28 Jul 2021
By Stuart Patrick, Chief Executive of Glasgow Chamber of Commerce
The economic damage from coronavirus has not been spread evenly across the country, with new evidence confirming deprived communities have taken the biggest hit.
Last week a research team from the University of Nottingham, working with academics from Warwick Business School and the University of Chicago’s Chicago Booth, announced an index demonstrating the link between pre-Covid deprivation in local areas and the economic impact of the extended lockdowns. Data includes material capturing consumer credit and spending, travel data and business financial distress.
In England amongst the top 10 most affected communities were Blackpool, Great Yarmouth and Liverpool along with the three London boroughs of Barking and Dagenham, Newham and Haringey - for Scotland it was Renfrewshire and Glasgow City. All areas with large pockets of long-standing deprivation.
Team leader Professor John Gathergood said: “Local areas have had very different experiences of the pandemic, with some benefitting from working from home as people spend more of their time living and working in the suburbs, whereas central city areas and rural towns have been particularly affected.“
The team encouraged the UK government to consider their work when deciding on the allocation of Levelling Up funding, knowing there is a competitive element involved in that decision.
No doubt the evidence will also be of importance to the Scottish Government given its concern to secure inclusive growth that will spread the benefit of economic recovery to those communities that have always struggled to share in economic success.
It is well understood that economic sectors have been affected very differently by Covid-19 and another report, this one by the Glasgow City Region Intelligence Hub, sketched out how important some of those sectors are to what is known as the foundational economy - a concept presented initially by the Centre for Research on Socio-Cultural Change in 2013.
The foundational economy captures the basic services and products essential to our quality of life ranging from transport, water and power through health, education, food, leisure and hospitality. It typically employs at least half the workforce - in Germany 58% and in Italy 56%, while in Scotland it is even higher with 62% as a whole and 60% in Glasgow City region.
Contrast is deliberately made with knowledge-intensive professional services or those high-tech sectors that generally secure government support through industrial or economic development strategies – and which are strongly represented in both Scotland’s export and foreign direct investment action plans.
The pandemic has sorely tested some of the sectors like retail and hospitality that are significant contributors to the foundational economy. These are also sectors that traditionally have had lower pay but have often provided entry points into the labour market for many people in the more deprived communities who struggle to get anywhere near the high-tech economy.
Here then is the perpetual dilemma with which we must struggle as we rebuild our economy. The natural tendency has been to invest in the higher technology industries which we see as the source of future growth and which tend to pay higher wages, and that will undoubtedly still be worthwhile.
But given where coronavirus impact has fallen heaviest, perhaps at this time we need to pay more attention to the foundational economy and to our deprived communities.
That needn’t be at the expense of improvements in productivity. Think tank IPPR Scotland argues that a policy aimed at our less-productive smaller businesses could lead to quicker results both for productivity and for pay with the outcomes going most to the poorest households.
Having watched the painful experience of so many traditional small family businesses in recent months they certainly deserve better.
This article was first published in The Herald on Wednesday 28 July 2021
