by Tuan Luong and Zenas Azuma

The economic impact of the COVID-19 pandemic has sparked concerns among economist, policymakers, labour force, students and quite frankly the general population. To fully comprehend the gravity of the situation pertaining to the national setting, a further analysis concerning the consequences of the pandemic on the economy is required.

In this section, we will provide an estimate of the potential impact of the COVID-19 outbreak on the labour market in England and Wales. Our methodology has three main steps. First, having retrieved data from the NOMIS Labour force survey[1], we took the share of workers that could work from home in each occupation. The share was calculated by the Resolution Foundation, which was based on the Labour Force Survey. Second, we calculated the occupation-by-industry shares to infer the shares of workers that can work from home within a given industry. This share was calculated from the National Census carried by the Office for National Statistics. The latest available Census took place in 2011. We assumed that there is little change in the occupation share in each industry. We then multiplied this share with the total employment in each industry by counties in 2018, which was the latest available data. This gave us occupation-by-industry employment in the UK. Finally, we discounted these employments by the share of workers that could work from home that we calculated in the first step.

According to the Standard Occupation Classification, there are nine main occupations. Their shares of working from home are given by the following table:

Managers, directors and senior officials0.56
Professional occupations0.51
Associate professional and technical occupations0.49
Administrative and secretarial occupations0.55
Skilled trades occupations0.08
Caring, leisure and other service occupations0.04
Sales and customer service occupations0.24
Process, plant and machine operatives0.06
Elementary occupations0.06
The probability of working from home across occupations

Source: Resolution Foundation 2020

IndustryProbability to Work from Home
Energy and Agriculture0.24
Manufacturing0.19
Construction0.13
Wholesale and Retail0.22
Hotels and Restaurants0
Transport and Communication0.53
Finance, Insurance and Business0.79
Public Administration1
Education0.14
Health0.04
Other Services0.22
Other Services0.61
The probability of working from home across sectors

Source: Resolution Foundation 2020

The impact of the COVID-19 pandemic is highlighted in the estimated findings of Effective Employment (represents the percentage share of the labour force that can effectively work from home) in England and Wales. From the estimation, it can be inferred that the construction industry is the industry most impacted by the pandemic across England and Wales in terms of productivity. This is directly followed by the jointly proportionally shared impact experienced by the agriculture, forestry and fishing industry, mining and quarrying industry, electricity, gas, steam and air conditioning supply industry, and the water supply, sewage, waste management and remediation activities industry.

Moreover, from the estimation, it is notable that the industries with a relatively higher density of low-skilled and low-wage labour force were more impacted by the pandemic. Also, regarding occupations, this argument is still relevant as low-skilled and low-wage workers such as Process, Plant and Machine operatives and those with elementary occupations only have a 6% probability of working from home. This point is further complimented when reflecting on the relatively least affected industries (financial and insurance activities industry, professional scientific and technical activities industry, administrative and support service industry and real estate activities industry), as their wages are not as low. This highlights the potential impact of this virus to poverty, as the reduction in the generation of income for these low-income households coupled with continual expenditure, can lead to a depletion of their savings. This predicament stresses further as the lockdown goes on. Although, the government has set out a plan to partially reopen nursery and specific years for primary and secondary schools, and shops in the retail sector which meet the necessary COVID-19 secure guideline by the 15th of June[2], this does not ensure that the economy will pick up from where it left off.

It is difficult to predict the extent of the impact and how the economy will react as it remains unclear as to when the pandemic will end. However, one can reflect on what is known, to estimate the likely economic implications of the pandemic by using the estimation from Effective Employment. Although the lockdown is helping to save lives and protecting the NHS, it is accumulating cost for businesses and hindering the generation of revenue and causing a loss in sales across supply and demand agents (loss in seasonal sales cannot be retained in a later month). From the graphical representation of the estimation representing Effective Employment in England and Wales, it is clear that the overall economic productivity of the region has dropped significantly. The information derived also highlights the loss of labour by industry which could potentially lead to unemployment if productivity is not restored quickly. The halt of operations in businesses such as aviation travel, retail, restaurants, hospitality (hotels) and the like, together with the closure of factories have had a significant negative impact on the labour market. This leaves some workers furloughed while others are made redundant and makes doing business extremely difficult for the self-employed, which could potentially result in a further rise in unemployment.

Moreover, as consumers stay at home and the lockdown is prolong, there is a subsequent reduction in the demand for commodities across multiple industries. Such declines are reflected in the fall in oil prices[3] and the subsequent fall in major stock market indices[4]. In addition, the pandemic has disrupted global supply chains and production, which may potentially lead to a retreat from globalisation and pose a new meaning to competitive advantage. Other significant issues caused by the pandemic are in regard to the reduction of revenue creation, balance sheet losses and the depletion of their financial reserves. This raises concerns regarding the defaulting of payments, liquidity and their overall impact on credit systems. The disruption the pandemic causes to productivity and long- and short-term debt cycles is detrimental to the state of the economy. This issue cuts across industries, and it is vital for businesses to remain solvent, especially for closed ones as the effect of such losses on multiple business and organisations, could significantly change the shape of the economy.

 The impact of the pandemic threatens double-digit unemployment rates and a recession or depression that hinges on the economy‚Äôs ability to bounce back in terms of a V, U or L shaped recovery. The creation of a viable vaccine may help ensure that there will be a V-shaped recovery. Nonetheless, the economy should aim to avoid an L-shaped recovery. Proactiveness from government officials and the prevention of a second wave of the virus is vital to avert an economic catastrophe. Measures such as zero interest rates, buying treasury debts, debt restructuring, debt forgiving, cutting spending (austerity) and money redistribution and printing remain key tools to be strategically fashioned to help soften the blow. However, the extent of the use of government relief packages must be done diligently to ensure that they do not become harmful and result in scarring of the economy.

Moreover, the consequences of the pandemic may delve into the area of behavioural economics and may, therefore, be prudent to take into account the possible lingering effects it may have on consumers and businesses. Fear may develop in the sense of herd behaviour among customers as they may seek to either boycott or purchase certain commodities in the spirit of safety or longevity, respectively. One cannot confidently predict how quickly consumers will return to their normal activities after the virus is contained. Consumers cannot be pressured into air-travel, restaurant dining or stadium attending et cetera. Therefore, it is vital to consider the possible industrial structural changes that may occur as a result of the potential changes in the demand from customers due to the pandemic. For instance, parents and students may decide to opt for Home-schooling or online universities as a precautionary measure. Also, a fear of social gatherings may lead customers to boycott public places and lead businesses to increase the prices of the commodities they offer in anticipation of the customers they might lose as a result of fear.

The behaviour of the government during this pandemic is critical. The creativity, adaptability and inventiveness of the government and businesses may be the way out of this economic predicament. Though there have been many negative repercussions of the pandemic, the government can use this situation as an opportunity to make changes and restructure the state of affairs within the nation particularly towards the reduction of global warming. Currently, the wheels of the economy are turning slowly, and businesses and the government need to adjust to the new normal quickly. Despite certain proactive measure taken by the government such as the government furlough scheme, all factors considered, a quick recovery to normal depends on a vaccine and the adaptiveness of businesses (undergoing a massive learning-curve and incorporating new modern ways of conducting business). Finally, the individual cost of the pandemic to NHS hospitals should be monitored to ensure it is not brought to the brink of collapsing.


[1] NOMIS Labour force Survey: https://www.nomisweb.co.uk/query/construct/summary.asp?mode=construct&version=0&dataset=168

[2] Coronavirus: All non-essential shops to reopen from 15 June -PM, https://www.bbc.co.uk/news/uk-52801727

[3] Over a Barrel: how oil prices drop below zero, https://www.theguardian.com/business/2020/apr/20/over-a-barrel-how-oil-prices-dropped-below-zero

[4] Coronavirus: FTSE 100, Dow, S&P 500 in worst day since 1987, https://www.bbc.co.uk/news/business-51829852