Adapting to a lockdown lifestyle has left us all pondering what changes may be ahead. TERRY MURDEN take a look into the near future (pic: Victoria Street, Edinburgh, DB Media Services)
We keep getting told a different world will emerge from the coronavirus blitzkrieg and two weeks into the health-enforced lockdown we’re all asking just what it will be like.
Few sectors will be untouched. It will not only affect behaviour, the impact of the virus will re-balance the economy, shrinking some industries that will inevitably suffer casualties.
Tourism, the conference trade and top level sport are among the most exposed, with global travel now viewed with fear and suspicion and sponsors left high and dry as big tournaments and events are called off. Those sectors which were already facing a precarious outlook, such as high street retail and newspapers, may be tipped over the edge.
Governments are frantically assembling eye-popping rescue deals to keep the world economy spinning. No one believes the debt will ever be paid off, or that the economy will just pick up where it left off. But it might just be enough to underpin those robust businesses which have enough reserves to see them through a short to medium term closure.
But how long is short to medium term? Some say the lockdown will last until June. Some say many businesses will not survive that long, even with government support.
Yet there are beneficiaries, the obvious ones being pharmaceuticals and medical supplies, but also the IT sector, with its army of consultants press-ganged into helping maintain mothballed businesses and assist the new battalion of home workers. More than half of companies polled by the Parliament Street think tank said 58% of companies have ordered new laptops, tablet computers and mobiles.
While the ultimate and tragic death toll and damage to the economy cannot be accurately guessed at, there are obvious changes already happening.
Corporate behaviour
The phrase ‘we’re all in this together’ resonates not just as a campaign slogan to fight the virus but also as a call for economic unity. Companies are realising that they’re all in deep in the you-know-what and that there is a need for greater co-operation.
This sense of togetherness is leading to a realisation that businesses are not just rivals, but are dependent on each other to make the world go round.
This is manifest in moves such as Network Rail’s decision to pay suppliers immediately. Others are doing the same as the penny drops that by helping others they help themselves. The lockdown has done more for late payments than years of campaigning.
Remote working
As many has half of us are now working from home, a figure that has been on rise even before the virus crisis as technology has made it more possible to work remotely. Many people are already ‘laptop nomads’, working from wherever they happen to be: home, coffee bar, even on the beach.
Savings on office costs is not the only benefit of having staff work remotely. It removes the need to commute and all the stress and cost that comes with it.
Companies and their staff have discovered a new world of group chat tools to stay in touch via virtual meetings through software such as Slack and Trello. Videoconferencing tools like Zoom and Teams have taken off.
It has made many wonder why they ever invested in that season ticket and trudged through the rain every morning to catch a packed train.
Firms that find they can work just as efficiently and have invested heavily in new kit may opt to make the switch permanent.
Home working also solves a lot of problems for parents of young children or those with other dependents.
However, we are social animals and many say they miss the office environment. Some feel isolated, and find it difficult to work from their dining room table. Others struggle with the self-discipline required or with tech-based meetings and feel uncomfortable with it, even suspicious of who else is listening in. The ease of leaning over to speak to a colleague can’t be replicated from home. The feeling of being out of sight and out of mind bothers those concerned about being sidelined or overlooked, particularly those on the career ladder.
Added to that, IT can be a hit-and-miss experience, no matter how much money is thrown at it. Just under a third of UK businesses (31%) say their video conferencing system has crashed during a critical meeting since the Covid-19 outbreak, according to a poll from Parliament Street think tank.
Commuting
It follows that as more of us work from home, there is likely to be a decline in commuting when the virus alert is over. That will raise questions over planned road, rail and air projects.
The government gave the go-ahead to HS2 just before the coronavirus took hold, but an acceleration of remote working and teleconferencing will raise questions over the wisdom of a project which is justified on meeting growing commuter traffic. The odds have lengthened on Heathrow getting its third runway.
Energy saving
While many businesses are finding it difficult to navigate these uncertain times, one ray of sunshine is that small businesses are set to save an average of £489 per month. In the north of Scotland businesses will be saving on average £508.07 and in the central belt and south £483.71.
That’s according to research by energy price comparison website BritishBusinessEnergy.co.uk, which assessed the impact of business utility bills as a result of offices and workplaces remaining empty.
A marketing agency based in Sheffield and London has saved £6,850 per month by swapping the office to working from home. Carrie Rose, creative director and co-founder of Rise at Seven, said “We cancelled our monthly rolling contract with co-working spaces and in doing so have saved £4,000 a month on rent, £750 on energy bills, and £2,100 on travel expenses going back and forth to client meetings and pitches.”
The environment
According to Pawprint, the Scotland-based personal eco app, the reduction in road and air traffic will see a fall of more than 80 million tonnes of carbon emissions this year – equivalent to a 9% drop in the annual footprint for everyone in the UK, an achievement that Greenpeace, Extinction Rebellion and Greta Thunberg could only dream about.
Already the restrictions on human activity around the world have had a surprising and immediate impact on nature as city smog lifts and dolphins have been spotted in the now clear canal waters of Venice.
The postponement of the COP 26 Climate Summit in Glasgow should give those involved time to think how much can be achieved when governments around the world act together. Perhaps more, short lockdowns and stoppages in production and travel will be considered. If we can get through three months of this, then the odd day or two of inaction must be a feasible option if it would help save the planet.
Travel and tourism
Only the most optimistic believe air travel will get back to pre-virus levels any time soon. Gordon Dewar, chief executive of Edinburgh Airport, is forecasting two years.
Analysis by ForwardKeys, the travel analytics company, reveals that the COVID-19 crisis has brought the aviation industry to its knees. International airline seat capacity fell this week to just 23% of what it was in the first week of April last year. Just 10 million seats were still in service, to facilitate essential travel, compared with 44.2 million a year ago.
Olivier Ponti, VP Insights, ForwardKeys, said: “It is likely that when we get to the other side of the pandemic, things won’t return to the vibrant market conditions we had at the start of the year anywhere near as easily as some people imagine.
“By then, it is possible that a number of airlines will have gone bust, consumers will have lost confidence in flying and uneconomic discounts will be necessary to attract demand back.”
The slump in travel and tourism has many consequences. An immediate impact has been the decline of holiday letting in favour of residential. Bad news for Airbnb, good news for communities tired of the churn of neighbours.
Food and drink
Forecasters are divided on food and drink outlets. Some believe the lockdown will turn us into a nation of home drinkers, while others say the opposite is more likely and that without the temptation of the pub on the way home from work, it will see more people ditch alcohol. Data currently appears to favour the former, with wine sales soaring.
Peter Kubik, a partner at UHY Hacker Young, said restaurant chains were likely to be the hardest hit from the coronavirus crisis. As consumers get used to ordering takeaways, or cooking at home, they may get out of the habit of eating out.
Fred Diamond, a consumer analyst at GlobalData, said the outlook for the restaurant and pub sector looked increasingly bleak. “As people adjust to isolation by making their home as comfortable as possible, street retailers will have an even harder time convincing people to leave their living rooms.”
M&A activity
A return to normality is expected to herald a wave of mergers and acquisitions as thousands of distressed companies seek buyers or refinancing deals and the stronger companies conduct what Fred Goodwin once termed ‘mercy killings’.
The most obvious targets will be in customer-facing businesses such as retailers, estate agencies, events and conference organisers, pubs and restaurants, as well as B2B merchants and wholesalers.
This bodes well for corporate finance advisers, including lawyers and accountants who, in the meantime, face weeks or months of little or no M&A business.
Employment and recruitment
Over half of employers will look to furlough their staff but one in four expect to make permanent redundancies, according to a joint survey from the CIPD, the professional body for HR, and a people management magazine. Fifteen per cent of employers expect to lose up to 10% of the workforce.
Hiring is expected to take a hit over the next few months as employers assess demand for products and services. More than half (52%) said that all hiring has been frozen. A quarter (25%) said they would continue to hire but less than normal.
Infrastructure
As remote working takes hold, there may be a re-prioritising of government spending from transport, bridges and tunnels to digital forms of connectivity. The nature of the crisis has focused a need on more and better medical facilities and supplies together with improved care provision.
Commercial property
The last few weeks have seen wholesale closures of shops, offices and other facilities with a growing number of tenants unable to afford to continue with rental payments. Some are asking landlords to reduce rental payments, or to waive these completely until things improve, says Darina Kerr, a Glasgow-based partner and real estate specialist at law firm CMS.
A prolonged period of out-of-office working, especially if it is combined with minimal disruption to performance, may persuade more businesses to go virtual on a permanent basis.
This will be troublesome for those who own, or are trying to let offices. Many commercial landlords have already offered rent deferrals and holidays to tenants who are struggling with cashflow difficulties in the current climate.
It may call for some imaginative use of properties, including re-purposing of retail, perhaps as shared office facilities in the new remote working environment.
Planning
One other unintended benefit from the lockdown is an improvement to the planning process.
Council committees and planning hearings are already taking place by way of video and telephone conferencing.
Mark McMurray, partner and planning specialist at law firm CMS, says: “There are already calls for some of the changes to be kept for the long term. After years of discussions on planning reform, it could be a public health emergency which has the most significant impact on the operation of the planning system.”
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Great article Terry. I suspect the world will never be the same, post Covid. Although, I also think we will have short memories on sone things when you look back at past dowturns.