Wednesday 6 May 2020

corona shock

Corona shock: Week III

This year, we abolished Easter

By Chris Cook and Chris Newell

A

re signs of economic life re-emerging in England and Wales? The latest readings from our weekly Corona Shock tracker are certainly positive. Crude household total spending increased by around 10 per cent on the week before: shops and businesses may have been finding new ways of serving their customers.

But the sheer scale of the shock remains mind-blowingly large: the data being examined by Tortoise, which shows direct spending by a large group of UK households, suggests their spending remains 28 per cent below the same weeks of last year. Compared to the period immediately before the lockdown in March, spending is now down by 34 per cent.

One swallow does not make a summer: the latest uptick may, in part, reflect some natural rebound because our data is for the week ending 21 April. The week before that was Easter; it contained two bank holidays. This bounce also only brings us back to where we were a few weeks ago. And the normal clichés about green shoots do not apply when we are still in lockdown and so far from anything that might be called a recovery.

The data, shared with Tortoise by SIB, a regeneration charity, continues to reveal the deeply uneven effects of this shock. Immediately after the lockdown, the ten towns with the biggest exposure to manufacturing were 44 per cent down on the same week last year. Now they have recovered some ground to be just 31 per cent down. But the ten towns with the largest employment exposure to tourism are still sinking – now down by 61 per cent:

  • The most heavily affected economic areas are Wadebridge, Penrith, Kingsbridge and Dartmouth, Pwllheli and Porthmadog, and Penzance. Spending is down in these areas by between 75 and 69 per cent. All five areas are tourist towns.
  • The most heavily affected counties are tourism-heavy, too. Gwynedd and Cornwall have moved into first and second place. Gwynedd, home of the Snowdonia national park, is down by 59 per cent. Cornwall’s losses stand at 53 per cent.
  • Brighton is still most the severely affected mid-sized town or city, with a 59 per cent loss. Towns reliant on visitors, be they shoppers or tourists, are doing badly: Oxford, Colchester, Canterbury and Cheltenham are the next in line.
  • Sheffield remains the most afflicted bigger city, with sales down by 49 per cent. London, which is flattered by its financial centre, is down by 12 per cent.

This is, in truth, a story about Easter – or the lack of it. Here is how spending shifted last year in the ten towns with the biggest employment exposures to education, tourism, retail and manufacturing around Easter last year.

We’ve benchmarked spending to two weeks before Easter, so you can see how spending changed in those towns relative to that week last spring.

The Easter season was very clear: it peaks with a 30 per cent increase in spending in tourist towns, and a 10 per cent bump in shopping hubs. Education towns – lacking students – face a slight dip. Manufacturing towns stumble, too, as the two bank holidays and school breaks take effect. But if you look at data for this year, there is no such pattern. And, remember, at the start of this graph, spending is down by, for example, 54 per cent in the tourist towns.

What is striking is that, this year, these different types of towns are all behaving much alike. Britain is in sync as we spend locally. Spending went up and down in the tourist towns and manufacturing towns alike in the past few weeks, week-on-week.

They are quite closely packed. Of the 173 economic areas, only 54 grew by more than 15 per cent or less than 5 per cent in the latest data week.

But that uniform cycle means tourist towns, which would normally get a huge surge – and from a much higher level – are being butchered. It also means heavy losses for retail. And this new cycle means that losses to manufacturing towns look a little less severe because, in a normal year, our data would be covering some so-so weeks.

This week, Bradford joins the rarefied company of Milton Keynes and Yeovil in having seen increased spending since the lockdown, compared to the same week of last year. There is a slight curiosity here: Bradford is still down 12 per cent since March.

The ward which is driving this result happens to include the headquarters of Morrisons, the supermarket: internal accounting there appears to have been causing some slightly strange swings back and forth in local spending. Last year, it was recording steep declines.

A few towns have similarly curious spending patterns. Leeds, which happens to contain Asda, and Welwyn Hatfield, home of Tesco, are also doing suspiciously well. And some of these shifts suggest changes to the way these “local” businesses are logging sales.

But this is a moment to note the continuing astonishing figures for Hoxton and East Shoreditch, a ward in Hackney in central London. Spending in this ward, which has about 13,000 residents, accounted for 6 per cent of all spending in our sample last week in all of England and Wales – and has tripled since lockdown. It might be the area’s notorious hipsters spending a lot on beard maintenance and penny farthings. But it also happens to be the home of a few large businesses – including Amazon.

London, this week, has benefitted from that national 10 per cent boost in spending. It is now just 13 per cent down. But it remains a tale of three cities. In the inner boroughs, spending is now up by 5 per cent. But that reflects the City and its surrounds in Hackney and Islington. Spending in the rest of the middle, excluding those three boroughs, is down by 39 per cent. The outer boroughs are down by 33 per cent.

This week, we got a new type of data, which lets us break down consumer spending a bit more. We have obtained spending data for people in the Grimsby area, on the north-east coast. We will be writing more about the town, where we have a strong Tortoise Network presence. We, along with SIB, will present some findings on the town at a ThinkIn on 19 May to discuss the town and work out what is happening.

But from the data we have already examined from Grimsby, we can start to see the shape of the household response. Compared to the same week as last year:

  • Grocery sales are up by 14 per cent. 
  • Spending at food and drink outlets is down by 67 per cent
  • Travel and accommodation spending is down by 73 per cent
  • Health and beauty spending is down by 67 per cent. Spending on clothes has halved.

Grimsby is, in some ways, an unusual place; it is not a representative town, out on the Lincolnshire coast. Its population is not as prosperous as the country at large. It struggles to support higher-skilled jobs.

But these trends match what businesses are saying nationally. We will be bringing you back to Grimsby – and a few other places: we think that by looking at a few towns in detail, we can understand the national story a little better.

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