Business ghosts of the pandemic will haunt our economy for years yet

I HAVE BEEN having a few days out in the sun recently, going around the shops up Steep Hill in Lincoln. If you don’t know it, the area is populated with independent shops and attractive restaurants and bars – but it is indeed a very steep hill that takes you from the bustling main shopping district of the usual retail stores that every high street has to the Cathedral and Castle dating back from mediaeval times.

It is these unique shops and traditional English pubs with their beer gardens together with the occasional tapas bar or tea shops that make every city or town special. They were also one of the most vulnerable of business sectors during the pandemic lockdowns and the restrictions beyond them that kept hospitality or retail shopping out of bounds. I therefore have made it a habit of mine to ask the proprietors “how is business now, is it picking up?”

The replies are interesting and revealing in equal measure. There is only the occasional evidence of a business that has not reopened – and the reasons may not be so much economic as a shortage of voluntary staff (especially so with charity shops). What I have been told – and it is obviously random and anecdotal – is not just a significant economic hit being taken – that has been absorbed using the owners’ own capital after the government funds (grants and loans) had run out (or were not applicable) – but the changes in customer behaviour. 

Some businesses are undoubtedly hanging on and hoping for a lift in customer sales but it is not necessarily coming back in the same manner as in the past. One business owner told me she had found that her attractive, nay, very cute clothes for kids were not proving as popular in the past. The reason was simple, thanks to lockdowns and other restrictions on personal gatherings the idea of dressing up smartly for special occasions or simply visiting people had evaporated. Ordinary and casual everyday dress has (possibly temporarily) become the default position. Dressing smartly is just not so important to some people now.

If this is not an isolated incident, then the economic risk from this is obvious. There will be many businesses that in this and other specialities will find their businesses are no longer viable. They will be carrying stock and can’t shift it. Discounting to shift stock and allow a business to adjust its business model was already in evidence. Taking this in the round the next few months are going to be crucial. A good summer where people are going out and spending their money is their best hope – but the willingness of people to enjoy themselves must be tempered now by inflation and the cost-of-lockdown crisis. 

When people are finding their costs for heating and lighting and filling up their petrol tank almost doubling, then spending on what independent retailers tend to sell – authentic, bespoke, specialist or plain whacky items – is not going to be a priority. They risk becoming economic ghosts of the pandemic.

We also need to add to this possible tidal wave of insolvencies the cost of business closures that shall never be known. By that I mean the businesses that were slated to open in the year of 2020 but could not because of lockdown. These are businesses that had raised capital, invested personal savings and appealed for the support of others, often relatives and friends. They had dreams, ambitions and were all set up to go. Then came lockdown. 

Due to open immediately after or in April and May – for what had originally been sold to them and the public as only for three weeks – they had no record of turnover, nothing to show what their earnings were and what they could be judged by as eligible to receive help for. Worse, if they were in Scotland the rules would be different and they might not have qualified even if they had some evidence of business activity. 

There will be thousands of such businesses that were about to open but never got over the line – but the investments, savings and capital of those behind them were lost, never to be recovered and seen again.

These businesses and their contribution to the economy will not even register as a cost to the lockdowns, the ONS does not, probably cannot gather such information – but it is real, a true cost of the pandemic. They too are ghosts of the pandemic and like the impact of other business casualties we shall take years to recover from losing their contribution to our lives and our economy.

We shall not forget.

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Brian Monteith is a former member of the Scottish and European Parliaments and managing editor of the Recovery blog.