Building on the latest figures from the Office for Budget Responsibility (OBR), CPP analysis finds that the economic impact of coronavirus will vary significantly across the country. The decline in economic output is estimated to reach close to 50% in parts of the Midlands and the North West in the second quarter of this year. In other parts of the country, the hit to the local economy may be half that.

Earlier this week the OBR published its analysis of the likely impact on the UK economy resulting from the coronavirus crisis. The OBR expects real GDP to fall by 35% in the second quarter of this year. This 35% decrease is calculated as an average of the likely impact on different sectors, weighted according to the size of each sector in the national economy (see table in technical notes below). We have applied this methodology to every local authority district in the UK, weighting the average sectoral hit by the distribution of each local authority’s GVA by sector.

The results show significant place-based variation in the size of economic contraction resulting from the coronavirus shut down (chart 1). In Pendle, the local authority we estimate will be hardest hit, the decline in GVA is estimated to reach 49% in Q2. At the other end of the scale, the Orkney Islands is estimated to see a hit of 16% of GVA.

Chart 1: Estimated decline in GVA for the top 10, bottom 10 and median performing local authority districts in the UK (Full ranking can be downloaded below - please contact us for the full dataset)

There is a clear regional dimension to the results. Nine of the ten worst affected local authorities are in the Midlands or the North West (Chart 2). Of the twenty hardest hit local authorities, none are in the South East or London. The results display less of a regional dimension in terms of those places least affected by the economic crisis. No region is home to more than two of the ten local authorities with the lowest estimated decline in GVA.

Chart 2: 9 of the top 10 and 16 of the top 20 are in the Midlands or the North West

The analysis shows the importance of viewing the economic impact of the coronavirus through a place-based lens. CPP takes a place-based perspective in all our work, recognising that the ‘national economy’ and measurement of GDP is an abstract concept without such local drill down. The challenge the Chancellor then faces is one of shoring up, before moving to a revitalised levelling up agenda that recognises the new place-based challenges facing the economy. In the coming weeks and months, we will be working to explore the potential longer-term economic challenges and policy solutions for different places in the wake of this crisis.

Technical notes

Table 1.2 from the OBR coronavirus commentary: Output losses by sector in the second quarter of 2020

• See paragraph 1.18 of the OBR commentary for their methodology of calculating the effect on output for each sector.
• We assume that the impact on a sector output (e.g. a 55% fall in manufacturing) remains constant across local authorities.
• Sectoral GVA for local authorities is only available for Agriculture and Mining, energy and water supply together, so we merge the sectors in our analysis and use a weighted average for the effect on output (-17%). This assumes the relative size of the two sectors is constant across the country.
• Other services includes ‘other service activities’, ‘Activities of households’ and ‘Arts, entertainment and recreation

This article was first published by the Local Government Chronicle.

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