The Thames Valley remains one of the most economically successful regions in the UK despite the COVID-19 pandemic, with faster growth forecast between 2019 and 2025 than any other region except London, according to EY’s latest report.
‘Assessing the impact of COVID-19 on the Thames Valley’, provides analysis and commentary on the region, its vibrant business economy, and its response to the challenges presented by COVID-19.
Pre-COVID-19 predictions had expected to see the Thames Valley continue to outperform all UK regions in 2020, with sectors including technology, business services and scientific research leading combined regional growth. Although the COVID-19 pandemic is likely to reduce the region’s forecast Gross Value Added (GVA) by just over 10% for 2020, this is lower than the UK average of just above 11%.
EY’s Regional Economic Forecast, which informed the report, identified that some industries within the Thames Valley had better weathered the pandemic. Professional Services, Science & Technology and Information & Communications are forecast to see a reduction in GVA of 9%. Sectors more heavily affected in the region, such as Arts, Entertainment & Recreation and Accommodation & Food Services were both forecast to see reductions in GVA growth of between 23-47% for the period 2019-2020.
Richard Baker, Managing Partner at EY in the Thames Valley & South, said: “This report predicts that the medium-term outlook for the Thames Valley remains strong, with the most prominent sectors in the region expected to recover from COVID-19 at a faster rate than many other affected UK regions. However, the next step for business is how it adapts not only to the impact of COVID-19, but also the upcoming challenges posed by Brexit, which continues to affect business, planning, decision making and investment.
Medium Term Impact
Despite the short-term impact of COVID-19, the Thames Valley is likely to remain one of the UK’s fastest growing regions, with forecast GVA growth of 9.4% between 2019 and 2025. This is below London (10%), but significantly higher than the forecast UK rate of growth of just above 7% over the same period.
There are a range of key growth projects already underway in the region that will continue to support the growth of the regional economy, including Crossrail. However, amid increasing uncertainty following the pandemic and the prominence of rival destinations such as the Northern Powerhouse Rail and Midlands Engine, action must be taken to encourage investors and retain existing employers.
Richard added: “EY has long been an advocate of a joined-up strategy for the region, between businesses, the public sector and other institutions, for the benefit of all. And, whilst inroads and initial conversations have been had it’s still the case that the fragmented nature of the region contributes to the challenge of business engagement and effective collaboration. We must focus on continued digital transformation to help local businesses to retain a competitive edge and address the social-economic challenges of high housing costs and skills transference and diversification to enable the workforce to adapt.
“The challenge of COVID-19 has really helped to highlight the need for a ‘master plan’ for the region, to help created a more sustainable Thames Valley area. And, I’m looking forward to engaging in further conversations as a result of this latest report and, as a key business and employer in the region, supporting greater collaboration in the future.”
Rising Unemployment Figures
Although COVID-19 has caused a rise in unemployment in the region, levels are still much lower than elsewhere in the country. A total of 64.3k unemployment-related benefits were recorded in the Thames Valley between July and August 2020, or 2,991 per 100k people. This compares with an average across the UK of 4,082 claims per 100k people. The region has historically had much lower unemployment rates than the rest of the UK, and unemployment remains significantly below the rest of the country (4.1% compared to 7.6% to the end of August 2020).
Although, unemployment rates are likely to continue to rise as wage support schemes are wound down, the furlough rate (the number of furloughed roles divided by the size of the workforce in given areas) in the Thames Valley (19%) is considerably lower than the UK average (24%) and only slightly higher than in London (17%).
Positively, the region’s third largest sector for employment – Information & Communication (12% of regional employment) – has the second lowest proportion of businesses in the region (48%) to have applied for the COVID-19 job retention scheme (behind the Human Health and Scientific sector (45%).
The impact of the pandemic on the region’s global links may affect the flow of investment and jobs from international firms.
Of the towns that sit within the immediate vicinity of Heathrow airport, for example, Slough has the highest unemployment rate in the region (8.1%), nearly double that of the rest of the region. Reading (6%) and Bracknell Forest (5%) also had unemployment rates higher than the region overall. Of the three counties which make up the Thames Valley, Oxfordshire had the lowest unemployment rate (2.5%), followed by West Berkshire (3.6%) and Buckinghamshire (5.7%).”