How will the Welsh workforce be affected by the firebreak lockdown?

Cases of coronavirus have been rising sharply in Wales over recent weeks. On 19 October, the Welsh First Minister announced a new ‘firebreak lockdown’ aimed at containing the spread of Covid-19, saving lives and preventing the NHS from being overwhelmed. The restrictive measures come into force on 23 October and will last until 9 November.

To quantify the direct impact of the lockdown on Welsh businesses and employees, we have identified the sectors set to be directly affected by the new restrictions and used the four-digit SIC codes to match them with data from the Labour Force Survey (LFS).

Which businesses, employees and occupations will be most affected by the new lockdown?

As expected, those working in ‘hotels and restaurants’ will be most affected, with all businesses operating in these industries forced to close. In addition, 71.9% of employees performing ‘other service activities’ – which includes creative, arts and entertainment activities, as well as cultural and sports activities – will be directly affected by the lockdown (see Figure 1).

Under the new rules, all inessential retail businesses are required to close, meaning that an estimated 36.1% of employees working in the ‘wholesale and retail’ sector will be affected by the regulations, in addition to 22.2% of those working in transport and communication roles. Workers in these industries are most at risk of reductions in working hours and earnings, as well as job losses during this second wave of Covid-19.

Figure 1: Share (%) of workers that will be affected by the 'firebreak lockdown' in Wales, by industry

Source: Labour Force Survey Q1 2014 to Q4 2019

It is worth pointing out that sectors such as health, education and finance will be largely unaffected by the lockdown. Those employed in these sectors, as well as those working in public administration, will largely continue their normal activities either at their usual place of work or from home.

Using workforce data from the Business Register Employment Survey (BRES), we estimate that roughly 224,000 employees in Wales work in a sector that will be partially or entirely shut down due to the new firebreak lockdown. This figure represents 16.24% of the Welsh workforce (see Figure 2).

Figure 2: The Welsh workforce by sector

Source: Business Register and Employment Survey, Labour Force Survey, and authors’ calculations

But the effect of the lockdown will not be felt evenly across society. Those employed in ‘elementary’ and ‘sales and customer service’ occupations will be disproportionately affected by the lockdown. On the other hand, ‘professionals’, ‘associate professionals’ and those working in ‘administrative and secretarial’ roles are less likely to see an interruption to their work and regular earnings (see Figure 3).

Figure 3: Share (%) of workers that will be affected by the 'firebreak lockdown' in Wales, by occupations

Source: Labour Force Survey Q1 2014 to Q4 2019

Perhaps unsurprisingly therefore, the impact of the new lockdown will also vary considerably by age and education levels. AS Figure 4 shows, in general, younger workers are more likely to work in sectors that will be shut down in the coming weeks than older workers.

Figure 4: Share (%) of workers that will be affected by the 'firebreak lockdown' in Wales, by age and education level

Source: Labour Force Survey Q1 2014 to Q4 2019

This asymmetric impact is also reflected by educational levels. High skilled workers and people educated to a degree level or equivalent are less likely to be affected by the firebreak lockdown than those with lower qualification levels. This raises the prospect that, once again, younger workers and those working in so-called ‘low skilled’ industries will be more exposed to loss of employment and earnings during the second wave of Covid-19.

Can government support mitigate the economic impact?

It remains to be seen to what extent government support will mitigate the economic fallout from this short lockdown.

Although the Welsh government lacks the ability to borrow to fund its fiscal response, it will be in a position to provide substantial support for the Welsh economy: its supplementary budget for 2020/21 published on 20 October showed nearly £1.2 billion of yet unallocated day-to-day spending. From this, a £300 million fund will provide grant funding to affected businesses.

A concern for businesses and employees is the gap of one week between the start date of the firebreak lockdown and the start date for the revamped UK-wide Job Support Scheme (JSS), originally set for 1 November. The UK government has already rejected a request by the First Minister to bring forward the start date, even though the Welsh government was prepared to pay for any additional costs. Some employees in closed sectors may be left unsupported if they do not fulfil the eligibility criteria for the last week of the Coronavirus Job Retention Scheme (CJRS).

The impact of the firebreak lockdown on workers and businesses may be vast if proper government support packages are not in place. But it is also worth considering that if these short-term measures to suppress the virus are successful, they could pave the road to a quicker recovery and avoid the need for longer and more damaging restrictions in the future.

Where can I find out more?

• The Wales Fiscal Analysis programme of Cardiff University’s Wales Governance Centre publishes regular reports on fiscal and economic issues in Wales.
• The Welsh government’s Key economic statistics brings together monthly data covering topics such as employment, indices, exports and earnings.
• The Welsh Parliament’s Senedd Research InBrief blog often collates research on the Welsh economy and other relevant policy areas.
• The Bevan Foundation produces regular commentary on labour market data for Wales.
• The Wales Centre for Public Policy collaborates with policy experts to produce research on economic and social issues in Wales.

Who are UK experts on this question?

• Jesús Rodríguez, Wales Governance Centre, University of Cardiff
• Guto Ifan, Wales Governance Centre, University of Cardiff
• Cian Siôn, Wales Governance Centre, University of Cardiff
• David Phillips, Institute for Fiscal Studies (IFS)

Authors: Jesús Rodríguez, University of Cardiff; Guto Ifan, University of Cardiff; Cian Siôn, University of Cardiff