The UK leisure sector is a vital part of the economy – it employs around 9% of the UK workforce and generates revenues of £200bn a year. Big numbers in anyone’s book.
At times of crisis the leisure sector is often the first domino to fall. Whether it’s a credit crunch or recession, jobs in travel, pubs and restaurants are often the first to go causing a ripple effect to other parts of the economy as consumer spending gets cut back.
Today the country faces a much different threat and it is how Boris Johnson reacts to this in the early days of his premiership which will define the rest of his time in government.
The spread of Co-Vid 19 within the UK is not just a health crisis (extremely serious though it is). It is also an economic one. Both elements of the crisis need to be tackled with equal imagination and tenacity.
Monday’s advice from Boris Johnson urging everyone to avoid unnecessary social contacts, to work from home where possible, and to stay away from pubs and restaurants – based as it was on scientific and medical advice - must be the right approach.
But its economic consequences could be dire. The Government needs to act and act fast and the initial focus must be on the leisure sector.
And so Tuesday’s intervention from the Chancellor was timely. Alongside a welcome raft of measures it was positive to see him single out the pubs, theatres and restaurants who will suffer as a result of the shut-down. In particular, it was positive to see him pledge grants of £25,000 for businesses in the leisure sector who don’t have insurance "to help bridge through this period".
But with the stakes so high I would like to see the Government adopt an even bolder and simpler set of measures for the leisure sector. Things are moving fast and one doesn’t want to criticise the steps announced so far as they are a good start. But we believe that the government guarantees for credit don’t address the real problem, in that pretty much every leisure business has had its trading severely disrupted or brought to a halt. The only way to save many of these businesses, and to prevent as many job losses as possible, is for the government to provide direct funding.
The Government has a tried and tested role as an insurer of last resort. We believe that the Government must adopt the role of insurer now by offering businesses impacted by the coming Coronavirus shutdown insurance against their reasonable losses incurred in the coming months. Cash advances should be made now against later full restitution to ensure that the workforce continues to get paid.
This would give the leisure sector the confidence to ride out the coming storm and give their employees the time and space needed to combat the health aspects of the virus safe in the knowledge that their jobs are secure.
As the virus threat recedes in the months to come we will then see a resurgence of pent up economic activity which the leisure sector – preserved through Government foresight – will be in a good position to capitalise upon.
As crazy as it sounds, there are positives ahead. Most economists expect the impact on the UK economy to be severe but to be short. The Chinese economy is powering up again and its stock markets are already back at pre-Corona levels. The economic measures the government must take are short term but must be big and bold.