UK Markets close in 3 hrs 8 mins

Jobs in cafes and shops may never bounce back – and ministers must address this

Phillip Inman
Photograph: Barcroft Media/Getty Images

To save your local cafe and beat the virus, dine at well-spaced tables in the street. To watch films on a big screen, take your car to the local drive-in cinema. And to get fit, join an open-air Pilates class.

All that is easier done in Greece and Spain than in the UK, but that shouldn’t stop Britons thinking about new ways to enjoy ourselves over the coming years with an ever-present virus. If we don’t, unemployment is going to be as bad as it was in the 1980s, when the Thatcher government “let go” the steel and mining industries without any consideration for people’s livelihoods, scarring large parts of the country for decades. This time the worst-hit sectors will be leisure, travel, tourism, hospitality and retail.

Strategic planning is not something we have done much of during the past 10 years – except in discrete bunkers such as those in the Bank of England, where policymakers have plotted the banking sector’s return from the 2008 crash. Not since the Blair/Brown years has anyone at the centre of government been given the space, time and resources to produce some plans and not be ignored.

The Tory party under both David Cameron and Boris Johnson has preferred to guess at the best solution and busily make amends when it doesn’t work. This sometimes careless, sometimes dogmatic attitude to public policymaking was always going to have a high cost.

Think of Chris Grayling’s privatisation of the probation service (soon to be renationalised, we hear from murmurings inside Whitehall) and Iain Duncan Smith’s welfare reforms. The cuts to public health budgets, which George Osborne instigated, were always going to leave the UK woefully exposed when anything like a pandemic arrived.

As the Conservatives yet again try to make amends for their past mistakes, the nation must adjust to a new normal.

Customers may resist a return to normal, feeling that however enjoyable it is to go out and spend, the risk is too high

Covid-19 is going to hang around because mostly it is not deadly. For some people who contract it, the virus can do terrible and lasting harm; it can live in others without causing any symptoms. No one yet knows why some people are more susceptible than others.

That leaves everyone fearing the virus and not knowing who has it and who doesn’t. For businesses, that means making a judgment about the next year at least and deciding – whatever happens with test and trace, or a vaccine – that physical distancing will remain.

Even if businesses try to return to something like normal, customers will resist, feeling that however enjoyable it is to go out and spend money, the risk is too high.

The desperate lack of planning by the hapless Gavin Williamson and his chaotic education department that preceded a return to the classroom for some children is a case in point – and sparked a predictable reaction from parents. There is every likelihood that the leisure and hospitality industries will face a similar boycott, at least from older customers, who will feel more vulnerable.

In his latest report, Dhaval Joshi, investment strategist at BCA Research, says a simple return to “normal” will be disastrous. Analysis of the US jobs market – which is similar to the UK’s but has better data – shows that the leisure and hospitality sector generates 11% of jobs, but just 4% of output. Retail generates 10% of jobs, but just 5% of output.

financial sector

So if both sectors are operating at half their pre-pandemic capacity, output will drop by 4.5%, but employment will collapse by 10.5%.

The reverse is true for sectors that are relatively unaffected by social distancing. Financial activities (which includes real estate) generates 6% of jobs, but 19% of economic output. Information technology generates just 2% of jobs, but 5% of output.

“If economies reopen and social distancing persists – either via government policy or personal choice – output can rebound in a V-shape, but employment cannot,” Joshi says.

us leisure

Friday’s fall in US unemployment, and Donald Trump’s bombastic declaration of a bounceback in the jobs market, doesn’t alter the need for change. Service industries in the US and Europe could still suffer millions of permanent job losses.

To avoid this, business leaders must jointly come up with imaginative ways of delivering services. Acting alone will be counter-productive. Industry associations and local employers’ groups will need to work with communities and staff to make investments tailored to physical distancing.

It would help if local government had the resources to coordinate efforts, but meddling Williamson, communities minister Robert Jenrick and others in the Vote Leave cabinet won’t let that happen.

The state’s power remains in Whitehall – which knows best, except when it very often doesn’t.