Did the Covid-19 local lockdowns reduce business activity? Evidence from UK SMEs

James Hurley () and Daniel Walker ()
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James Hurley: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH
Daniel Walker: Bank of England, Postal: Bank of England, Threadneedle Street, London, EC2R 8AH

No 943, Bank of England working papers from Bank of England

Abstract: This paper analyses the local lockdown measures introduced to contain the spread of Covid-19 in the UK. We use a spatial regression discontinuity design to assess whether the fall in business activity during the lockdowns was driven by the policy measures or by other factors, such as voluntary social distancing. We conclude that the local lockdowns did causally reduce business activity but that activity would have probably fallen substantially even in the absence of the lockdowns. During the local lockdowns, the average turnover growth for SMEs in the UK was around -20%. SMEs that were up to two kilometres inside the lockdown boundaries had 8 percentage points lower turnover growth than those up to two kilometres outside. This implies that the local lockdowns accounted for two fifths of the overall drop in business activity at most. The estimates are largest for restaurants and non-food retail (eg clothes shops), which were directly targeted by the restrictions. Costs fell by much less than turnover, reducing cash flow.

Keywords: Covid-19; small and medium-sized enterprises (SMEs); public health measures (search for similar items in EconPapers)
JEL-codes: D22 E65 G30 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2021-10-15
New Economics Papers: this item is included in nep-ent, nep-mac, nep-ore and nep-ure
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0943

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