The impact of Covid-19 on the Arran economy

Fraser of Allander Institute; Brocek, Frantisek and McGeoch, Adam and Spowage, Mairi. (2020) The impact of Covid-19 on the Arran economy. University of Strathclyde, Glasgow.

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Abstract

Arran is a unique economy within North Ayrshire, and Scotland, and has a number of strengths that are highlighted throughout this report. We discuss the key challenges facing this Island economy as it begins its economic recovery from the ongoing Coronavirus pandemic. It is clear that Arran is a relatively prosperous part of North Ayrshire and performs well on many economic measures, such as education. However, we discuss many of the challenges when using current official statistics to properly measure island economies like Arran. In terms of what data is available from the UK and Scottish governments, it is evident that there is little data that can be used to inform policy in this area, a common finding for island economies in Scotland. The current outlook for economic growth in Arran is dominated by the immediate impact of Covid-19. Although many of these economic shocks should be temporary, there is a risk that these disruptions may have longer-term implications. That is, as the furlough and self-employment income support schemes are scaled back and job losses increase, we could see long-term scarring effects in the local labour market. While the UK and Scottish governments have implemented a range of measures to support the economy throughout this pandemic, the true effects of lockdown measures will not be felt until the scaling back starts, and job losses begin to crystalise. Already we are seeing rising unemployment and Universal Credit claims. Policy must focus on limiting ‘hysteresis’ effects from plaguing the labour market and ensure that young people are not left behind. Arran, like most island economies, is limited by its infrastructure and rurality and is highly dependent on its ferries to transport commuters and tourists. We estimate that, on average, each day of ferry operation contributes just under £170,000 to the island’s economy. Due to its prevalent tourism industry, Arran has been disproportionately impacted by the lockdown restrictions. The subsequent capacity constraints in restaurants, bars and cafes have meant that even as lockdown restrictions have eased, businesses in these tourism-facing industries are still highly dependent on government support. National policy must recognise that the Arran economy is very different to the North Ayrshire and Scottish economy. Policy makers must take care when determining policies for this area as the implications may differ greatly between North Ayrshire and Arran.

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