COVID-19 and Business

Service Sector
Mihaita Iliut
Introduction:
In a brief span, the COVID-19 crisis has emerged as the most critical
political and societal hurdle of our era. The economic aftermath of this
pandemic has had a global impact on businesses, causing disruptions in
supply and value chains, widespread layoffs, and closures of numerous
establishments. Some of these changes in the business landscape may be
enduring, necessitating business service providers to reconsider their global
location strategies and assess their resilience in the face of unforeseen
shocks. While the crisis places decision-makers under immense pressure, it
also presents opportunities by compelling companies to expedite their shift
towards greater agility in ensuring business continuity and managing crises
when confronted with other disruptive events in the future (Delloite, 2021)
In times of sudden travel bans, trade
barriers, and remote work policies, the
saying 'Putting all your eggs in one
basket' takes on even greater risk. The
COVID-19 crisis has exposed the
vulnerability of Business Service Sector
locations worldwide, as they were
unprepared to handle an event that
demanded immediate changes in
leadership style, agility, prior investments,
infrastructure, and digital adaptability.
The COVID-19 crisis caused a significant decline
in global trade, although it was not as severe as
the Global Crisis. By analyzing data from 40
countries, it is evident that the type of demand
played a crucial role. The reduction in imports
was mainly driven by a decrease in consumption
and services sector demand, which is less reliant
on imports compared to investment and
manufacturing production. This likely contributed
to a less severe decline in imports during the
COVID-19 crisis (Simola, 2021)
The U.K. has been recognized for its significant policy
response to the COVID-19 pandemic. Initially, the
government planned to protect only the vulnerable and
build herd immunity, but they changed course after
Imperial College of London model projections were widely
publicized. The U.K. implemented strict lockdown
measures, with a national lockdown from March to July
2020, followed by several others until mid-2021. As a
result, U.K. GDP suffered a historic decline of 20.4% in
the second quarter of 2020 and dropped by 22.1% in the
first half of the year. Sectors subject to the government's
restrictions, such as services, production, and
construction, were hit hardest. The U.K. experienced a
greater economic downturn than other countries, partly
due to the extended lockdown (Boyle, 2023).
Travel and Tourism:
A key component of the global economy that contributes to travel and tourism saw a sharp decline.
International travel almost came to an end, which had a profound impact on the profitability of airlines,
hotels, restaurants, and tourist attractions (UNWTO, No date)

In 2018, the UK's travel and tourism sectors

generated 6.7% of the country's total gross
value added. Since then, the coronavirus
(COVID-19) pandemic has had a significant
impact on the industry in 2020 and into
2021, with government restrictions in the UK
and across the globe severely limiting
travel. Unnecessary travel was first
prohibited within the UK on March 16 before
a statewide lockdown was declared on
March 23 (ONS, 2021)
2. Retail and Hospitality

• The reduction in consumer spending and foot traffic hurt retail businesses, especially brick and
mortar stores. The hotel industry suffered a large income loss as a result of restaurants and bars
having to reduce capacity or shut down. The hotel industry contributed $59.3 billion, or about 3%, to
the UK's overall economic output in 2019. In each nation and region, 3-5% of enterprises were in
the hospitality industry.

• There were 2.53 million jobs in the hospitality industry in the UK in the three months up to March
2020, making up 7.1% of all employment there. In comparison to other industries, the hospitality
sector employs a greater share of young people, people from other countries, people who work
part-time, and those who are from minority ethnic groups. Compared to other industries, hospitality
pays a lower median hourly wage (UK Parliament, 2022)
Education
Global COVID-19 limitations have had a particularly negative
influence on education, resulting in 184 country-wide school
closures, 1.53 billion students being kept out of school, and 87.6%
of all enrolled students worldwide. Furthermore, the conversion of
educational institutions to online learning models had an impact
on student enrolment and revenue streams. Inequality in
educational access and the digital gap were also made clear by
the changeover. Also, despite more government backing, the
pandemic has had a significant financial impact on the industry.
There is a claim that the financial assistance was given too late
and insufficiently (Shoosmiths, no date).
4. Healthcare
While there was significant demand for
healthcare services during the pandemic,
non-urgent medical operations were
postponed, which had an effect on the
financial security of healthcare
professionals. Long before COVID-19, the
health and care systems in the UK were
operating in scarce conditions, and they
weren't well-equipped to withstand the
pandemic's storm. With too few
employees, beds, and buildings that
weren't fit for effective infection control,
the underlying problems were ruthlessly
exposed (BMA, 2023)
5. Professional Services
As businesses cut expenditures and delayed non-essential initiatives,
demand for many professional services, including law and consulting firms,
fell. The impact of the crisis has varied among companies based on their
size. Smaller companies, with revenues of $100m or less, have been more
significantly affected compared to larger companies. This is mainly due to
their lack of sufficient technological infrastructure prior to the pandemic.
Consequently, these smaller companies are facing difficulties in recovering
from the crisis, which consequently affects the professional services firms
that cater to their needs (Grant Thornton, no date)
Ways in which The UK Service Industry was affected:

• Economic Impact

The COVID-19 pandemic caused a significant and unprecedented impact on the UK economy, as
evident from its gross domestic product (GDP).

During the period of April to June 2020, which marked the peak of the initial national lockdown, the
GDP experienced an unparalleled decline of 19.4%. However, as the country gradually reopened
during the summer, there was a remarkable rebound of 17.6%.

Such a substantial shift in GDP had not been witnessed since the Office for National Statistics (ONS)
started recording economic data in 1955. Now, one might wonder about the effects of other major
events in recent history on GDP (ONS, 2021)
Challenges in Employment
The pandemic and the subsequent implementation of lockdown measures caused a significant surge in redundancies, peaking between September and
November 2020. During this period, there were 402,000 recorded redundancies, marking the highest number in any quarter since records started in
1995.
Digital Transformation
Amidst the COVID-19 pandemic, the importance of digital transformation has been magnified significantly. It has enabled businesses to maintain connections with their existing customers despite
restrictions, while also opening doors to potential new customers and cost savings. However, as this rapid digitalization continues, we anticipate long-term benefits in terms of enhanced business
efficiencies, but it also brings along new risks.
One notable concern lies in developing countries, where digitalization might lead to a growing disparity between individuals who can access digital technologies and those who cannot (CDC, 2022)
Road to Recovery
The service sector anticipates recovery as government limitations are loosened and immunisation efforts advance. Uncertainties still exist, and different
nations and industries may experience different recovery rates. Future strategies will be influenced by the lessons learnt during the pandemic, and firms
are expected to increase their investments in digital capabilities and backup plans (Delloite, 2021)
Conclusion
Globally and in the UK, the COVID-19 epidemic has had a
significant effect on the service industry sector. The
epidemic not only revealed weaknesses but also sped up
industrial innovation and digital change. Adaptability and
resilience will be essential in maintaining the sector's
viability and growth in a post-pandemic environment as
enterprises navigate the path to recovery.