Page: 1 Brandon Tchoudi

Some argue that the Covid-19 pandemic has dramatically impacted the fate of inner cities
and, in the future, expensive, commuter-driven urban cores will decline in favour of less
compact/dense areas such as towns and the countryside. Do you agree?
Introduction

The Covid-19 Pandemic has had a substantial effect on the tertiary and quaternary sectors of the
economy, especially in the way that business has been conducted. The UK has experienced some of
the largest contraction in GDP out of the G7 countries, thus leading to speculation that the foreign
direct investment (FDI) led commuter driven cities such as Birmingham or London, would have a
rather bleak Future. Furthermore, cities are population dense and are hubs for international
transport thus making them large vectors for disease meaning, they faced tougher enforcement of
restrictions during the Britain’s lock down period which worsened its effects. However, during this
current recovery phase of the economy, there is increased rates of employment and an increase in
consumer spending, at least compared to the previous couple of years of economic recession. In
addition, many theorise cities will be integral for the bouncing back of our economy as they breed
innovation and are the key to economic prosperity, so government intervention may occur the
prevent the decline in commuter-driven urban cores. On the other hand, covid has led to decreased
workplace and retail mobility causing some commuters to default to employment closer to their
rural areas of residence and outside of urban cores though some, due to increased advances in
technology may be even working further away from home than they were before. This essay will
discuss the fluctuations in Investment, consumer spending, unemployment, tourism, and population.
Then using these metrics, it will evaluate the effects on commuter-driven urban cores and rural
areas as well as possible future implications.

The Effects of Investment

^ Figure 1

In terms of Investment, UK governmental investment into commuter-driven urban cores has

decreased whereas foreign investment into densely populated areas has increased. In contrast to
this, little investment into rural areas has been made currently though it has been postulated. UK-
based Investment in urban cores has decreased mostly since the government has had to save other
areas of the economy with excessive investment into sectors such as healthcare which made up 25%
of government spending in 2020, Education which made up 13% and welfare which made up 14% (as
shown in figure 1). It has also been shown that, Covid-19 has caused firms to take a hit on stock
prices and (Skingle, 2020, blog post) states ‘public markets have already suffered huge blows, with
stock prices dropping up to 25%’. This was likely caused by decreased company valuations of city-
based firms as Covid-19 has cause increased market volatility and decreased cash flow. This pattern
of events can be seen in well-known companies such as Monzo with it having an estimated worth of
£2 billion in 2019, then it’s estimated value dropping to £1.24 billion by 2020 and now as of 2022 the
companies estimated value has now risen to £3.7 billion. This is likely due to the decline of Covid-19
and the restrictions brought along with it. However, I have assumed that people could have
predicted the fall in stock price and sold their shares in these companies or that people have not just
chosen to keep their stocks in a company and allowed the market to return to normal. Moreover,
Monzo and other companies that have been so heavily affected could be considered outliers as
(PWC, The impact of Covid-19 on valuations) states ‘This is a time when all assumptions fed into
valuations should be challenged’. Foreign investment has surprisingly increased during the Covid-19
period. (Banks, UK exceeds investor expectations, June 2020) states that ‘The UK expands its market
share of FDI… from 16% in 2018 and 17.3% 2019 to 17.5% in 2020’ as well as ‘London reclaimed its
status as Europe’s most attractive city for investment’. Using this evidence, it clear to see foreign
investors are still willing to invest in Urban areas. In addition, it is to their advantage to invest in
other countries as it allows them to spread the risks of their investments in safe highly valued
companies. In contrast to this, there has been large declines in rural economies due to the Covid-19
virus as they as they were mostly based in manufacturing and construction which were some of the
most effected sectors of the economy. With little investment being implemented by the government
to fix them, this does not bode well for the future of rural areas. Despite this, there are predictions
that the government will use impact investment (investment in private debt, publicly traded debt,
and private equity) to rebuild these rural economies. Additionally, the government may subsidise
goods based in the primary sector (such as agriculture) as this will reduce the price it is sold and
increase the quantity of units sold. Consumers will also be left with more disposable income to put
back into the economy and stimulate the multiplier effect causing economic growth. This is assuming
the government even decides to invest rural economies or subsidise goods produced by rural
economies. Overall, from the perspective of Investment it looks more likely that firms and commuter
driven urban cores are here to stay and are unlikely to dramatically decline economically in favour of
less population dense rural areas.

The Effects of Consumer Spending

^ Figure 2
Covid-19 has caused increase in the popularity of online shopping due to limitations on
transportation throughout Britain’s quarantine period. During 2019 it was estimated that 19.4% of
all retail sales were online. This number then increased to 26.2% in 2020 (as shown in figure 2).
Likewise, the revenue from online sales also rose from £64 billion in 2019 to £93 billion in 2020.
Therefore, it could be inferred that this increase in online shopping could lead to reduced levels of
in-person retail purchases, with many of the most luxurious retailers being based in commuter-
driven urban cores. In fact, unlike other thing that were affected by covid this market may never go
back to its previous state as the improved convenience of online purchases may lead to a permanent
change. Including changes in the medium in which people use to make purchases, people may have
also become more aware of local business during the UK’s lockdown and may prefer to support local
business rather that City
based retail chains.

Figure 3 ->
Furthermore, consumer
debit and credit card
spending in urban areas
has almost returned to
pre-covid levels. Starting
with an index number of
100 in February 2020
there is an obvious fall in
spending at the end of
march to an index
number of just under 60. This indicating that urban Debit and credit card spending almost dropped
to half of its previous numbers. This continued throughout the month of March and as
Covid-19 restriction were slowly lifted spending using cards returning to normal levels over the
following 6 months (as shown statistics using average of all cities in figure 3). Considering the
evidence, the retail industry in cities has taken a large blow due to Covid-19 and as a result there
may be a permanent decline in commuter-driven urban cores in comparison to less dense areas such
as towns and Country sides.

The Effects of Unemployment

<- Figure 4
The negative effects of Covid-19 on employment were rather obvious especially on labour intensive
and in-person work. This included areas such as construction and mining. These areas of
employment form a large part of rural economies so one would assume the economy of rural areas
struggled much throughout the 2020 and 2021 periods. The Contrary is true if you look at the
numbers. During the First Quarantining rural American areas spiked to an unemployment rate of
roughly 13% however, urban American areas spiked to 14.7% (as shown in figure 4). This
phenomenon can be explained through mass migration of unemployed people from rural areas to
urban areas. Taking this into account cities coped rather well in terms of unemployment levels. This
was mostly attributed to the advances in technology allowing people to carry out jobs that were
heavily focused on IT, research, marketing and Finance. Another effect on employment, was that
people were and still are taking jobs further from their place of residence as online applications such
as Zoom and Microsoft teams have been optimised better. This has also led to more workday
flexibility and an increasing number of people going into their offices less than 5 days a week. This is
likely to be a permanent change. In the regard of unemployment, less dense areas have suffered
more than urban cores because of the sectors of employment that their local economies are derived
from and how the recent restrictions have affected them. Even though the numbers tell another
story the long-term effects are worse as a rural economy would take longer to recover from a
recession this large. Taking these factors into account towns and countryside were worse affected
the areas of dense tertiary employment and thus there the future of commuter-driven urban cores is
looking very stable, at least employment wise. So, looking at levels of unemployment it is unlikely
that urban areas are going to decline in favour of less dense areas.

The Effects on population and tourism

Looking at population, there was still an increase in the percentage of the population living in urban
areas in East Asian Countries (as shown in figure 5). Compared to West covid had a head start on
Easter Society making a large impact on China and Surrounding Countries in 2019, yet during this
period of turmoil and harsh transportation restrictions people were still migrating and there was no
expected drop. Moreover, there was an increase of 2% in China’s urban population and when you
look at this in terms of the scale of China’s 1.41 billion population 2% amount to 28.2 million people.
This shows how there will always be consistent migration to urban areas, and it is unlikely that in the
future commuter-driven urban cores are likely to decline. Tourism was another industry that was
harshly affected both for the countryside and for cities. There was a potential decline of roughly 60-
80% in the international tourism economy in 2020. Though tourism makes up a significant
proportion of urban area revenue, tourism in a main driver for rural development. It can be seen in
areas such as Blackpool which lost 2 thirds of its visitors due to covid. In 2019, 18 million people
visited Blackpool whereas in 2020 only 6 million people visited black how devastating the effects
were on the local economy due to a fall in tourism Revenue of an estimated £1 billion. Overall, as a
result of the negative effects on tourism, it is again not likely for there to be a decline in central
business districts as tourism makes up a smaller percentage of there total net revenue than less
densely populated areas as they rely on tourism to drive their economy. It could however be argued
that there was an environmental improvement due to reduced tourism.

Conclusion

In Conclusion, I do not completely agree with the statement that the Covid-19 pandemic has
dramatically impacted the fate of inner cities and, in the future, expensive, commuter-driven urban
cores will decline in favour of less compact/dense areas such as towns and the countryside. I agree
with the idea that cities have been greatly affect by the coronavirus, though I do not think that
towns and countryside will replace more densely populated areas. This is because towns to do not
receive near the level of investment that cities receive which will negatively affect their ability to
adapt and recover from Covid-19 and the recent economic recession it has caused globally. In
addition, people are still migrating to urban areas. To make matter worse for rural areas the decline
in the tourism industry massively affected them paired with a constantly reducing population due
toa general lack of employment opportunities. On the other hand, the fall in consumer spending in
the retail industry was had a greater effect of urban areas and supports the idea that they will
decline as people then spent more money online and on local businesses.

Bibliography