Are Welsh Local Authorities Prepared for The Economic Impact of COVID-19?

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Surj Bami is the director of Blue Harper, a consultancy specialising in the Financial and Public sectors. He is also part of an expert consortium consultancy LGimprove focussing specifically on Local Government excellence.

Local authorities, already under pressure before COVID-19 will be under even greater pressure after it. As well as coming to terms with the operational impact of the virus, councils are at the forefront of protecting the vulnerable, providing support and leading any future recovery. They will be the ones building community resilience, revitalising the local economy and softening the impact for the affected. All of this within an already fragile budgetary landscape, which continues to shift under them towards an increasingly uncertain future.

Following media reports that Wales will be the most economically impacted region by COVID-19, the clever people at the Centre for Progressive Policy have taken figures released by the OBR and dug further into their meaning. By applying a calculation for GVA (Gross Value Added – the value added by a sector or organisation taking into account costs incurred) they have been able to compare the economic impact of COVID-19 on every local authority in the UK.

Extrapolating the figures for Wales reveals some stark messages:

Surj Bami LGimprove image of GVA impact on Welsh Local Authorities

From a 29% reduction in GVA to a massive 43% it’s clear that Wales faces some tough challenges ahead. Combine this with the assumption that the UK economy will shrink by 35%, that Wales shores up the lower levels of economic well-being indices and that 43% of towns in Wales are in the worst affected tenth overall, it could see itself in the eye of a perfect storm.

While the debates about central government provision will continue what can councils practically do to position themselves for the future?

An immediate focus is the robustness of income analysis. Sources of true income, projected losses and the impact on the ability to deliver services are all areas worthy of almost forensic attention. In the authority I’ve been working within England, the government has asked for high-level estimates on potential income loss, providing an opportunity to build a rudimentary economic case. This is a good first step but over and above the government return, there is an internal need for the analysis to be granular, building in ‘what-if’ scenarios and in the absence of any ‘end date’ showing multiple timelines built around local recovery knowledge, not predefined time scales.

Secondly, understanding that recovery may not be linear, uniform or even comparable between councils adds a further need for individual clarity. For Wales, place-based variations such as rurality, agriculture, tourism, hospitality etc. will highlight significant economic recovery differences. One possible approach is to give the sectors that supply the local economy a weighting that reflects their true contribution. Factors such as income generation, employees, wages and ‘knock-on’ impacts across the locality are all useful inputs. Taking this weighting and then applying the most up to date analysis on sector impact (there are many sources, the ONS analysis is here) can build an evidence-based local picture. As the impact projections change, so will the picture.

Finally – ensuring that the organisation is fit enough for the challenge ahead may be the hardest part of all. It will mean implementing changes at pace, with focus and clear accountability. The issues here will be unique to each council. For some they will be cultural, for others it may be procedural inertia, technology dis-enablement, convoluted governance or even senior leadership capability. For many it will be a combination of these factors and more. Whatever they are, however long they’ve been there, the current situation will bring them out. It will highlight that while they may have been talked about and written down in best-laid plans, any practical execution failings will be exposed. An honest, dispassionate assessment (no matter how uncomfortable) is a must for the well prepared.

Councils across Wales and the UK may now be the key to recover from the biggest challenge many of us have ever known. The times may be ‘unprecedented’ as everyone likes to tell us – but so is the opportunity.

It is now about which councils will be ready to grasp it.