From supermarket measures to ease panic buying to the headlong rush to bring in home working, Oliver Balch looks at the impact on businesses around the world the pandemic gathers pace
Predictions about the economic fallout of the current Covid-19 crisis are just that – predictions. Yet, as stock markets plummet, government debt spikes and global events such as COP26 face cancellation or postponement, business leaders still need to strategise for the future as best they can.
In a 34-page briefing, global consultancy firm McKinsey sought to lay out the potential scenarios ahead. The report calculates the implications for two basic models for the pandemic, the confirmed cases of which now stand at over 160,000 (a fraction of those thought to have the condition).
These comprise a “delayed recovery” and a “prolonged contraction”.
Neither is pretty. The first anticipates new case counts rising in the Americas and Europe until mid-April, with Asian countries peaking earlier, and Africa and Oceania avoiding contagion. The consequent travel restrictions, social distancing and quarantines will see a “sharp fall” in consumer and business spending until the end of June, resulting in a recession that will most likely last until the fourth quarter of 2020.
Under a “prolonged contraction” scenario, meanwhile, the peak in cases in the Americas and Europe will not come until May and epidemics will affect Africa, Oceania and some Asian countries. Although McKinsey avoids putting hard numbers on the impacts, the story is one of widespread corporate layoffs and bankruptcies, coupled with huge stress on the global financial system (although falling short of a full-scale banking crisis), with little sign of recovery until the second quarter of 2021.
Companies are not sitting on their hands. A “pulse survey” of chief executives and chief financial officers in Mexico and the US by professional services firm PwC finds Covid-19 is their top concern. Surveyed last week, 90% of the 50 leaders interviewed felt their business would rebound within three months were the outbreak to end immediately. Today, such a possibility looks wildly unlikely. Indeed, at 58%, the proportion that expect Covid-19 to “significantly” affect company revenues this year already feels like an underestimate. Presumably the 14% of finance leaders who are not considering any financial action as a result of the pandemic might now also be having second thoughts. PwC intends to repeat the survey every two weeks to track changing attitudes.
Just how bad the coming weeks and months will be for business remains open to speculation, but bad it certainly will be. With airlines grounding airplanes, hospitality and sports venues closing their doors, and manufacturers slashing production, now more than ever will corporate claims to responsibility be put to the test. Impressive examples are already trickling through. Brightening the grim mood, for instance, is word from some of the world’s largest internet service providers and cellular services about relief for struggling customers. Nearly 70 US operators pledged to adhere to a Federal Communications Commission statement agreeing not to terminate contracts for non-payment.
Meanwhile, a list compiled by computer retailer PC World highlights 16 other companies, including AT&T, Comcast, and T-Mobile, that are going the extra mile with measures such as removing data caps or lowering bills.
JUST capital is keeping track of the rapidly growing US corporate response to the coronavirus crisis. These include a queue of chief executives who have promised to forgo part or all of their salaries, led by the leaders of embattled airline firms like Delta, United Airlines and Air France. Meanwhile, in the UK, supermarket chain Morrisons has given its suppliers assurances of immediate payment to help with cashflow.
Among other initiatives, Iceland and Sainsbury’s supermarkets have set aside the first hour of trading exclusively for elderly and vulnerable customers in an attempt to counteract the impact of widespread panic buying, which has seen shelves empty of staples like toilet paper, paracetamol and tinned tomatoes.
In France, luxury firm LVMH has asked factories that normally produce perfumes and cosmetics for Christian Dior, Guerlain and Parfums Givenchy to shift to making hand sanitising gel, which will be distributed free to French hospitals, while the French hair and beauty brand L’Oréal has launched a European solidarity programme to provide its European food distribution customers and partner hospitals and care homes with free hand sanitiser.
Workplace disruption: staff safety and pay
WORKPLACES the world over are changing in different ways and at different speeds in response to the coronavirus crisis. In a Gallup survey undertaken last week, half of Americans felt Covid-19 was set to have a very negative (18%) or a somewhat negative (32%) effect on their workplace. Women (54%) are more likely than men (46%) to have a negative view on potential workplace disruption, possibly because they are more likely to work in part-time jobs, which are more liable to interference.
As the pandemic spreads and offices close or working hours fall, attitudes will no doubt change. In Italy, most offices have already been closed for a fortnight or more, while in the UK offices began shutting up shop this week. As recently as last week, however, one third of UK employers still had no plans should one of their staff contract Covid-19.
Meanwhile, according to a global survey of 158 employers released late last week by Willis Towers Watson, fewer than two-fifths (37%) of US businesses had reviewed their business continuity plans and fewer still (27%) had reviewed their insurance coverage.
Pay for sick staff is perhaps the least clear issue at present. A survey by the Harvard Business Review of US firms found that nearly 40% of employers have recently clarified their pay policy in the event that worksites close or employees self-isolate. Even so, 24% of US workers (around 33.6 million people) do not have access to paid sick leave, data from the US Bureau of Labor Statistics reveals. In the UK, meanwhile, 48% of workers qualify for contractual sick pay (at full salary) from their employer, while one quarter (24%) are entitled to statutory sick pay (set at £94.25). One stand-out case is Denmark, whose government has said it will cover 75% of the monthly salaries of those at risk of losing their jobs due to the virus (with employers paying the remainder). Workers paid on a per-hour basis will have 90% of their wages (up to 26,000 Danish kroner, or £3,162, per month) covered by the state.
Home working: troubles, transport and TV
HOME WORKING is fast becoming a reality for millions around the world as measures to restrict Covid-19 come into force and efforts to limit all but essential contact start to bite. Working alone and communicating virtually will take considerable adjustment for many. Most US workers (59%) say home working would present difficulties for them, in part because of the hands-on nature of their jobs, according to the University of Southern California. For others, flexible working marks a culture shift. Nearly four in 10 businesses (38%) around the world have no policy around home working and other flexible work patterns, a 2019 global survey by co-working specialist IWG found. Most employees are set up to work at home, however, with 57% of workers having a fully equipped home office (although only 28% received help from their employer towards set-up costs).
Numerous challenges are associated with home working. Habitually, data security and privacy have been two business risks that have caused employers concern. Both are very much still with us. Another long-standing issue coming to the fore is employee productivity. Nearly half (47%) of home-based “knowledge workers” recently interviewed by GitLab admit to finding domestic distractions, such as children and pets, problematic. Despite this, roughly half report that remote or home working makes them more productive (52%) and more efficient (48%). Distractions are not the only struggle, however. The latest annual State of Remote Work report by Buffer identifies loneliness (20%), difficulties with collaboration and communications (20%) and “not being able to unplug” (18%) as challenges.
One of the sustainability upsides of home working is the reduction in commuting. This is a stress-buster for many. One notable 2015 survey of over 5,000 commuters in five European capitals (Barcelona, Berlin, London, Madrid, Paris and Rome) found the experience of travelling to work causes them more tension than their actual jobs (or, for that matter, visiting the dentist). But the environmental benefits of the corresponding reduction in transport are marked.
Video footage from the European Space Agency, for instance, has noted a dramatic decrease in nitrogen dioxide emissions in northern Italy since self-isolation orders came into effect – a phenomenon associated with drops in industrial output as well as transport. Similar effects were noted in China, with NASA observing a reduction in nitrogen dioxide of between 10%-30% compared with usual levels. According to the World Health Organization, around 80% of city dwellers are regularly exposed to levels of air pollution above recommended levels, resulting in an estimated annual death toll of 4.2 million people. Oil demand is also expected to slacken off considerably as economic activity slows, with the International Energy Agency predicting year-on-year oil consumption to drop for the first time since the financial crash of 2008/9.
On the flipside, as employees working from home anticipate increasing their internet use and television viewing (potentially up by 60%), the carbon footprint of our online habits is expected to increase. Time spent streaming reportedly increased by 20% last week, with rates in lockdown Spain double this. Video streaming service Netflix has also seen installations of its app spike in recent weeks, with download figures in Italy jumping by 57%, according to market data service SensorTower. Energy comparison website SaveOnEnergy recently calculated the emissions linked to streaming Netflix’s top-10 movies. Views of ‘Birdbox’, for example, numbered around 80m (Netflix has 158m subscribers worldwide), resulting in the release of 66 million kilograms of carbon dioxide. This equates to driving more than 146 million miles. Even before the coronavirus outbreak, Cisco was estimating that online videos would account for 82% of all internet traffic by 2022 (equivalent to 4.8 ‘zettabytes’ – 4.8 sextillion bytes – per year).
Main picture credit: Peter Cziborra/Reuters