During the COVID-19 pandemic, countless businesses have been reducing or closing their operations, including permanent shutdowns. As a result, there has been an abrupt cessation of economic activity. Companies have faced pressure to show responsible behavior in the wake of the financial crisis, which is expected to accelerate businesses’ shutting down. Those that remain working are expected to show that they bring benefit to both society and the environment, not just their bottom line. In the high-pressure climate, businesses that have been shutting down have suffered not only a financial loss but have also been challenged by the need to reconfigure their operations and rethink strategies that may help them adapt to the new environment during recovery.
The three variables to be included in the current examination include the quarantine restrictions (x), which are not dependent on any other variables, businesses shutting down (y), which is a dependent variable, and the rates of the newly-infected population (z), which is a control variable. The correlation between the variables is essential to examine because it will reveal the major trends associated with the business in the pandemic and help predict future developments. In addition, there may be a variance in the relationships between the variables depending on the political and economic setting, which provides possibilities for further research and comparison. In the context of the UK, the closing down of businesses has been aligned to the four tiers of local restrictions, such as “Tier 1: Medium, Tier 2: High, Tier 3: Very High, and Tier 4: Stay at Home” (UK Government, 2020). Between Tiers 1-3, businesses and venues are allowed to be open if they follow the COVID-19 Secure guidelines. In Tier 4, however, the tightest restrictions are put in place, with most businesses and venues required to be closed.
Theory and Hypothesis
Quarantine restrictions have a direct influence on whether businesses are limiting or shutting down their operations, and, in the case of the UK, the Tier system plays a significant role. The decision on which area goes in which tier is based on core epidemiological factors. These include the case detection rates of COVID-19 for all age groups, the case detection rates in the group of individuals over sixty years old, the rate at which the cases are either increasing or decreasing, the positivity rate, and the pressure on the National Health Service (NHS) (UK Government, 2020). Therefore, depending on the tier of the quarantine restrictions, businesses will be either open or shutting down indefinitely. In the UK, the mechanism connecting the outcome variable, the closing down of companies, and the explanatory variable, the quarantine restrictions, represents a chain of decisions made by the government regarding whether to allow venues, shops, restaurants, and other service institutions to be open.
Therefore, the hypothesis is that the stricter the quarantine restrictions under the Tier System in the United Kingdom, the more businesses will be closed. Both variables, the limits under the Tier System and the closing down of businesses, are connected to the statistics of the newly-infected population’s rates in different regions of the country. Businesses shutting down cannot be causing quarantine restrictions because fewer people visiting service institutions and public places such as shopping malls leads to a lower number of contaminations. As a result, the rates of new cases decrease, which further causes quarantine restrictions to loosen under the UK Tier System, thus allowing businesses to be open. This means that the y variable is not causing x in the causal relationship mechanism. It is crucial to control the z variable, which is concerned with the newly-infected population in the region because it is embedded into the quarantine restrictions decisions made by the government. The more people there are catching COVID-19, the higher is the possibility of businesses having to close due to the increased restrictions. Finally, it should be mentioned that there is no possibility that the relationship between the two variables could be spurious because there is an implication that fewer restrictions lead to more businesses allowed to be open and vice versa.
Data and Methods
The operationalization of the three variables deals with the selection of indicators for each of the proposed variables. For the variable of the quarantine restrictions, the core indicator in the chosen context is the tier of the lockdown established in the region. For the variable of businesses closing down, the leading indicators include the possibility of remaining open and working or the need to shut the operations. For the control variable of the newly-infected population rates as correlated to the indicators of the Tier System, such as the case detection rates in the population, the speed at which the cases are either increasing or decreasing, the positivity rate linked to the number of tests done and the number of positive results, and the strain on the NHS. All of the indicators are possible to measure through statistical methods.
The most common types of businesses to shut down in the UK include arts, entertainment, recreation, and accommodation and food service activities, with the shutdown rates at 82.2% and 81.2%, respectively (Clark, 2020). The businesses that remained predominantly working include human health and social work activities and professional scientific and technical activities, with the rates of the shutdown at 3.5% and 3.7%, respectively (Clark, 2020). The tightest restrictions fell on such regions as London that has reached Tier 4 lockdown at the end of 2020 – the beginning of 2021.
The establishment of the tier 4 related to the rise of the seven-day average of 38,936 cases of newly-infected individuals country-wide (BBC, 2020). As a result, daily hospital admissions in London, which is a densely-populated area, have skyrocketed around Christmas 2020, which called for the establishment of the highest tier of quarantine restrictions and the shutting down of businesses.
To measure the relationship between the established variables, regression analysis may be performed. The linear model of regression analysis applies to this case, attempting to model the correlation between the studied variables by means of fitting a linear equation to the data being observed. The equation for the linear regressions is Y=a+bX, where X is the independent or explanatory variable while Y represents the dependent one. The slope of the linear regression line is b and a is the intercept. The statistics to be used in the analysis are as follows:
|Restriction Tier||Businesses Closing Down|
Based on the data above, it is possible to make a prediction as to how the number of companies that will be closing or limiting their daily operations.
Analysis of Results
The linear regression analysis shows a direct correlation between the increasing restrictions and the growing number of businesses that are being closed down due to the COVID-19 pandemic in the UK. With the help of linear regression, a model specification was performed pertaining to the dependent variable being a linear combination of the parameters. The bottom row in the graph is represented by the four different levels of restrictions such as Tier 1, Tier 2, Tier 3, and Tier 4. The chart also shows that a lower level, which is associated with a lower extent of limitations imposed on both businesses and citizens, leads to fewer companies having to stop or alter their operations. Thus, there is a direct relationship between the two studied variables.
It is expected that additional restrictions that are more severe, such as a possible level 5, an even more significant number of companies will be required to close and not accept customers. In this application, linear regression is the ‘best guess’ for using a set amount of data to predict a future occurrence. The set of points are being fitter to a graph to show the increase in the number of companies closing down. The prediction of the higher number of shutdowns as related to quarantine restriction means that the businesses’ financial performance will be highly affected. Such companies will experience a decrease in customer turnover rates, likely with the food-related service activities and accommodation suffering the most economic damage. The waves of rising numbers of infected individuals mean that there would be decreased turnover for specific categories of business.
Further research in this area may be concerned with studying company experiences with closing down and having to deal with the financial implications of low turnover. In addition, the findings will be compared to the outcomes of businesses in the previous year to illustrate the real effects that the COVID-19 pandemic had on the economic stability of companies in the UK. Particular focus may be placed on small businesses because they are the ones that have been affected the most in the absence of a substantial financial buffer.
To summarize, that the central hypothesis is supported by the analysis because the increased tiers results in more significant restrictions imposed by the UK government. Since the change in the tier of the quarantine restrictions results in the transformation of the requirements for businesses to be either opened or closed, the core implication is that a government-imposed lockdown would lead to closing. The level of restrictions is correlated with the numbers of newly infected individuals, and the changes in lockdown status may vary from one region to another as per UK government rules. Such restrictions imply that businesses will be mandated to either close or allowed to reopen or work according to an adjusted schedule depending on the location in the United Kingdom. For example, a Tier 2 restriction means that pubs and bars are mandated to close, unless they operate as restaurants. Also, hospitality businesses that sell foods and drinks on site must provide table services only. Therefore, there would be a moderate level of companies closing down. Tier 4 restrictions, on the other hand, mean that the large majority of hospitality settings would be closed, which is correlated with the most enormous numbers of businesses being shut down. Since the country is now on full alert and has been experiencing one of the most significant hits associated with the new type of the virus, additional lockdown rules may be imposed, leading to further financial decreases for the country.
In the current study, linear regression analysis helped explore the correlation between a dependent and independent variable, specifically, the lockdown restrictions linked to the COVID-19 pandemic and businesses closing down in the United Kingdom. The regression analysis serves as a means to predict future developments as to how conditions and lockdown statuses will influence local businesses in the country. The scatterplot graph indicated an increasing trend associated with the relationship between business shutdowns and restrictions. The analysis showed that there is a direct relationship between coronavirus-related restrictions in the United Kingdom and businesses having to shut down. The sales of such businesses were shown to be between 30% to 40% lower than they otherwise would have been without the lockdown (Bank of England, 2020). The guidance and restrictions set forth by the Tier System in the country directly affected the dependent variable. The higher was the tier of the region, the larger was the number of organizations having to comply with the mandatory rule to either limit or completely stop their operations. The findings of the study align with the available findings in the literature on the topic. According to the UK Government (2020) rules, the limitations under the Tier System are concerned with businesses having to close. Specifically, non-essential retail, such as clothing and homeware stores, must be shut down under the high levels of restriction. Hospitality venues and accommodations ranging from cafes to campsites must not operate, in addition to leisure and sports facilities as well as entertainment venues.
Evidence showed that the new strain of COVID-19 was increasing in densely-populated areas, which can lead to higher rates of businesses shutting down in those locations. The UK Government (2020) report indicated that the majority of cases were occurring in London, the South East, and the East of England as related to the new variant of the virus. Furthermore, the strain on the NHS is an issue, with the winter period being the most challenging time for the Service. The introduction of Tier 4 in the most problematic regions implies the prioritization of community testing, local support programs, as well as the collection of statistical data that is pertinent to the areas.
The limitation of the current study pertains to the continuously changing statistics regarding the rates of companies closing down. While there is information available regarding the number of cases of the newly-infected individuals in the UK and other health-related data, the statistics regarding, for example, London-based businesses closing down is absent, and the research had to use the information that is highly limited. Future research on the correlation between the quarantine restrictions and the financial implications for organizations has future potential. Specifically, multiple regression analysis may be performed to find out a statistically significant correlation between a set of variables and find relevant trends in the available data sets. For instance, a correlation between nurse staffing levels, new cases of coronavirus in the population, and the businesses shutting down may be studied.
Bank of England. (2020). The impact of COVID-19 on businesses’ expectations: Evidence from the decision maker panel. Web.
BBC. (2020). Covid: Millions more braced for tougher rules in England. Web.
Clark, D. (2020). Share of businesses that have closed in the UK due to coronavirus in 2020, by sector. Web.
UK Government. (2020). Guidance: Full list of local restriction tiers by area. Web.