What is the socio-economic impact of COVID-19 in cities?

7 May 2020

Eurocities brought together 120 strategists from 60 European cities across 23 countries in direct dialogue with OECD to discuss the socio-economic impact of COVID-19 in cities and how to tackle them.

This was one in a series of online city dialogues organised by EUROCITIES to inform, connect cities and facilitate city-to-city dialogue on responses to fight COVID-19 crisis and its impact.

Key findings from OECD analysis

Paolo Veneri, Soo-Jin Kim and Isabelle Chatry from the OECD Centre for Entrepreneurship, SMEs, Regions and Cities presented the key findings from their analysis on the territorial impact of COVID-19:

  • The impact of COVID-19 pandemic has been strongly asymmetric, affecting cities more than other regions. Cities are more affected than other areas because of their exposure to tradable sectors, exposure to global supply chains and type of specialisation. In particular, tourist destinations and large cities have a higher share of jobs at risk than other regions.
  • Local action is critical to implement and complement national economic measures. Cities have been quick to act by putting in place: emergency funding to ensure liquidity to SMEs and income support to vulnerable people, tax breaks, loan guarantees and supporting local production.
  • Cities’ finances will be badly hit. Cities are increasing public spending to respond to the new economic and social needs, while facing reduced revenues (notably taxes and user charges), which creates a ‘scrissors effect’ and leads to increased deficits and debts. Support from national governments is needed. Neither cities nor national governments can do it on their own. Shaping urban recovery & resilience is a shared responsibility.
  • Cities have an opportunity to achieve a green and inclusive recovery from the COVID-19 crisis. How? By making the emergency measures more permanent to reduce homelessness, encourage green mobility (cycling lanes) and digital infrastructure (online public services). This is the chance to ‘build back better and re-imagine public life’.

You can read the full OECD papers here: city policy responses, managing the crisis across levels of government, territorial impact on jobs

Key lessons from cities

The impact of COVID-19 crisis on cities is huge and unprecendented, much bigger than the initial estimates when lockdown started:

  • Economic impact is massive: Barcelona estimates a drop of 14% in GDP, which is 4 times higher than in the previous financial crisis of 2008-2009. Amsterdam estimates a loss of 1.6 billion EUR in growth, affecting between 250.000 and 500.000 jobs, equivalent to 31% of all jobs in the city. Manchester is also estimating a shrink in employment between 8% and 35%.
  • Social impact is already visible in cities: there are new groups of people in vulnerable conditions – ‘the new urban poor’ – who are losing their jobs and some even their home due to loss of income. Students and young people are particularly vulnerable as they are facing a high risk of unemployment or not finding internships or apprenticeships to complete their studies. Freelance workers and self-employed are also vulnerable and at risk of not being covered by the support measures at national level. Homeschooling is deepening the social gap and inequalities in education and in opportunities for children.
  • Fiscal impact on cities is high: municipalities in Austria are estimating a loss between 900 million EUR and 2 billion EUR as a result of increased spending and decrease in revenues due to COVID-19, and are requesting financing support from national government. Many cities in Europe are in the same situation.

Cities are mitigating these impacts by taking bold and innovative measures to support local businesses and local people affected by the COVID-19 crisis:

  • Amsterdam set a financial aid package of 50 million EUR to provide temporary income support to self-employed and freelancers, who are not covered by national provisions. To prevent massive unemployment, the city is actively match-making people who are about to lose their job with job vacancies in other local companies through the ‘Mobility Centre for Employers’.
  • Bologna is supporting its culture and creative sector by offering ‘innovation vouchers’ to stimulate the demand and offer of cultural activities
  • Vienna set up a new company ‘Stolz auf Wien’ (Proud of Vienna) with a capital of 500 million EUR to invest in local companies at risk of insolvency due to COVID-19.
  • Barcelona created a 25 million EUR emergency fund for the local economic recovery.

Cities are pro-actively leading the way towards recovery by setting out holistic local recovery plans, which have in common:

  1. Use data on local impacts to inform policy decisions. Many cities are mapping the effects of COVID-19 outbreak at local level. For example, Utrecht is using an integrated approach to consider impacts on all dimensions of the city: 1) on vital economy (employment, mobility, sustainability, digitalisation), 2) on healthy society (health and risks, equal opportunities, social cohesion and social resilience), and 3) atttractive city (housing market, public services and safety).
  2. Coordinate across city services. Many cities have set up internal taskforces to monitor the socio-economic situation, generate timely policy responses and coordinate action plans for recovery (e.g. Barcelona’s Centre for Economic Response Coordination, Bologna’s taskforce on impact on tourism and culture).
  3. Engage everyone in the city in the recovery to ensure shared ownership. Barcelona has reached a major cross-cutting agreement between all political parties to relaunch the city. This involves working with all stakeholders in the city, businesses, trade unions, civil society, NGOs, for the next three months to define structural measures for the recovery from the crisis, which will be supported by the city budget. Similarly, Vienna set up an Economic Council bringing together the city, business, academia and trade unions to work together on the recovery towards Vienna 2030 strategy.
  4. Integrate recovery post-COVID as part of wider city frameworks for long-term development. Amsterdam, Barcelona, Tallinn, Vienna and Utrecht are all using the UN 2030 Agenda of SDGs as roadmap for their city development strategies (e.g. Utrecht’s Healthy Urban Living strategy, Vienna’s Smart City Wien). This was already in place before COVID-19, but now cities are using this strategic framework to guide the recovery post-COVID and link up the social, economic and environmental measures in a whole-city approach.
  5. On the positive side, COVID-19 can be a catalyst for positive change in cities. Many cities agree that the challenges we are seeing in our society due to COVID-19 crisis are not new, but they are just becoming more visible and it makes it more urgent to prioritise them now. There is an opportunity to come back as greener, more inclusive and more resilient societies, and many cities are answering positively to this call for change by making some of emergency measures more permanent in the recovery plans (e.g. green mobility with more cycling, digital public services, etc.)

You can watch the recording of this city dialogue here: