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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.

Furthermore, the varying readiness and response measures between countries have
emphasized the importance for multinational companies to adopt diversified geographic models,
aiming to mitigate the impact of regions that could be heavily affected, both now and in the
future.

Consequently, as a result of this global crisis, business service providers will need to reassess
their current global footprint across all locations and determine the right balance of activities and
functions. They must carefully weigh the specific risks and benefits associated with a centralized
hub structure (operational consolidation versus single-source dependence) against a diversified
satellite structure (greater flexibility versus operational redundancies).

For their new location strategy, it will be crucial to critically evaluate certain location factors that
were previously overlooked and incorporate new factors that have emerged from the crisis. The
optimal model will be unique to each enterprise and depend on its specific goals and sensitivity
to particular risks (Delloite, 2021)

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
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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)

Based on data from the U.K. Office for National Statistics (ONS), the services sector is the
biggest industry in the U.K., making up 80% of the country's gross value added (GVA), a
measure similar to GDP. This sector encompasses various industries such as finance, business
services, retail, food and beverage, and entertainment. The remaining two significant
contributors to the U.K.'s economic output are manufacturing (10%) and construction (6%).
Agriculture makes up approximately 0.67% of the total economic output (Boyle, 2023)

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).
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Global disruptions caused by the COVID-19's rapid cross-border closings were unparalleled. To
combat the epidemic, governments enacted stringent measures like lockdowns, travel bans,
and social seclusion rules. As a result, the service sector faced a variety of difficulties, such as:

1. 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)
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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)
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(ONS,2021)

3. 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
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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)

(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
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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.

However, after that specific quarter, the number of redundancies swiftly declined, returning to
pre-pandemic levels at a pace similar to their initial increase. By March to May 2021, the
redundancy figures had reverted to the levels observed before the pandemic's impact (House of
Commons Library, 2022)
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(House of Commons Library, 2022)

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
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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.
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Reference list
BMA (2023) Covid-19: Impact of the Pandemic on Healthcare Delivery, Available at:

https://www.bma.org.uk/advice-and-support/covid-19/what-the-bma-is-doing/covid-19-impact-of-
the-pandemic-on-healthcare-delivery

(Accessed 20.07.2023)

CDC (2022) Research Insight, Available at:

https://assets.bii.co.uk/wp-content/uploads/2021/12/15173749/
DigitalAdaptationHealthEducation-BII-1.pdf

(Accessed 20.07.2023)

Delliite (2021) Covid-19 Drives Changes in the Business Service Sector (BSS), Available at:w

https://www2.deloitte.com/content/dam/Deloitte/de/Documents/financial-services/
Deloitte_LS_Covid19_SSC.pdf

(Accessed 15.07.2023)

Heli Simola (2021) Consumption and Service Sector Demand Played a Key Role in the Covid-
19 Global Taale Collapse, Vox Eu CEPR, Available at:

https://cepr.org/voxeu/columns/consumption-and-service-sector-demand-played-key-role-covid-
19-global-trade-collapse

(Accessed 15.07.2023)

Grant Thoronton (No date) Professional Services Firms Prove Their Resilience, Available at:

https://www.grantthornton.global/en/insights/global-business-pulse-professional-services/

(Accessed 16.07.2023)

House of Commons Library (2022) Coronavirus: Impact on the Labourer Market, Available at:

https://researchbriefings.files.parliament.uk/documents/CBP-8898/CBP-8898.pdf

(Accessed 16.07.2023)

Michael, J., Boyle (2023) The Economy of the United Kingdom, Investopedia, Available at:
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https://www.investopedia.com/articles/investing/042915/how-uk-makes-money.asp

(Accessed 16.07.2023)

VOX EU CEPR (2021) Consumption and Service Sector Demand Played a Key Role in the
Covid-19 Global Taale Collapse, Image Resource, Available at:

https://cepr.org/voxeu/columns/consumption-and-service-sector-demand-played-key-role-covid-
19-global-trade-collapse

(Accessed 15.07.2023)

UNWTO (No date) International Tourism and Covid-19, Available at:

https://www.unwto.org/tourism-data/international-tourism-and-covid-19

(Accessed 15.07.2023)

UK Parliament (2023) Hospitality Industry and Covid-19, Available at:

https://commonslibrary.parliament.uk/research-briefings/cbp-9111/

(Accessed 15.07.2023)

Shoosmiths (No date) Covid-19: Impact on the UK Education Sector, Available at:

https://www.shoosmiths.com/insights/articles/covid-19-impact-on-the-uk-education-sector

(Accessed 15.07.2023)

ONS (2021) Coronavirus and the Impact on the UK Travel and Tourism Industry, Available at:

https://www.ons.gov.uk/businessindustryandtrade/tourismindustry/articles/
coronavirusandtheimpactontheuktravelandtourismindustry/2021-02-15

(Accessed 15.07.2023)

ONS (2021) GDP and Events in History: how the Covid-19 Pandemic Shocked the UK
Economy, Available at:

https://www.ons.gov.uk/economy/grossdomesticproductgdp/articles/
gdpandeventsinhistoryhowthecovid19pandemicshockedtheukeconomy/2022-05-24

(Accessed 15.07.2023)
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