Demand hit by local restrictions and holiday season
The August holiday season and additional restrictions imposed in Greater Manchester have contributed to a dampening of demand, according to the fourth GM Covid-19 Recovery Tracker survey conducted by Greater Manchester Chamber of Commerce. The two Recovery Tracker surveys conducted in July showed improvements in customer demand, cash positions and business confidence relative to the low levels in spring.
The latest survey results show that current sales have remained stable but advance orders have weakened. Seasonal fluctuations in the main holiday period of the year and restrictions imposed in parts of Greater Manchester appear to have had an impact on economic activity.
The sectors that usually benefit during the summer holiday season are retail, leisure and tourism. These are amongst the worst affected sectors and may not have had seen a significant increase in sales. There is evidence government support schemes as ‘Eat Out to Help Out’ did increase restaurant patronage but since the discount was not available on all days of the week, the scheme could have shifted demand from the second half of the week to the first. Despite resulting in increased footfall in August and helping many restaurants increase revenues, it is yet to be determined whether the scheme had the desired macroeconomic impact. The reduction in sales and revenues remains the primary challenge that businesses have been facing during the pandemic but compared to historic lows during lockdown, there is continuing improvement.
Subrahmaniam Krishnan-Harihara, head of research at Greater Manchester Chamber of Commerce, said: “The Chamber’s Covid-19 tracker surveys shows the recovery trajectory for Greater Manchester’s economy after the historic economic collapse. Our data has shown that the recovery is muted and not sufficient to lift the UK out of recession yet. The balances relating to customer demand are still negative and continue to hover in the -15 to -20 range. Not only does this mean that more businesses reported a reduction rather than an improvement, but it also shows a short-term stabilisation in business activity. A full recovery is some time way.
“Now that the ‘Eat Out to Help Out’ scheme has ended, hospitality businesses will be particularly looking forward to today’s relaxation of restrictions in some boroughs. Other government schemes are also being wound down, or support reduced, and could impact businesses. But there is some good news – cash flow positions are stable. Businesses are more confident of improving revenue but margins appear to be low at the moment.”
Data from the latest Recovery Tracker also reveals challenges emerging with regards employment. Many large retail chains have already announced store closures and job cuts. The survey results show that job losses are not restricted to retail and hospitality sectors with businesses in many other sectors beginning to be affected. Further improvement in demand and liquidity is critical to business investment and job retention.
Subrahmaniam added “The survey results show that recovery prospects are muted. Businesses have not reported any substantial increase in sales and revenue in the last six weeks. Accordingly, we have revised the recovery outlook. There is a lot of anxiety that the recent increase in infections may require more restrictions to be imposed. The pandemic is both a public health and economic crisis and the government should not rule out support for businesses which are adversely impacted by a local lockdown. Without a further improvement in business activity, there is the risk of a prolonged period of economic stagnation. That can only be avoided with additional support and we call on government to not put the nascent recovery at peril.”
