The ‘Covid effect’: shops closed and planes grounded by hi-tech alternatives

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Currently some 11 million people, around one-third of the UK workforce, are being supported by one or other of the Government’s job-related funding schemes. But everyone understands that such support can only be temporary, and that job losses will mount as the schemes are wound down. The rate of recovery of the economy and the lasting impact of these job losses, remain to be seen.

Recent job loss announcements are coming from those sectors that have been worst-hit by the lockdown, notablyretail and aviation. A significant feature shared by these two sectors is that they both have tech-based alternatives, of which their customers are being forced to make use as a result of confinement at home and the fear of viral infection.

The question now is: have customers liked the alternatives the lockdown has allowed them to discover? Will COVID prove to be a harbinger of longer-term change?

In the retail sector, John Lewis has announced the closure of eight stores, with the loss of 1,300 jobs; Arcadia and Harrods are planning 1,180 job cuts, while T.M. Lewin has announced the closure of all its 66 stores in order to focus on its on-line presence. A company particularly badly hit is UpperCrust, the baguette restaurant chain concentrated along commuter routes with outlets commonplace in stations and rail terminals: its business model has proved particularly vulnerable – and now 5,000 jobs are to go.

While shoppers for goods being sold by John Lewis, Arcadia, Harrods and T.M. Lewin will of course have made purchases during the lockdown, these transactions will have been largely on-line: and it is those retailers with a strong on-line presence that have proved their resilience during the pandemic, against those without.

With the UK already having the most developed e-commerce sector in Europe – and with more and more people discovering the convenience and ease of shopping online, as a result of the COVID shut-down – the hitherto rapid growth in online sales is expected to make a further leap forward in 2020: the pressures on the High Street to adapt are continuing to mount.

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In a similar vein, aviation has been drastically affected by COVID-19, with flights in April and May down by over 90%. Consequently, British Airways has announced a major restructuring, which could mean up to 12,000 redundancies and changes to the terms and conditions of employment for the remaining staff. Virgin Atlantic also announced over 3,000 job cuts in May – amounting to around one-third of its workforce – with a similar number being made redundant by Ryanair (15% of its work force), and over 2,000 losses at EasyJet in the UK alone.

Such responses have been inevitable – and it remains to be seen whether there is more to come.

Airline business passengers will have been making-do with other forms of communication than face-to-face meetings, with many finding that digital audio-visual communication today has greatly improved over the years. As a consequence, they may start to question whether that cancelled business trip was really necessary in the first place. Similarly, virtually every family in the land will have been enjoying some form of digital interaction: many people had not heard of Zoom before the pandemic, and yet now they use the service as if they had done so all their lives.

The question will now be asked: is there the need to cross the world to see loved ones, when it is so easy to chat on-line in small groups?

The acute turbulence being experienced by the airlines is having a comparable impact on aircraft manufacturers and their suppliers: in response to what the Airbus CEO described as “the gravest crisis this industry has ever experienced”, Airbus has announced an 11%-reduction in its global workforce amounting to up to 15,000 job losses, including 1,700 in the UK at their Filton, Bristol and Broughton, North Wales sites. Likewise, Rolls-Royce – the exclusive supplier of engines for the Airbus A330 and A350 aircraft – has announced 3,000 redundancies.

All job losses are bad, but the loss of very highly-skilled jobs requiring a large amount of training and experience, is particularly damaging to the economy.

So, how long will job losses continue? After initial talk of a quick, ‘V-shaped recovery’, forecasters have now become more pessimistic about the UK economy, though in a recent speech the Bank of England’s Chief Economist Andy Haldane said that the recovery in the UK and global economies had come “sooner and faster” than expected. 

Despite such glimmers of hope, however, the prospect for jobs is bleak, with Haldane warning of soaring unemployment as the furlough scheme ends: the greatest risk, he said, is of “a repeat of the high and long-duration unemployment rates of the 1980s, especially among young people”.

Robert Whitfield is a former Senior Vice President (Finance) of Airbus Industrie