Communities Economy

Coronavirus: the impact on the Welsh economy

This article uses available data to explore the impact of the coronavirus pandemic on economic output, businesses, sectors, the labour market, and on different groups within Welsh society.

Estimated reading time: 8 Minutes

1 July 2020

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

Countries across the world are experiencing the most severe economic recessions for nearly a century due to the coronavirus pandemic. The Counsel General and Minister for European Transition, who is leading on Wales’ recovery from the pandemic, has said that:

Coronavirus has had a significant impact on all countries around the world and Wales. As well as the health risks; jobs are at risk; public finances are at risk; our vulnerable communities are at risk.

There can be no doubt that we face huge, unprecedented, challenges.

There can be no doubt that we face huge, unprecedented, challenges.

This article uses available data to explore the impact of the pandemic on economic output, businesses, sectors, the labour market, and on different groups within Welsh society. We’ll be publishing a separate article on statistics relating to the business support measures taken by the Welsh and UK Governments.

Impact on economic output

In April 2020, UK Gross Domestic Product (GDP) declined by 20.4%, the largest monthly fall since records began. GDP measures the value of goods and services produced, and is a measure of economic growth.

While there are not monthly GDP figures for Wales available, the Office for National Statistics (ONS) does produce quarterly figures although these will not be available for the pandemic period until later this year.

In the meantime, the Economic Statistics Centre of Excellence set up by the ONS has published quarterly estimates of GDP for devolved nations and English regions covering the first quarter of 2020. This dataset looks at historic growth for the devolved nations and English regions as well as factors such as oil prices and inflation. It uses these to estimate how the UK decrease in GDP for quarter 1 was allocated across the different parts of the UK.

Figure 1: Estimates of change in GDP for devolved nations and English regions in quarter 1, 2020

Figure 1: Graph showing estimated change in Gross Domestic Product in quarter 1, 2020 for devolved nations and English regions
Source: Economic Statistics Centre of Excellence, Regional growth at the start of Covid-19: What happened across the UK in Q1 2020?

Impact on business

The latest Coronavirus and the economic impacts on the UK survey by the ONS shows that at the end of May:

  • 20% of Welsh businesses had temporarily closed or paused for trading, the highest percentage of any of the UK nations. The Bevan Foundation states that these closures are most likely to be in rural areas and the Valleys.
  • 65% of Welsh businesses had experienced a decrease in turnover from what they would normally expect at this time of year, similar to the picture across the UK.  23% of businesses reported that their turnover has decreased by more than half.
  • 46% of Welsh businesses had six months or less cash reserves,the highest percentage of the UK nations.

Figure 2: Trading status of businesses by UK nation, 18-31 May 2020

Figure 2: Graph showing trading status of businesses by UK nation, 18-31 May 2020

Figure 3: Percentage of businesses reporting a decrease in turnover by UK nation, 18-31 May 2020

Figure 3: Graph showing the percentage of businesses in each UK nation reporting a decrease in turnover, 18-31 May 2020

Figure 4: Percentage of businesses with six months or less cash reserves by UK nation, 18-31 May 2020

Figure 4: Graph showing the percentage of businesses with less than six months cash reserves by UK nation, 18-31 May 2020
Source for figures 2-4: Office for National Statistics, Coronavirus and the economic impacts on the UK: 18 June 2020 – data for Wave 6

Impact on sectors

The Bevan Foundation highlights that two sectors that have been most affected by closure requirements – food and accommodation; and arts and recreationaccounted for more than half of all temporary business closures in Wales. When added to the retail sector, parts of which have started to reopen this week, almost 20,000 businesses in these three sectors were temporarily closed for a three month period during the lockdown.

Wales employs more people in ‘shutdown sectors’ than many other parts of the UK. The Learning and Work Institute Cymru highlights that Wales and Scotland have a greater reliance on employment in ‘shutdown sectors’ than Northern Ireland and England. The Centre for Towns found that Wales employs a higher percentage of people in these sectors than all English regions except the South West. It also states that small coastal towns were the most affected areas in Wales, including Aberystwyth, Porthcawl and Llandudno.

The Welsh Government’s Tourism Business Barometer found that at the start of May businesses within the tourism sector had lost 20% of their normal annual revenue, with some firms having lost up to 80%. It also highlighted that around a quarter of businesses do not expect to survive the next three months if lockdown continues.

90% of manufacturing businesses in Wales have experienced a downturn in orders, with Make UK reporting that this was higher than the UK average of 83%. Make UK also highlighted that employment and investment in the Welsh manufacturing sector had decreased over the previous quarter, and that firms are forecasting considerable decreases in output, orders and employment over the next three months.

Impact on the labour market

The official labour market data from the Labour Force Survey covers a three-month period, meaning that data that wholly covers the pandemic period will be available next month. However, in the meantime there are other sources that produce up-to-date information for Wales.

At UK level, the ONS states that there are 600,000 fewer paid employees in May than there were in March, with much of the reduction coming at the start of the pandemic.

The most up-to-date indicator of unemployment for Wales is the claimant count, although this has some limitations. It includes people who are either claiming Job Seeker’s Allowance or are required to search for work as a condition of receiving Universal Credit. The claimant count rate for Wales in May 2020 was 8%, the highest rate since 1996, and slightly higher than the UK figure of 7.8%.

As there have been some changes to Universal Credit in recent months, the ONS suggests that this may have increased the number of people in work eligible for Universal Credit who would be included in the claimant count. This means that not all of the increase over the last couple of months will be due to an increase in unemployment.

Figure 5: Claimant count rate for devolved nations and English regions, May 2020

Figure 5: Graph showing the claimant count rate for the devolved nations and English regions, May 2020
Source: Office for National Statistics, Labour market in the regions of the UK: June 2020 – dataset S01: Regional Labour Market Summary

Workers who have been furloughed are classed by the ONS as being temporarily away from work rather than unemployed. Figures released by HM Treasury show that at the end of May 316,500 jobs in Wales had been furloughed under the Coronavirus Job Retention Scheme out of a total of 8.7 million jobs across the UK. Workers who have been furloughed by more than one employer will be counted more than once.

Figure 6: Number of jobs furloughed under the Coronavirus Job Retention Scheme, by Parliamentary Constituency

Figure 6: Interactive map showing the number of employments in each Welsh local authority furloughed under the Coronavirus Job Retention Scheme.

The Institute for Social and Economic Research’s Understanding Society study concluded that 22% of households in Wales had lost at least 20% of their weekly earnings between February and April, with 36% of households having lost at least 5% of their earnings. These figures were slightly lower than the UK average.

People have been working much fewer hours since the start of the pandemic. The Understanding Society study found that average hours worked per week in Wales fell from 34 to 22 between February and April 2020. Across the UK, the ONS states that hours worked fell by 9% in the year to February-April 2020, the largest decrease on record.

Workers in Wales have been able to work at home less than in other parts of the UK. Griffith and Taylor find that just over 40% of workers in Wales are employed in occupations that can be done at home. London and the South East are the only two parts of the UK where over 50% of workers can perform their roles at home.

For those looking for work, job vacancies are also considerably lower than before the pandemic. The Institute for Fiscal Studies states that in mid-May job vacancies in Wales were nearly 60% lower than at the same time in 2019. The Institute for Employment Studies found that Cardiff, the Valleys and rural areas have seen the greatest reductions in vacancies between March 2020 and June 2020, and that there are around 15 unemployed people in Wales for each vacancy available.

Impact on different groups within society

The report of the Welsh Government’s advisory group on coronavirus and Black, Asian and Ethnic Minority (BAME) communities highlights that BAME groups are more likely to be employed in ‘shutdown sectors’ across Wales than white people. In 2019, Welsh Government research shows that 20% of BAME workers were employed in these sectors compared to 15% of white people, although as Wales Fiscal Analysis shows there is considerable variety between different ethnic groups. Over half of all BAME workers employed in shutdown sectors worked in the food and beverage service sector.

The report also highlights that BAME workers are more likely to be in low-paid, precarious work and therefore enjoy fewer employment rights such as sick pay, meaning that workers may “have no choice but to continue working”.

Wales Fiscal Analysis has found that workers of Bangladeshi, Black Caribbean and Pakistani ethnicity are most likely to be employed in ‘shutdown sectors’ in Wales.

Figure 7: Percentage of workers in Wales employed in ‘shutdown’ sectors by ethnic group, 2019

Figure 7: Graph showing the percentage of workers employed in shutdown sectors in 2019, by ethnicity.
Source: Wales Fiscal Analysis, Covid-19 and the Welsh economy: shutdown sectors and key workers

While previous recessions have tended to reduce employment in sectors which largely employ men, emerging evidence at a UK level suggests that women have been particularly affected by the shutdown so far. For example, the Resolution Foundation has suggested that women are more likely than men to have been furloughed, lost their job or to have lost hours and pay. Similarly, academics from Oxford, Cambridge and Zurich Universities have published research stating that in the UK women are around 5% more likely to have lost their job since the start of the pandemic than men.

The Understanding Society survey has found that mothers in Wales are more likely to spend more time on home schooling and housework than fathers, reporting that they spent 39 hours a week on these. However, it also found that fathers in Wales reported spending more time on home schooling and housework than elsewhere in the UK.

The Welsh Government found that, in 2019, 18% of women were employed in ‘shutdown sectors’ compared to 14% of men, and that women aged 16-24 and 65+ were particularly likely to work in shutdown sectors. For both men and women, 16-24 year olds were the most likely age group to be employed in a ‘shutdown sector’.

Figure 8: Percentage of workers employed in ‘shutdown sectors’ in 2019 by gender and age

Figure 8: Graph showing the percentage of women and men in Wales employed in ‘shutdown sectors’ in 2019, by age group
Source: Welsh Government, Coronavirus and employment: analysis of protected characteristics

At UK level, the Resolution Foundation has found that 30% of workers in the lowest 20% of earners had been furloughed or lost their job since the start of the pandemic, the highest percentage of any group. In contrast, 8% of the top 20% of earners have been furloughed or lost their jobs. The Resolution Foundation also found that workers on zero-hours contracts; with variable hours; employed by an agency; or on temporary contracts were much more likely to have been furloughed or lost their job than those in more traditional employment.

Wales Fiscal Analysis has found that almost 50% of the lowest 10% of earners in Wales were employed in ‘shutdown sectors’. This is ten times as much asthe top 10% of earners in Wales.


Article by Gareth Thomas, Senedd Research, Welsh Parliament

We’ve published a range of material on the coronavirus pandemic, including a post setting out the help and guidance available for people in Wales and a timeline of Welsh and UK governments’ response.

You can see all our coronavirus-related publications by clicking here. All are updated regularly.

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