In this article we discuss how monitoring an economic crisis will help you understand the impacts and implications for your local economy
Unfortunately – most indicators show that the UK economy is tipping into recession
Yesterday (21 September), the Bank of England increased interest rates by 0.5% and at the Monetary Policy Committee Meeting stated that it considered the UK economy to be in recession with two quarters of negative (-0.1%) growth (the most recent quarter is an official estimate from BoE but has yet to be confirmed with ONS estimates). This comes on top of today’s (22 September) news that the pound has reached a 37-year low against the dollar, UK (GfK) consumer confidence is the weakest on record (at -49 in September). This has been building for the past few weeks – the Purchasing Managers’ Index in September reported that just 3 regions in the UK reported growth in business activity. Further afield, there are headwinds building in many other European economies too.
Of course, actions taken by the chancellor, Kwasi Kwarteng may offer some relief – such as the government’s energy price guarantee and a package of sweeping tax cuts expected to cost more than £150bn to kickstart economic growth and shield households from soaring bills. However, during these uncertain times – I expect further policies and initiatives from HM Government to be announced over the next few weeks and months in response to economic events as they unfold. We only have to recall the rapid evolution of government policy over the past 4 weeks in terms of energy bills – to demonstrate this.
The need for local monitoring and intelligence
During economic crises, we find that local partners often desire to convene emergency groups or committees or resilience groups for the economy. Providing an analysis of the crisis and its potential implications is often an essential role for such committees or resilience groups. During COVID-19, we provided such briefings, starting on a weekly briefing service for Hertfordshire LEP, EM3 LEP, Thames Valley Berkshire LEP, Cambridge City Council and South Cambridgeshire District Council.
Some local authorities, LEPs and partnerships are resourced and set up to analyse the economy, run weekly briefings, and do focused deep dives to better understand local vulnerabilities, risks and resilience. Others rely on consultants – like us – to step in quickly and help them.
Let’s hope that there isn’t a crisis or serious recession. However – best to plan for the worst and hope for the best. And a good plan needs to be well-informed.
What does an economic briefing need to include during crisis?
Well – I can tell you how we have done this in the past (and my team have experience over two crises – the 2020 Covid-19 crisis, and the 2009 recession).
A good briefing will explain:
- The nature of the crisis, as it unfolds: what’s going on in the economy, what the current impacts of the economic crisis are
- Consequences and risks: the potential consequences and risks of recession or economic crisis
- Local vulnerabilities: which businesses, industries, households, and communities are at particular risk
- Length of recession and prognosis for recovery: the potential route out of the crisis and likely length of time until recovery begins
We provide clear and objective intelligence and insight. We explain what events, trends and the economic outlook means for your local economy, and we assess the risks and the opportunities.
Examples of good practice
City REDI (part of the University of Birmingham) provided such a briefing throughout the Covid-19 crisis – continuing to this day. A best practice approach right here on their website – with their monthly West Midlands Economic Monitor and weekly Economic Impact Monitor.
We provided an economic briefing service to several clients during the Covid crisis – you can read about our service and some report examples here.
In the past we’ve begun our briefing service with clients by delivering weekly briefings, because events, move fast during economic crises. The nature of a recession ‘unfolds’, and whilst we have a good idea of what’s happening, new facts and changes emerge frequently day-to-day, and week to week.
Also the government’s response can be very rapid and can change the economic outlook very quickly. When there’s interventions to help businesses, workers or households – local stakeholders want to know about this, and how it may benefit their local community.
After a month or two when the nature of the crisis is better known and the implications are clearer, we settle more into a fortnightly, or a monthly monitoring service.
What does a good crisis monitor/briefing cover?
I can tell you how we’ve done this in the past, and what I’ve gleaned from City REDI (whom I tend to follow, as I regard them as leaders in the UK at city and regional economic intelligence, monitoring and research).
Typical content and structure
Global context: We tend to begin our briefings with an overview of economic conditions and recent events below globally in the US. Clients find that understanding the global situation is critical – because of the interconnected nature of the UK economy and local economies with the rest of the globe. Also some data sources on the US economy are released weekly, such as payroll and unemployment claims – and this is very useful in tracking in almost real time – the extent and depth of a crisis as well as recovery.
UK economic conditions and events: We then review UK economic conditions and recent events. And these include: Office for National Statistics (ONS) figures on GVA, business activity and confidence, jobs, payrolls, employment and economic growth, HM Treasury’s monthly average of forecasts for the UK economy, Bank of England Agent reports and the Quarterly Inflation Report, OBR forecasts, and briefings from think tanks such as the Institute for Fiscal Studies, the Work Foundation and the Resolution Foundation. We incorporate other useful research insights as they emerge.
Business confidence and activity. We review business confidence and business activity surveys. These include the ONS business surveys. They include British Chambers of Commerce, CBI and IoD surveys, as well as manufacturing surveys. We monitor monthly insolvency statistics for the UK. Importantly we also monitor national and regional Purchasing Managers’ Index reports (Natwest PMI) as these give leading indicators on whether the economy is contracting or growing.
Labour market and unemployment. We review in some depth the latest labour market and benefit claimants statistics. Unemployment statistics are released monthly and there is a UK and regional labour market release issued monthly which we pay close attention to. These are useful sources of insights into labour demand, such as jobs, payrolls and unemployment.
Sector impacts, restructuring and prospects. A significant part of the crisis briefing analysis we do is research to understand the impacts on different sectors and industries and different types of businesses in the local economy. We find that crises and recessions have a disproportionate impact on certain types of businesses. For example, during Covid-19 it was retail, leisure, and hospitality businesses that were hit the hardest. There are also certain types of businesses, such as those with restricted cash flow or exposure to debt loans that are vulnerable during downturns, and are at greater risk of closure and bankruptcy.
Dedicated local analysis. It’s also important to include dedicated local analysis to provide an understanding of how the crisis may affect the local economy, whether this is through sectoral composition and specialisation, or the latest unemployment statistics or other local intelligence and business news.
Assessing forward downside and upside risks. Finally, we provide some assessment of the forward risk both in terms of downside risk which analyses problems associated with crisis and recession, and upside risk in terms of market change and restructuring that may favour local businesses or industries.
Where we add value and expertise
Firstly – I sincerely hope that you don’t need to hire us – that the crisis or recession will be short-lived and mild. But just in case – here’s how we can help.
We’ve had a lot of experience in crisis and recession briefings, and have a very good idea of what local clients and stakeholders want and need. We are experienced at explaining why certain changes have occured and the causal factors and dynamics behind this. And we connect the dots in terms of local economic structures, global and national economic events, and the implications. We provide insights, analysis, and explanation.
We can also present – in person, or virtually. We are all experienced presenters and public speakers. During the 2009 recession, we produced regional monthly reports for Central Government and presented to them in person to the then government departments of BIS, HMT, and DCLG, helping to shape their policy responses. Many of the summaries went to Ministers. We also produced monthly local labour market briefings for the then-Regional Minister.
We are now able to offer podcasts or to record presentations as movies with commentary for you to publish on your website. We are flexible about how the information analysis and insights are provided – it’s really up to you to help guide us as to what would be most beneficial for your stakeholders.
You can learn more about our Crisis Briefing analysis and services here. We’ve got a lot of experience in researching and writing these briefings on very tight deadlines, and presenting and speaking to senior local stakeholders on these issues.
Glenn runs his own consultancy, Mylocaleconomy. We help local leaders translate their economic ambitions into winning advocacy and solutions that get funded. We work all over the UK – from the Highlands of Scotland to Wales, Bristol, Teeside, North East England, Gloucestershire, London, Cambridgeshire and Sussex.
Get in touch via LinkedIn messaging or the contact form on our website.