mobile. While this may seem surprising, it is because most of the data on all handsets comes via WiFi from the fixed network, even if to a mobile phone. Both mobile and fixed data volumes are rising by orders of magnitude each decade and this will continue for some time.

What does the network actually look like?

The fixed core network that connects everything (including WiFi and mobile base stations) is overwhelmingly made of silica optical fibre. The ‘access’ network, which is the last kilometre or so to your home, is likely still to be a copper wire pair, originally installed even up to a hundred years ago for landlines, or analogue voice telephony. This has been effective far beyond what was originally envisaged, but these copper wires are now near their fundamental limits and will be replaced by fibre within a decade.

Fibre is currently being used at a tiny fraction of its ultimate capacity – perhaps a millionth or less. This means that this infrastructure will most likely last another hundred years or so. Further, fibre is generally more reliable, for example, it does not corrode when wet.

The last link in the network will often be wireless and this is also improving and getting shorter. Many things from WiFi6 to 5/6G and new technologies that direct signals to each user will help here, and incidentally reduce energy usage. It is notable that communications technology has not only delivered far more capacity for about the same energy, but it has even reduced the energy used. Fibre optics, for example, is much less energy consumptive than copper, which is partly why data centres use it internally.

Operators tend to point out that the telecommunications industry has by and large seen little benefit from the vastly increased volume of products it carries, let alone from its increasing significance. Revenues have not risen with goods carried – but this is a worldwide problem without an easy answer. The suppliers of end terminals, such as smartphones, have done much better.

How is the network changing?

The network consists of much besides the basic transport fibre and wireless, and exciting developments are taking place in this area. The data routing and switching functions that are vital to all communications need very fast and expensive kit.

Many years ago, this changed from simple switches that connected the ends to ‘packet’ switching where all data travelled in small packets with an address label at the front – making all digital services rather similar, regardless of the content (whether video, voice, internet and so on). This was a lot more efficient, but the next stage is to put the functionality into generic standardised hardware like super-PCs with the clever stuff in software, instead of expensive single-purpose devices. This is much harder than it sounds but may enable equipment from many suppliers to be mixed and matched in ‘open disaggregated networks’, reducing costs and increasing resilience.

And the actual physical transport that carries the signal – these days normally a modulated light wave – is still changing. New ‘hollow core’ fibres guide light in a central hole ‘nudged’ into place with 100 nanometer (1/1,000^th of a human hair) membranes. This largely gets rid of the limits imposed by the solid glass core normally used today, allowing more capacity, higher speeds (that is lower latency) and probably lower loss (and thus longer range). Radio antennas are evolving too, so that signals can be ‘pointed’ at the intended receiver rather than just sprayed about – improving quality as well as reducing power consumption.

What will this be used for? Experience suggests that predictions here are always wrong. For example, no one anticipated that mobile phones would be much used for video, whereas this is now is the dominant type of data carried on them. But once the capacity is there, people will use it.

And it is not hard to suggest things that could be useful to communicate that currently cannot be done easily. For example, just connecting the huge number of car and bicycle dash cams to each other, which could be useful in seeing further ahead, would saturate any envisaged network.

What should we care about in a future network?

It is important that capacity isn’t the only focus when considering the future of our digital infrastructure. There are existing ways of improving this.

We should care about coverage – many people do not even realise that things they use all the time, like speech recognition and navigation or the need to call for help (often now automatically and using digital techniques) – need communications technology. We are increasingly stuck if we are even briefly without it, so it needs to be ubiquitous.

And digital technology helps in less obvious ways too. For example, the vaccines being developed for Covid-19 are not made using the actual virus; they based on the viral DNA sequence transmitted over the world-wide network.

While connection speeds are getting faster, 13% of households are not online, which may have had serious implications for children in these households who needed to join lessons remotely this year.

Further, we need low latency (no delay) for many things, including anything that uses remote processing (like speech), not just games. And all this needs to be seamless from a user perspective.

Can we do all this for moderate cost? Well yes, we can – and it will transform our lives even more than it already has been. But adequate funding to ensure universal access will be crucial.

Where can I find out more?

• UK’s internet use surges to record levels: Ofcom report on online usage rates in 2020
• Ofcom Communications Market Report 2020: Details on the increase in data speeds and internet usage
• Digital economy: Articles and resources from the OECD on digital platforms and infrastructure

Who are experts on this question?

• Diane Coyle
• Will Stewart 

Author: Will Stewart

Photo by Mika Baumeister on Unsplash

The post Can the UK’s digital infrastructure continue to cope with rising demand? appeared first on Economics Observatory.

It is a long time since I was first seized by an interest in digital technology, wanting to understand what it is doing to our economies and societies. It was the mid-1990s when I first saw a webcam showing me – in London – live traffic driving along San Francisco’s Golden Gate Bridge. It sounds dull now, but many were equally enthralled at the time by a webcam showing how much coffee was left in the pot of the University of Cambridge computer science department. I for one was hooked.

A quarter of a century on, one of the many lessons to emerge from the pandemic is how much we rely on digital technology. The availability of digital services – from online shopping to Zoom, Teams and other platforms – has meant that many people have been able to continue to work and sustain their social contacts since March 2020.

Recent figures from Ofcom, the UK’s regulator of the communications sector, show a surge in the amount of time the average Briton spends online: 3 hours and 37 minutes a day (excluding TV watched by streaming online). That’s over a day a week. It is hard to imagine how we would have coped without it.

This dependence raises many questions for economists. One is the basic reliability of digital infrastructure, and access to stable and adequate broadband. That there are vulnerabilities was revealed recently when the content delivery network service Fastly, one of the jigsaw of companies enabling access to websites, brought down swathes of the internet for more than an hour, seemingly because of a single software bug.

Overall though, the communications networks have proven wonderfully robust and able to cope this past 15 months. In an upcoming Observatory article, Will Stewart, a telecommunications engineer, discusses how our digital infrastructure has expanded to meet rising demand. But the big policy and economic challenge is extending coverage: access needs to be reliable and ubiquitous. The need for universal access also points to issues concerning distribution in terms of devices and affordability of services. These are economic and political challenges, not engineering ones.

For in addition to reliability and resilience, there are major distributional questions. School pupils have needed to access their lessons online, and those in low-income families or rural areas have been significantly disadvantaged. Around one in seven adults in the UK does not use the internet, generally older and poorer people. And there are still gaps in service coverage around the country.

A second set of issues concerns the fact that digital markets are so concentrated. In a recent Observatory piece, William Quinn and John Turner (both Queen’s University Belfast) discuss the extent to which there is currently a tech bubble. Have share prices for technology companies risen far beyond the level justified, even by the extent to which we all use them?

There’s a big difference between ‘crypto-assets’, the purpose of which is, to say the least, unclear, and companies such as Alphabet (Google) and Amazon that deliver genuinely highly valued services. This is highlighted in an article by Andrew Urquhart (Reading) on the meme cryptocurrency Dogecoin. Started as a joke, Dogecoin is now the sixth largest cryptocurrency. Yet its value is extremely precarious and ultimately tied to interest in the meme.

Figure 1: Price of Dogecoin

Source: CoinMarketCap

A handful of giant companies absorb the majority of our time online. The economies of scale are large, and network effects – whereby we all benefit from services with more users – are powerful. Amelia Fletcher (East Anglia), a member along with me and our legal and technical colleagues on the 2019 Furman Review Unlocking Digital Competition, explains in her article the changes taking place in competition policy to make sure digital markets are ‘contestable’ – that is, open to new entrants with better technologies. She also sets out the challenges in achieving this.

Figure 2: Shares of supply by page referrals from January 2009 to April 2020

Source: Statcounter Global Stats
Note: Bing’s share represents Bing and MSN Search, MSN Search was rebranded as Bing in 1998; ‘Other’ consists of: AOL, AskJeeves, AVGSearch, Babylon, Baidu, Conduit, Webcrawler; Yandex; and ‘other’

The challenges in ensuring the markets are competitive mean that regulation of digital platforms also needs to step up a gear. Although competition is important, and the threat of competition can tackle some of the problems attributed to the big digital platforms, it cannot do everything.

Social media platforms in particular seem to involve harms such as potential loss of privacy, conspiracy theories, polarisation of views and damage to users’ mental health. As Carlo Reggiani (Manchester), Leonardo Madio (Padova) and Andrea Mantovani (TBS) explain, online intermediaries have largely not been held responsible for the harms that their users perpetrate. But many economists, lawyers and other commentators are starting to question this presumption, and regulation of the platforms is beginning to tighten up.

A third area of interest is the impact of the enforced increase in the use of digital technology on working patterns and productivity. Economists have begun to investigate the trends and the productivity effects of working from home, which broadly seem to be positive, at least in the short term.

But there remain longer-term questions about the effects on younger workers, who learn from more experienced colleagues, and the impact on women’s promotion and pay at work, as well as their share of the household work. Many of us working in teaching and research consider online meetings far less effective for conveying information and ideas. This was the subject of a debate I had with Cary Cooper (Manchester) at a recent conference at The Productivity Institute.

One area where there are high hopes for using digital technologies to boost productivity and improve outcomes is healthcare. In a recent paper, my co-authors and I look at the use of technology in UK hospitals during the pandemic. Interviews with senior leaders in two major NHS England hospital trusts show that they expect the use of digital technologies – both internally and for patient consultations – to continue. But there has been no evaluation yet of either long-term productivity effects or the impact on patient outcomes.

As Heidi Tau (Hertfordshire County Council) and Marselia Tan (Care Policy and Evaluation Centre) set out in their Economics Observatory article this week, the pandemic has catalysed a lot of new activity in digital health. Another question will be the distributional impact and ensuring everyone can access health services, including the devices (such as smartphones or pulse oxymeters for example) needed for remote consultations. But as with other digital innovations, the expansion of digital technology seems sure to have a major impact on healthcare.

Figure 3: Number of deals and size of investment raised by e-health companies

Source: Beauhurst, 2021

Of course, there are many other economic questions relating to digital technology, in addition to the ones covered this week at the Observatory. One set of questions relate to changes not only in working lives but also in the labour market. There has been much debate about the impact of automation on jobs, and the pandemic – along with Brexit – has jolted some sectors of the economy toward faster automation than might have otherwise occurred.

Then there’s the outlook for further innovation either in the digital sector itself, with rapid development of commercial uses of artificial intelligence under way, or in sectors that rely on massive computing such as biomedical innovation and pharmaceuticals.

There seems little doubt that the role of digital technologies in our lives will continue expand. There have been a number of recent efforts to measure the size of the digital economy. To my ears, after more than 25 years of study, this sounds like talking about ‘the electricity economy’. If it isn’t all digital yet, it soon will be.

Author: Diane Coyle

Image by Alexandre Debiève for Unsplash

The post Digital economy appeared first on Economics Observatory.

Surprisingly, Covid-19 appears to have had only a limited short-term impact. While overall freight volumes are down, the situation is better for ports in Wales than for other UK ports due to the variety of cargo handled and a focus on commodity products. Of the seven major ports across Wales, Newport, Cardiff, Port Talbot, Swansea and Milford Haven are particularly associated with bulk products, including oil and gas, timber and steel.

By contrast, Brexit has had a significant impact on ferry ports with links to Ireland, namely Fishguard and Holyhead with their roll-on, roll-off (‘ro-ro’) ferry services, as well as those operated from Pembroke Dock (part of the Milford Haven port area). There was a surge in the run-up to Brexit followed by a significant drop-off. Data suggest volumes are returning, but there remains a need to build confidence that transit through Welsh ports will not bring disruption.

Consequently, there are interesting dynamics in considering the impact of Covid-19 on port volumes, while the links with Ireland have been of extensive interest since the Brexit referendum in 2016.

How did Welsh ports perform during 2020?

Milford Haven is the largest port in Wales and the third largest in the UK, handling 33 million tonnes. Each of the remaining ports handles under seven million tonnes. Figure 1 shows normalised annual port freight volumes through the seven major ports in Wales. Total tonnage across all ports dropped by just 3% in 2020, compared with a UK port average fall of 8%. These changes could be seen as just a continuation of historical trends, but data for 2021 and beyond would be needed to confirm this.

Since the data are for overall volume of freight, they may also disguise changes in the type of goods arriving or leaving these ports as they tend to handle a variety of cargos. The focus on commodity products such as steel and timber found at the start of supply chains may also insulate the ports from short-term changes in end consumer demand. As a comparison, Felixstowe and Southampton saw volume drops of 9% and 17% respectively. These ports are the main entry points for containerised goods in the UK, which are typically consumer products destined for retailers.

Figure 1: Major Welsh ports

Source: BBC News

Figure 2: Freight through major Welsh ports, 2009-20

Source: Department for Transport (2020) Quarterly Port Statistics

While most ports’ activity remained steady or declined slightly in 2020, Holyhead saw 10% growth, representing the eighth year of continuous growth at the port. This trend has been driven by firms exploiting the advantages of its geographical location as an access point to Ireland through the ferry links to Dublin. For example, many retailers use the route to service their stores in Ireland, as sailing times allow loads to be shipped from UK warehouses (or manufacturers) in the evening to be in retail outlets for sale the following morning.

Another area of growth has been what is termed ‘landbridge’ traffic. This is freight from Ireland destined for the EU, which passes through Great Britain in between two sea crossings (the Irish Sea and the English Channel). About 150,000 lorries per year use the landbridge, 85% passing through Welsh ports (Irish Maritime Development Office, 2018). The frequency of sea crossings both to Wales and across the English Channel has made this a trusted, quick and reliable route for deliveries.

Since 1 January 2021, Holyhead port, along with Fishguard and Pembroke Dock for southern Irish Sea crossings, have found themselves on the border between the UK and the EU, and there is evidence showing that these particular ports have been affected both before and after this date.

How has Brexit affected Welsh ferry ports?

Figure 2 shows the port volume by quarter for Holyhead and Fishguard between 2018 and 2020. While there was a slight drop in the second quarter in 2020 due to Covid-19, these ports experienced significant growth in the second half of the year, showing a clear break in previous trends. While the data for Fishguard are less conclusive, anecdotal evidence suggests a spike towards the end of the year.

Figure 3: Quarterly freight volumes through Holyhead and Fishguard

Source: Department for Transport (2020) Quarterly Port Statistics

Data for early 2021 are still emerging, but information provided by Stena Line (Figure 3) shows a significant drop in the number of lorries being handled during the first few months of this year at both Holyhead and Fishguard. While traffic at the former is showing some signs of recovery, freight remains lower than usual on the southern Irish Sea route. This situation was not helped by cancellations from Fishguard during February when Stena redeployed the ferry to allow another vessel to undergo maintenance.

Figure 4: Change in freight units through Holyhead and Fishguard

Source: Stena Line, via How Brexit has changed trade between Britain and Ireland, Sky News

Brexit caused significant uncertainty for supply chains, especially with the Trade and Cooperation Agreement with the EU not being agreed until 24 December 2020, just a week ahead of the UK’s exit from the EU. When faced with any form of uncertainty, supply chains will typically change one of three things: inventory; time; or capacity (Pound et al, 2014). Capacity changes often occur over the longer term, but there is clear evidence of changes in inventory and time being used in the case of Brexit.

Firms will typically use changes in inventory to ensure that supply to their customers continues. With Brexit being a single defined event, the focus was on ensuring that enough stock was available to allow new processes to be adopted and settle in. Therefore, in late 2020, there was clear evidence of stockpiling by firms moving goods into and out of the UK. This surge, coupled with typical seasonal increases ahead of Christmas, not only affected the ports but also the roads, with congestion on the A55 (BBC, 2020).

Yet whenever a firm increases their stock, there then comes a period of time when this is reduced back to a more normal level. This has clearly been happening during the first few months of 2021 and, with Holyhead volumes starting to recover, there is evidence that new ways of working are bedding down and firms are now returning to regular shipments across the Irish Sea.

This ‘boom and bust’ approach is also known as the ‘bullwhip effect’, as variation in customer demand is magnified by each stage of the supply chain (Lee et al, 1997). One of the challenges is that without coordination, this effect can get worse as you move up the supply chain, and potentially separated in time from the initial disruption too. Therefore, the consequences may be felt by some firms for a while yet.

The other approach to greater uncertainty is to increase the time in the supply chain, to give more reliability to arrivals. Here, firms have been switching to direct ferry routes between the Republic of Ireland and the mainland EU instead of the landbridge. This switch started before Brexit, and it was expected that changes of this nature would occur. But the volume of change has been surprising. The port of Rosslare, the main departure point for these ferries to the mainland EU, saw a 45% growth in traffic volumes in January (RTE, 2021). Further, the number of weekly services to the EU has grown from three to 14.

These ferry routes can cost €400 more than using the landbridge while taking a similar amount of time, but they are seen as offering a more predictable arrival by not crossing the UK-EU border twice and therefore avoiding port delays caused by paperwork and customs checks. There is currently little sign of this volume declining, with ferry operator DFDS Seaways recently introducing a fourth vessel on their Rosslare to Dunkirk route to provide eight sailings each way per week (Irish Times, 2021).

How can Irish Sea traffic be attracted back?

This is a key question over the next few months as new ways of working settle down and it becomes clearer how supply chains will be organised. After all, if commuters can find better routings when disruption occurs (see Larcom et al, 2015), so too can supply chains. Although volumes are recovering, there are various actions that will help this to happen. Ultimately, the aim will be to show that using Welsh ports will offer a consistent, reliable transit option for companies, thereby reducing uncertainty.

Given that many choices on the use of Welsh ports are taken by decision-makers outside Wales, there are only limited actions that the Welsh Government can take. Nevertheless, it has implemented a five-point plan to support the ports (Welsh Government, 2021b).

Three of these points relate to improving the information processes around freight movements, where errors with paperwork can lead to unexpected delays at the ports. The remaining two look to provide information and support to companies using the ferry links, ensuring documentation is completed correctly and building confidence in the landbridge.

Ferry operators also need to provide assurance by guaranteeing that crossings continue to be reliable and scheduled at relevant times for freight users. The recent increase in schedules by Stena between Fishguard and Rosslare helps with this, while Irish Ferries are introducing a crossing on the Dover-Calais route to offer logistics firms a ‘one-stop-shop’ for all sea crossings on the landbridge.

It will also be interesting to see how the direct route from the Republic of Ireland to the EU fares in terms of reliability and whether this affects future choice of route. The Irish Sea can be exposed to incoming storms, leading to cancellations. In early March, there were cancellations for two to three days on all direct EU routes from Rosslare while services to Wales were cancelled for one day only (NIFerrySite, 2021). Coupled with the opportunity for more frequent sailings, recovery from weather delays occurs more quickly on the landbridge route, which may affect firms’ choices.

What does the future look like for Welsh ports?

Clearly, Covid-19 and Brexit have brought challenges to Welsh ports, although any immediate impact from the former has been largely offset as services have recovered through the rest of 2020. Brexit has brought more significant challenges, particularly to those ports with ferry services to the Republic of Ireland. Going forward, the Welsh Government will need to take a proactive role in supporting port development, not just for users but the wider communities that they serve. The Wales Transport Strategy offers such an opportunity through focused plans for ports and logistics more widely (Welsh Government, 2021a).

There has been talk about the potential for so-called ‘freeports’ to facilitate future growth (Welsh Affairs Committee, 2020). Freeports contain areas where goods can be held and processed without paying customs, with duties only payable if the goods enter the domestic market. Businesses located there can receive tax reliefs and other benefits.

While freeports can help to bring economic growth, there is a danger that they may just transfer jobs from other areas. There are also concerns about whether there will be impacts on environmental or employment standards because these areas have special regulatory status. It is perhaps telling that the Welsh Government has yet to commit to establishing such a site in Wales, despite eight locations in England being announced.

Another opportunity lies in the cruise market, which has previously brought tourists to ports such as Fishguard and Holyhead. This sector has been particularly affected by Covid-19, not just in terms of cancelled holidays but also wider perception about infection spread within vessels. While operators remain confident that demand will return, there is considerable uncertainty and plans for Welsh ports to capitalise on this market may need to be put on hold.

Regardless, what is clear is that Welsh ports will need to continue to adapt to reflect their changing roles in supply chains and the economy more generally. In doing so, we may then look back on Covid-19 and Brexit as a blip in their history, rather than a turning point.

Who are experts on this question?

• Andrew Potter, Cardiff University
• Anthony Beresford, Cardiff University
• Edward Sweeney, Aston University

Where can I find out more?

• The Welsh Government’s plan for supporting ferry ports in Wales in response to the changes in demand immediately post-Brexit.
• The economic contribution of the Maritime sector in Wales: A report by the Centre for Economics and Business Research.
• The Implications of Brexit on the Use of the Landbridge: A report by the Irish Maritime Development Office.

Author: Andrew Potter, Cardiff University

Photo of Swansea Marina by Tiia Monto on Wikimedia Commons

The post How are Covid-19 and Brexit affecting ports in Wales? appeared first on Economics Observatory.

One commentary on the Economics Observatory, written early in the pandemic, notes that Covid-19 has accelerated many changes in our ways of working, shopping and social interaction, and explores three scenarios for exit from the pandemic (Nathan and Overman, 2020). Like those authors, we recognise that the lasting effects on cities are yet to be determined since cities are highly adaptable, but drawing on new evidence, we find indications that employees like the new arrangements of remote working.

According to the Office for National Statistics (ONS) Labour Force Survey, mainly working from home was a rising trend before the pandemic, but it amounted to less than 5% of working adults over the age of 16 prior to 2019. Understanding Society reported that in January and February 2020, 11.8% of workers often or always worked at home, and a further 17.7% sometimes worked at home. This implies that more than 70% of the entire UK labour force was commuting most working days prior to the pandemic.

ONS data from its Coronavirus and the social impacts on Great Britain survey indicate that it was common for more than 40% of the population to have worked from home during the pandemic, but Decision Maker Panel data show this varies by industry (Haskel, 2021). Having tasted the benefits of working from home, spending two to three days a week at home is the most common expected working pattern post-Covid-19. In a new UK survey of working adults in the UK, we find that many would prefer a drastic change in the pre-pandemic pattern of five days a week commuting.

Having reduced commuting substantially during lockdowns, working adults in the UK are keen to commute just two to three days a week, and only one in seven expect to return to five days a week commuting. This will contribute a substantial reduction in costs and time travelling to work. Our results show that workers spent on average 29 minutes commuting and spent £5.50 per day on travel and parking costs. Over 60% commuted by private vehicle and 34% by public transport.

It is easier for workers in some sectors to work at home than for others due to the relative ease or difficulty of remote working (Haskel, 2021). While the evidence we present below indicates that employees are keen to adopt more working from home, employers asked between September 2020 and February 2021 were less keen to adopt it as a permanent model.

The resolution of these two competing views is still to be fully determined. But any change in the commuting patterns will have substantial impacts on the transport industry, the workplace and the future of cities – even if hybrid work patterns are adopted.

Employees’ reactions to working from home

Our survey focuses on four age brackets – 20-29, 30-39, 40-49 and 50-64 – during March and April 2021. All participants had earnings more than £10,000 per year, which enables us to screen out part-time workers. The survey results are summarised in a series of figures below.

Figure 1 shows that in March and April 2021, 47% of respondents are working from home, 40% are working in the office and 13% are not working. The numbers were slightly different than in January and February (when 52% were working from home), which is likely to be due to the lockdown and may reflect our sampling of workers from occupations with a higher share of tasks that can be done from home (Bartik et al, 2020; Dingel and Neiman, 2020; Taylor and Griffith, 2020). Nevertheless, as we shall see, working from home has reduced commuting to work substantially.

Figure 1: How often do you work from home?

Notes: Data are from two surveys of 5,000 UK residents carried out by Prolific in March and April 2021 on behalf of the University of Nottingham and Stanford University. We reweighted the sample of respondents to match the Labour Force Survey figures by age, gender and education.

We next asked the respondents: ‘After COVID, in 2022 and later, how often would you like to have paid workdays at home?’ Figure 2 shows the percentage who would prefer to have paid workdays while working remotely after the pandemic: 20% and 23% would like all working days or no working days at home respectively, but around 40% would prefer two or three days per week.

The eventual resolution of employees’ and employers’ perspectives on this issue will determine the long-run solution, which may vary by sector. Recent surveys of employers by the Decision Maker Panel show 88% of full-time workers were working from home rarely or never in 2019, but this figure had fallen to 53% in the first quarter of 2021 and was expected to by 64% in 2022 and beyond (post-pandemic) according to senior executives. The majority view is that the workforce will be working from home two or three days a week in the ‘new normal’.

Figure 2: In 2022, how often would you like to have paid workdays at home?

Notes: See Figure 1.

Adults in the UK report substantially improved perceptions about working from home and that working from home turned out to be better than expected. This rise in working from home looks like it will generate a long-run benefit to employees in terms of a valuable perk.

As Figure 3 shows, a large proportion of respondents felt positive about working from home after the pandemic, with the average employee reporting that working from home for two days a week post-pandemic was a perk equivalent to about 6% of earnings. As such, this shift in working patterns may be one of the few upsides of the pandemic. But it will also increase inequality since higher earning employees are more likely to be able to work from home post-pandemic.

Figure 3: After COVID, how would you feel about WFH two or three days a week?

Notes: See Figure 1.

How might this affect commuting to work?

In March and April 2021, after the number of UK adults working from home had fallen from levels seen in January and February, and the proportions working at home and working in the office were equalising, we asked about commuting patterns before and after Covid-19. Pre-pandemic, commuting to work five days a week was the norm for 61% of UK working adults, as Figure 4 shows. The average commuter was travelling four days a week and just 10% were not commuting at all.

Figure 4: How many days were you commuting to work before Covid-19?

Notes: See Figure 1.

This was time-consuming, incurred expense and was time spent relatively unproductively. As Figures 5, 6 and 7 show, workers spent on average 29 minutes commuting; they spent £5.50 per day on average on travel and parking costs (but this reflects a long tail of more expensive commutes: the modal cost was £3-5) and over 60% commuted by private vehicle and 34% by public transport.

One study finds that billions of hours of commuting time have been ‘saved’ in the United States, giving more hours for working, leisure, home improvements and family time (Barrero et al, 2020).

Figure 5: How long did it take you to commute to work before Covid-19?

Notes: See Figure 1.

Figure 6: What was the daily commuting cost to and from work before Covid-19?

Notes: See Figure 1.

Figure 7: What mode(s) of transport did you use for commuting before Covid-19?

Notes: See Figure 1.

When we asked about their preferences after Covid-19, workers showed a preference for commuting less than before the pandemic. Working adults in the UK are keener to avoid commuting or to commute just two to three days a week than to return to travelling for five days a week. Only one in seven want to return to five days a week commuting.

Figure 8: How often would you like to commute to work after Covid-19?

Notes: See Figure 1.

What would be the effect if we all did less commuting?

Changing attitudes about working from home may drive other changes, such as commuting patterns, urban design and the nature of our cities.

If travel were to change according to the preferences of workers shown in the results of this survey, it would be a major change for the transport sector. Fewer cars, buses and trams would occupy our roads, resulting in much lower levels of congestion and fewer emissions of greenhouse gases and particulates. Fewer trains would be required and the London Underground would be less crowded.

The demand for office space would also change: there might be an exodus from cities (Nathan and Overman, 2020) and a reappraisal of the need for office space in city centres. Workers would come into work less often; space would not be at a premium to the same extent as it was previously; and hybrid working would be more common, with some workers in the office and others at home.

Not every industry would be affected to the same degree, and different norms negotiated by employers and employees are likely to emerge based on considerations such as relative costs and productivity.

Nevertheless, if some adjustment takes place, then the lower volumes of workers in cities will affect other industries. With fewer office workers during working hours in urban areas, supporting industries that ‘live off’ urban commuting workers will see lower demand. Hospitality, retail and food sectors already devastated by Covid-19 may face another challenge if footfall in urban centres falls.

There is already evidence in staff surveys by major firms such as PwC, Lloyds, Barclays, BT, Aon and Virgin Media that the preferences of their UK staff for a hybrid model rather than a full return to the office is leading them to cut back on office space. Firms are letting their spare offices according to a survey of 405 executives by RSM the accountancy firm (Financial Times, 4 March). Office construction has fallen from 4.32 million square feet to 3.61 million square feet year on year, and vacancies have risen, although this may be temporary.

Potentially, workers would have more balanced lives, depending on how they chose to use their ‘saved’ commuting time.

Where can I find out more?

• Working from home is revolutionising the UK labour market: Results from the January and February surveys of working adults in the UK, summarised at VoxEU.
• Why working from home will stick: A study by Jose Maria Barrero, Nicholas Bloom and Steven J. Davis of the shift towards working from home.
• How the COVID-19 crisis is reshaping remote working: A VoxEU article on the uneven adjustment to remote working during the pandemic.

Who are experts on this question?

• Shivani Taneja, University of Nottingham
• Jonathan Haskel, Imperial College London
• Paul Mizen, University of Nottingham
• Nicholas Bloom, Stanford University
• Jonathan Dingel, The University of Chicago Booth School of Business
• Henry Overman, LSE

Authors: Paul Mizen, Nicholas Bloom and Shivani Taneja

Photo by Leon Warnking from Pexels

The post What is the future of commuting to work? appeared first on Economics Observatory.

One of the main policies deployed to contain the virus has been restrictions on mobility, both within and across countries. This has had a huge impact on the demand for travel, hotels, restaurants and other hospitality venues across the globe.

Indeed, the revenues of firms in the airline industry have plunged by around 60% compared with 2019 (International Air Travel and Tourism Council, 2020). Estimates suggest that if the pandemic continues for several more months, there could be a global loss of around 75 million jobs and $2.1 trillion in revenue (World Travel and Tourism Council, 2020).

While domestic tourism has resumed in some large countries, this can only offset a fraction of the losses from international tourism (UNWTO, 2020). For international travel to go back to pre-pandemic levels , several conditions will have to be met. For example, the vaccine will have to become available on a wider scale, countries will need to ease restrictions on international mobility and consumer confidence must return. These conditions hinge on the duration of the pandemic and the effectiveness of vaccination programmes.

Further, the extent to which the pandemic will prompt behavioural changes, and how government and international cooperation will be able to support the industry in the future, remain highly uncertain. In what follows, we explore some of the effects of Covid-19 on international travel.

What does evidence from economic research tell us?

Recent studies show that a continuation of travel disruptions for six months could cost 2.5-3.5% of GDP across the G20 countries alone (International Monetary Fund, IMF, 2020; MacDonald et al, 2020). This is particularly concerning as people working for airlines or travel companies, as well in those employed by restaurants and other hospitality venues, make up approximately 10% of jobs and about 9.5% of GDP globally.

With a third wave of coronavirus infections in Europe and the United States, it is now more urgent than ever that populations are vaccinated. But there is still a long way to go before vaccines are available in sufficient numbers for the whole world population (Duke Global Health Innovation Center, 2020). News of their rollout has raised expectations for recovery, but the tourism industry is set to struggle until at least the autumn of 2021 (Organisation for Economic Cooperation and Development, OECD, 2020).

While vaccination programmes have begun in several countries, new and more infectious strains of the virus have also emerged. The death rate has also been at an all-time high globally. Consequently, until vaccines are widely available around the world, restrictions on international travel and mobility are likely to remain (Hale et al, 2020).

How has international travel been affected by Covid-19?

Between January and October 2020, the pandemic triggered a 70% decline in international tourist arrivals compared with the same period in 2019 – see Figure 1. This was mainly caused by people not wanting to spend money on flights or not being allowed to fly by government restrictions. Based on these figures, the UNWTO expects international arrivals to have declined by 70-75% for the whole of 2020. This would mean that international tourism has returned to levels last seen roughly 30 years ago.

Figure 1: January to October 2020 international tourist arrivals (year-on-year percentage change)

Source: UN World Tourism Organisation (UNWTO), December 2020

Popular tourist destinations have been the hardest hit. For example, in March 2020, travel and tourism contributed almost 20% of Thailand’s GDP. According to one report, with losses in excess of $37 million, Thailand ranks fourth globally among the countries that have experienced the biggest tourism revenue losses due to Covid-19, behind the United States, Spain and France (US Electronic System for Travel Authorization, 2021).

But attempts to evaluate the overall impact of the pandemic on tourism remain challenging – particularly since the health conditions and ensuing containment strategies across countries are changing rapidly. Since lifting restrictions is contingent on a successful vaccine global rollout, there is a high level of uncertainty about how quickly countries will be able to re-open fully.

The pandemic’s impact on the travel industry and world trade

The impact of the pandemic on the travel industry can be considered along five dimensions: travel restrictions; commercial flights; hotel occupancy; industry profits; and jobs.

Travel restrictions

Since March 2020, a total of 217 countries have imposed some form of travel restrictions. Many governments recently reversed their efforts to ease restrictions on travel given the emergence of new variants of the virus. One in three destinations worldwide remain completely closed to international tourism, with restrictive travel regulations prevailing in most parts of Asia and the Pacific and Europe (UNWTO Report on Travel Restrictions, 2021; IATA COVID-19 travel regulations map).

To understand the importance of widespread vaccine distribution for economic recovery, recent research by the National Institute of Economic and Social Research (NIESR) examines alternative scenarios for the interaction between vaccine distribution and a re-opening of world tourism (Holland et al, 2021).

In the more positive scenario, a quicker-than-anticipated diffusion of the vaccine globally could provide a confidence boost and a pick-up in world trade. Trade would be 2.75% higher compared with the baseline of NIESR’s latest forecast scenario, and economic growth would be higher – particularly in countries and regions with a relatively high share of trade to GDP (such as the UK, Denmark, Greece, India and Singapore).

In the more negative scenario, a generalised opening of the global economy would not be possible before 2022 due to the failure to deliver a successful vaccine rollout, particularly in low and lower-middle income countries. This would cause world trade to decline by around 0.8% relative to the baseline. In this case, GDP growth is projected to be weaker in all countries, especially in countries that have not secured access to sufficient doses, such as large parts of Africa, Asia and Latin America.

Commercial flights

One significant effect of travel restrictions is the fall in the number of commercial flights. By the end of 2020, commercial flights were down 41.7% compared with 2019, having plunged by 74% back in April 2020. For the early part of 2021, flight traffic has continued to follow seasonal trends, though commercial flights remain well below 2019 levels – see Figure 2.

Figure 2: Number of commercial flights (seven-day moving average)

Source: Flightradar24 – Flight tracking statistics (2021)

Hotel occupancy

Hotels have also been hit hard by the travel reductions (STR, 2020). The proportion of people staying in hotels fell dramatically across all regions in March and April 2020. To date, Europe’s hotel occupancy rate is the lowest on a rolling seven-day average, with only 14% of available rooms occupied. The Middle East currently has the highest occupancy level (58.9%), followed by China (49.8%) and the United States (40.1%).

Industry profits

SImilarly, global passenger revenue for airline companies in 2020 is estimated to have plunged by around $118.5 billion compared with 2019 levels (IATA, 2020). Some markets, are expected to perform better, largely propelled by a recovery in China, but overall industry losses are expected to continue well into 2021 – see Table 1.

Table 1: Travel industry demand, capacity and profits

Source: IATA (2020)

Jobs

One in four of the world’s new jobs over the past five years were generated by the tourism industry (World Travel and Tourism Council, 2020). Globally, the total jobs lost during the pandemic amount to 142.6 million in 2020 alone, down approximately 40% compared with the previous year – see Figure 3.

Figure 3: Travel and tourism jobs lost in 2020 (percentage)

Source: World Travel and Tourism Council (2020)

The European Commission’s Joint Research Centre (2020) confirmed that between 6.6 and 11.7 million tourism-related jobs were at risk of a reduction in working hours or lay-offs in 2020, representing ‘between 3.2% and 5.6% of the total active population in the European Union’.

Because of its interconnectedness with the broader economy (from accommodation, food and transport to wool and silkworm cocoons), the tourism sector risks being among one of the last to recover, with consequences going beyond the industry itself (see OECD, 2020; United Nations Conference on Trade and Development, UNCTAD, 2020).

What else do we need to know?

While the situation may improve for the travel industry towards the end of 2021, the road to recovery is not easy. A return to 2019 levels in terms of international arrivals could take up to four years, and this recovery will depend on widespread vaccination programmes and the adoption of comprehensive test-and-trace regimes. These systems may themselves be challenging and will take some time to achieve (Holland et al, 2021).

So far, the survival of businesses reliant on international tourism has been down to continued government support. This includes financial aid received by companies such as American Airlines, Delta and United in the United States, and by Air France, KLM and Singapore Airlines in Europe and Asia.

The IMF has increased its lending facility by about $90 million – equal to 2% of global GDP – to support tourism in countries that have experienced higher fiscal deficits as a result of lower firm revenues and rising Covid-19-related spending (IMF, 2020). In Europe, there are calls for part of the EU budget and coronavirus recovery fund to be spent on helping tourism ‘emerge more resilient from the crises ahead’.

The crisis provides an opportunity to reconsider the future of tourism and accelerate longstanding priorities such as addressing climate change and promoting a renewable energy transition (OECD, 2020). Governments must encourage the structural changes required to transform the tourism industry in line with future health and environmental challenges. Addressing these challenges also calls for international organisations to use the full extent of their resources to restore traveller confidence, while helping the tourism industry to adapt and survive (Kara et al, 2020).

Where can I find out more?

• Once the dust settles, supporting emerging economies will be the challenge: This LSE blog from 2020 by Amit Kara, Corrado Macchiarelli and Renato Giacon sets out how best the international community can support emerging economies in the aftermath of Covid-19.
• A simple guide to estimating the impact of Covid-19 on travel and hospitality activity: This IMF report by Margaux MacDonald, Roverto Piazza and Galen Sher presents an estimate of the damage caused by Covid-19 to travel, tourism and hospitality.
• Rebuilding Tourism Competitiveness: This World Bank report sets out the case for protecting firms most severely hit by the pandemic, including airlines, tour operators and small and medium-sized enterprises that rely on tourists.
• Trade and the unequal race to the Covid-19 vaccine: This NiGEM Topical Feature from 2021 by Dawn Holland, Corrado Macchiarelli and Xuxin Mao examines alternative scenarios for the interaction between vaccine distribution and a re-opening of world tourism.

Who are experts on this question?

• Corrado Macchiarelli (NIESR)
• David Roberts (ONS)
• Dawn Holland (NIESR)
• Donald Houston (University of Portsmouth)
• Simeon Djankov (LSE)

Author: Corrado Macchiarelli

Photo by Skyler Smith on Unsplash

The post How is Covid-19 affecting international travel and tourism? appeared first on Economics Observatory.

Recent statistics for the UK and other European countries (Office for National Statistics, ONS, and Eurostat, 2019) reveal that small and medium-sized enterprises (SMEs) have considerably lower readiness to sell online compared with large businesses. There is a further gap between SMEs and micro enterprises, two categories of firms collectively labelled MSMEs. 

Given the potential benefits that e-commerce entails – in terms of both market access and cost savings, which can make firms more resilient to crises – it is worrying that small and micro enterprises appear to be falling behind. It is likely that this has contributed to the closure of a large number of small businesses over the last few months (Facebook, OECD and World Bank, 2020).

What does the evidence from economic research tell us?

E-commerce accounts for an ever-larger share of total turnover in the UK: 18.4% in 2018, up from 16.6% in the previous year. This trend is likely to be accelerated by Covid-19 (Coyle and Nguyen, 2020). But micro and small businesses also realise a smaller share of their total turnover from selling online compared with larger ones. Figure 1 shows that only 6.7% of the turnover of micro enterprises (those with fewer than ten employees) is derived from e-commerce. While this share is higher for small enterprises (those with 10-49 employees), it is still below 10%. 

This share increases to 15% for medium-sized enterprises (those with 50-249 employees), and to over 20% for firms with more than 250 employees. Moreover, the lower use of electronic data interchanges (EDI) by smaller firms indicates a focus on final consumers, rather than selling to other businesses. 

Figure 1: E-commerce sales in the UK by firm size (2018, percentage of total turnover)

Source: Office for National Statistics; and authors’ elaboration

The share of e-commerce in total turnover also differs considerably across sectors (see Figure 2), ranging from around 40% in transport and storage to less than 5% in construction. While a full breakdown by firm size bands is not available, it is possible to exclude micro enterprises. This reveals that in all sectors apart from retail, smaller firms derive a smaller share of their turnover from e-commerce activities. 

There are many possible reasons for the low incidence of online sales by micro businesses, but one could be that less than a half of them have a website in the first place (see Figure 3). While there are likely differences across sectors, this is a striking difference compared with larger firms. For example, 82% of firms with 10-49 employees operate a website and this increases to more than 90% for those employing more than 50 people.

What is more, among those micro and small enterprises that have a website, fewer take orders or bookings online or provide customers with the ability to track their order, two features that are providing considerable benefits to customers. These findings are confirmed by a cross-European survey, which also shows that while SMEs in the UK consider digitalisation a top priority, access to employees with digital skills is a barrier to increased e-commerce activity (European SME Survey, 2019). 

Figure 2: E-commerce sales in the UK by industry sector (2018, percentage of total turnover)

Source: Office for National Statistics; and authors’ elaboration

Figure 3: Use of websites and e-commerce tools in the UK firm by size (2018, percentage of total)

Source: Office for National Statistics; and authors’ elaboration
Note: The first two series consider only firms reporting that they have a website

Based on the trends examined here, it is likely that larger firms were in a much better position to exploit the large and sudden shifts to online shopping arising from Covid-19. This is supported by the fact that large online retailers such as Amazon could increase their market valuation by 40% since January 2020 (Reggiani et al, 2020).

But a recent study finds that 16% of SMEs developed or increased their existing online presence during lockdown by the end of April 2020, and 24% increased their use of digital technologies to facilitate working from home (FSB, Federation of Small Businesses, 2020). The latter point matters as the failure to adopt of information and communications technologies (ICT) and develop digital skills can be a key barrier to a firm’s readiness to turn online. 

SMEs in the UK are often aware that they could use digital technologies more effectively (for example, for digital marketing and e-commerce), but they face time constraints due to other more pressing priorities as well as a general shortage of digital skills in the labour market (UK Commission for Employment and Skills, 2016).

Other barriers for UK SMEs include tight budgets and a lack of willingness and knowledge to invest in and adopt digital technologies (IDC, 2017). In fact, only 20% of UK SMEs view ICT as a driver of competitive advantage, and 35% see it as an enabler of business efficiency. Figures for micro enterprises are even lower as a large fraction is worried about the potential risk of undertaking digital business models. 

While UK enterprises derive a higher share of turnover from e-sales compared with the European average (Eurostat, 2019), only 7% of UK firms made web sales to European Union countries, compared with 15% in Ireland and 12% in Belgium. Eurostat (2019) also highlights high delivery costs, foreign languages, adapting product labelling and judicial reasons as key obstacles for cross-border e-commerce. A recent report shows that only 9% of UK SMEs are engaged in international trade (British Business Bank, 2020) and that adoption of digital technologies are a key enabler of exporting (European SME Survey, 2019). 

These figures depict a mixed departure point for many small and micro enterprises in the UK to move towards selling online during the Covid-19 crisis. This is concerning in a context in which even cross-border e-commerce is estimated to have grown by more than 10% between January and April 2020 (Global-E, 2020), and where consumers in the UK and other European countries are increasingly engaging in online shopping.

Indeed, one recent study finds that in the UK, France and Germany, consumers are making over 50% of their purchases online, and 60% plan to remain shopping online for both essential and non-essential goods after the pandemic (Kantar, 2020). In addition, recent ONS figures reveal that online sales in the UK hit a record high of 33.4% of total retail sales in May 2020 (ONS, 2020). 

How reliable is the evidence and what else do we need to know?

While small and micro enterprises account for 95% of enterprises and 60% of employment worldwide (World Trade Organization, WTO, 2020), they are not easy to track via surveys or other official data sources. There is thus a risk that we do not have a good understanding of their current state and needs. For example, the Eurostat ICT survey only covers firms with ten employees or more, and the European SME Survey only firms with 20-250 employees. Hence, some findings for the UK need to be interpreted carefully, since micro enterprises particularly could be underrepresented due to a lack of data. 

The ONS started to provide differentiated statistics for firms with fewer than ten employees in 2014, but still little is known about them – for example, sectoral statistics are still only available at a highly aggregated level. What is clear is that the ability to distinguish e-commerce performance by SMEs across industries is essential for evidence-based policy-making. Other measures that are needed include indicators of the barriers that MSMEs face in their transition to e-commerce, including variation across UK regions. 

Finally, the timing of statistics is an issue as the latest ONS figures date back to 2018, with more recent data only due to be released in November 2020. As Covid-19 is a very recent and sudden shock, which has already had a strong impact on consumption patterns and the value that consumers place on online goods and services (Coyle and Nguyen, 2020), much more recent data are needed. There is a real concern that the current crisis will lead to the closure of many small and micro businesses that account for a large percentage of the UK’s employment (Financial Times, 2020 and FSB, 2020). 

Several studies make policy recommendations with the aim of ensuring that e-commerce can serve the public in a safe way. This includes training for small and micro enterprises on how to trade safely online (World Bank, 2020). Others highlight that digitalisation can help small businesses to overcome the damage in supply chains caused by Covid-19, by accessing a wider range of buyers and suppliers (WTO, 2020).

On the upside, the WTO brief mentions the UK as an example of countries that have introduced measures to encourage small and micro enterprises to adopt ICT to improve their resilience to downturns and diversify their trading partners. 

Information on government initiatives to support the use of e-commerce by MSMEs is limited. Much more evidence is needed on coverage and success of policy measures and to what extent small entrepreneurs are aware of them. Previous surveys of SMEs in Southeast England have found that they were largely unaware of existing policy instruments with the aim of helping them to adopt and use ICT (Harindranath et al, 2008). 

In addition, action from the government is required to support small businesses to anticipate and address potential risks of e-commerce. A recent study reveals that small firms in the UK have suffered from malicious or fake reviews (20%), sudden changes of terms and conditions (19%) and infringement of intellectual property (13%) when trading online (FSB, 2020). 

Where can I find out more?

• E-commerce and ICT activity, UK: 2018: This ONS report assesses the use of ICT and the value of e-commerce activity by UK businesses.
• State of digitalisation of UK business: This joint report contributes to the debate on how to improve productivity in the UK by evaluating the state of digitalisation of UK businesses.
• Going digital: The challenges facing European SMEs: This report analyses the results from the European SME Survey 2019 on attitudes towards digitalisation.
• Global state of small business report: This joint work by Facebook, OECD and the World Bank presents the findings from The Future of Business Survey, which aims to develop a better understanding of the impact of this crisis on small and medium-sized businesses.
• Recommendations to leverage e-commerce during Covid-19 crisis: This World Bank policy brief proposes a set of measures that governments can take in the short run to support e-commerce during the Covid-19 crisis.
• Helping MSMEs navigate the Covid-19 crisis: This WTO policy brief outlines the state of micro, small and medium-sized enterprises worldwide and lists policy recommendations to contribute to MSMEs’ resilience to crises like Covid-19.
• New horizons: How small firms are navigating the Covid-19 crisis: This FSB study provides insights on how UK small businesses are coping with the Covid-19 crisis in several aspects, and what measures the government can undertake to support them.

Who are UK experts on this question?

• Stephen Roper, Warwick Business School 
• Cecil Prescott, Office for National Statistics
• Tim Vorley, Oxford Brookes Business School
• G. Hari Harindranath, University of London

Authors: David Nguyen (NIESR) and Manuel Tong (NIESR)

The post Are small businesses ready to compete as consumers move online? appeared first on Economics Observatory.