As the COVID-19 crisis continues to devastate lives and livelihoods, policy makers are challenged to emerge from it in a way that lays a foundation for a strong, healthy economy in the long run. The scale of the economic challenge created by the pandemic has not been faced in nearly a century, and the impacts across employment and productivity are at levels rarely seen.

Governments need to turn their attention to reimagining a stronger economic future by very deliberately addressing the vulnerabilities the crisis has exposed. National monetary, fiscal, and other policy decisions will provide large-scale boosts to aggregate supply and demand and will help create the conditions for renewed economic growth.

Identifying where the COVID-19 crisis has caused the most economic damage

The first step toward reimagining a more resilient economic future is to understand how and where the pandemic has most damaged the economy.

  • The pandemic has attacked the economically vulnerable, much like it has attacked those with preexisting health vulnerabilities.

    The COVID-19 pandemic is a major threat to their personal financial situations, with many living from day to day and having to turn to unemployment assistance and food banks.

  • Small and medium-size enterprises (SMEs), are the lifeblood of employment growth. The COVID-19 crisis has put particular strain on this segment. SMEs have fewer cash reserves to maintain employee salaries when shocks occur and have more trouble navigating and accessing channels of aid. Absent of any intervention, 25 to 36 percent of the businesses were at risk of closing permanently because of disruption from the first four months of the pandemic.

    By contrast, tech-company stocks have soared, up almost 20 percent since the start of 2020 versus a less than 1 percent increase in the S&P 500 index over the same period.

  • The pandemic presents new challenges to innovation ecosystems, since history suggests that venture-capital (VC) firms may be less likely to raise new funds and start-ups less likely to receive funding in such circumstances. Research on Organisation for Economic Co-operation and Development countries suggests that governments that are innovation leaders increase public spending during recessions whereas innovation laggards cut back.
  • Accommodation and food service, retail, and manufacturing are experiencing the greatest economic impacts from the COVID-19 crisis. How can counties, towns and cities reimagine their least resilient and productive sectors while also diversifying into more resilient and productive sectors?
  • Seemingly overnight, access to digital infrastructure became a basic requirement for doing business in the face of the pandemic. Yet the variations in access across communities are still stark.

    Millions of households lack access to reliable, affordable, high-speed internet, and 80 percent of those households are in rural areas. As technological innovation continues and accelerates, the expectation of digital access as the key means of doing business is only expected to continue.

The COVID-19 crisis has exacerbated existing divides, cut into the productive potential of the most vulnerable segments of the working population, slowed the pace of productivity enhancements and limited the diffusion of their benefits, highlighted constraints in provision of essential digital infrastructure, and exposed opportunities of the future as open questions.

The stakes are high for government and local council leaders to get it right as they reimagine the economy.

Implementing new ways of organization to enable changes

The scope of the challenge in reimagining the UK’s economic future is daunting, but the stakes have never been higher. Governments could consider adopting new ways of working and organising, such as the following:

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