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Businesses diversifying as digital emerges as frontrunner for post-COVID economic recovery

Published on in Coronavirus

The South East LEP Business Recovery Survey shows that more than 40% surveyed said they are diversifying as a result of COVID-19 and the restrictions imposed, with a large number turning to more digital offerings to do so, including investments in technology which will support e-commerce, processing payments as well as webinars and training.

The South East LEP Business Recovery survey called on businesses to detail how they are looking to meet new Government requirements, recover and come out the other side of lockdown – what actions they are taking to adapt to a new socially distanced, COVID-secure business landscape.

Just 3% of businesses said they are “thriving” during the crisis. More than a third are surviving, while close to 23% are transitioning.

At the time of completing the survey, nearly 29% said their business was temporarily closed, while almost 12% said their business was closed “indefinitely”.

COVID-19 presents an unprecedented economic challenge across the SELEP area, our early estimations around the impact of COVID-19 include:

  • a 13% reduction in output – with gross domestic product reducing by £11.7 billion;
  • a 10% increase in unemployment thus far; and
  • 24% of our workforce has been furloughed.

Businesses are looking to digital and technology-based solutions to adapt. Businesses need to be more digitally savvy and SELEP and local partners recognise that we need to rapidly support and increase digital skills in the labour market. Businesses are themselves investing in technology which will support e-commerce, processing payment, hosting webinars, remote training for clients, building websites, developing more online services, virtual viewings and virtual open days.

With an SME-dominated economy, we know that government grants and support so far have provided the area with a lifeblood. With £750 million so far awarded to SELEP businesses, it is evident that the impact of the virus is severe and widespread.

There are some shoots of optimism, with 27% of surveyed SELEP businesses indicating that they felt the crisis has presented opportunities for their business and 49% saying that they were looking to adapt their business models and innovate.

Half of businesses said they will need support in adapting their business models, while 43% need backing to purchase new or additional equipment. More than 40% also need access to short-term capital, and 38% said they need help navigating their financial options.

However, some industries are simply unable to adapt or diversify due to the restrictions imposed. Some of our most significant sectors are most affected by the pandemic:

  • The retail, tourism and hospitality, and construction industries have seen the highest numbers of jobs lost according to the responses our Growth Hub has been gathering from businesses. Likewise, the tourism and hospitality, retail, and professional and business services have seen the highest levels of furloughed staff.
  • The South East has a high number of coastal towns that rely on tourism, as well as high levels of employment within construction. Country-wide, the retail sector is the UK’s largest private sector employer, so it is imperative that these businesses are given the support they need to adapt and become COVID-secure.

South East LEP Chair Christian Brodie said:

“As a region, the South East LEP houses a disproportionate number of businesses in the aviation, hospitality, destination and cultural sectors – all of which have been most affected by COVID-19. The landscape for Higher Education also looks especially challenging. We have nine universities in the SELEP area, and we understand that a cohort of graduates are going to be graduating into an extremely depressed economy this year.”

The pandemic has had a severe impact on employment, with a 27% year-on-year decrease on job postings seen in April 2020. Close to 11% of respondents to our Business Recovery Survey also said that they have had to either make their apprentices redundant or put them on furlough.

Christian Brodie said:

“The devastating impact this crisis could have on apprenticeships – and overall, on the next generation of workers – will be felt for years to come if action is not taken now. Our SELEP COVID-19 Skills Fund aims to help address these issues alongside national funding programmes.”

How is SELEP supporting economic recovery?

The South East LEP’s Strategic Board has recently agreed a package of economic support measures to boost skills and back businesses in the area, including a COVID-19 SME Business Support Fund to help businesses adapt, and a COVID-19 Skills Fund to aid in the reskilling of workers for sectors that have experienced growth during the crisis.

SELEP has been working hard with local partners to respond to a call for projects from Ministry of Housing, Communities and Local Government (MHCLG). The Government wrote to LEPs recently asking for ideas on how they could help to accelerate the delivery of capital projects in order to stimulate the economy over the next 18 months following the COVID-19 pandemic and lockdown. SELEP submitted a £573 million list to Government for investment in 170 projects across the patch, which would collectively bring more than 135,000 new jobs to the area, boost the local economy and drive not just short-term, but long-term growth in a number of industries.

The South East LEP is using the data we are collecting from businesses to feed directly into government. We are working with our partners in our Growth Hubs, Chambers of Commerce, Universities, Local Authorities and business support organisations such as the Federation of Small Businesses to support local enterprise.

In terms of the Government’s COVID-secure guidelines, more than half of businesses said they felt they would be able to meet the requirements set out, with the biggest challenges including capital to adapt, supply chains, and confidence from staff to return to the workplace. Our Growth Hub has, to date, helped more than 14,000 businesses during the COVID-19 crisis, including advice on the financial options available. The South East Business Hub (SEBH) website contains a comprehensive repository of financial information, general business support, sector-specific guidance, webinars and training, as well as our fact sheet outlining the key financial support on offer to SMEs.

Our Business Recovery Survey is still open, and we urge all businesses in the South East to complete it, which should take no longer than 5-10 minutes. This means that the LEP can push government for the greatest level of support as the country begins its recover from the COVID-19 pandemic. We are, and will continue, working hard to ensure that the South East leads the road to recovery and emerges from the crisis with a business landscape that is more resilient than ever.

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