As the nationwide lockdown began, few of us could have imagined that COVID-19 would still be dominating the news and our lives a full seven months down the road. Now, as we head towards the final period of a tumultuous year, returning to what we once considered to be normal is not only highly unlikely but, in some ways, not even desirable.
The pandemic has changed our lives, our businesses, and how we interact with each other forever.
Whilst this might seem like a bad news story, and we certainly wouldn’t want to minimise the personal tragedies experienced by many of us, there is still the potential for some positives to be taken from the experience and lessons to be learned that can benefit us socially and economically. So, let’s take a look at what’s happened so far and where we seem to be heading.
After two consecutive quarters of negative growth, the UK entered into recession at the end of Q2. Driven by the enforced closure of shops and businesses on an unprecedented level, combined with severe restrictions in movement; approximately one quarter of GDP was lost.
This sudden fall prompted a series of special measures to protect businesses and individual jobs. This was followed by a series of government initiatives designed to get us all spending again, such as ‘Eat Out to Help Out’ and temporary VAT cuts in the hospitality and leisure sectors.
These measures have clearly had an effect. Q3 has shown signs of a recovery within the UK, however there is still a high level of uncertainty and there are clearly some significant challenges ahead. The extent of these will depend, in the most part, on the size and impact of the ‘second wave’ currently being experienced.
Many analysts, such as PWC, anticipate a return to growth for most sectors at some point in 2021, albeit from a very low base and with some degree of geographic bias. It also needs to be said that COVID-19 is not the only factor to influence future growth, with a UK-EU free trade deal still hanging in the balance.
In summary, the economic impact of COVID-19 will be felt for many years to come and it will continue to shape the fiscal policy for this and future governments. However, somewhat paradoxically, the longer the uncertainty goes on, the more we learn to live with it. Personal and commercial decisions can only be put on hold for so long. Spending cannot be based on the bare necessities forever. And so, in the end, we all play a part in making a recovery happen.
Stability and growth are intrinsically linked to the strength of local and global economies. There will always be some businesses that buck this trend, such as the online traders, delivery companies, streaming services and video conference platforms that have seen extensive growth servicing the needs of people stuck at home. These may be the exception rather than the rule, but recessions and restrictions often lead to innovation and innovation, if it is well managed, can drive profit and growth.
The UK economy has always been cyclical and so, whilst it is clearly changing shape, it will in time return to previous levels of growth. On the other hand, the way we do business has changed forever — but that’s not necessarily a bad thing.
As lockdown took effect, millions of people who had never even considered working from home were hastily putting together makeshift offices in spare bedrooms, garages, and garden sheds. Some loved it, some weren’t so sure but, according to a recent survey of 1,000 businesses by the Institute of Directors, 74% of companies said that they plan to maintain the increase in home working even after social distancing measures are removed.
Their reasons vary. For some, it will simply be the preference of employees who are enjoying a better work/life balance and, having done it for over half a year, it becomes more difficult for bosses to say that it doesn’t work. In any case, another recent survey showed that 44% of businesses thought that working from home was proving more effective and that it makes sense to keep it going. It seems that, whilst it won’t work for everyone, and some jobs simply cannot be done from home, remote working is here to stay.
Wherever the work takes place, another business practice that appears to be forever altered is how meetings are conducted, with the use of video conferencing platforms such as Zoom, Microsoft Teams and Skype going from being an awkward concept to the working norm overnight.
Having been forced into the situation, many businesses have been surprised by the relative ease with which a significant percentage of meetings could be conducted virtually. And, without the need to factor in travel time, including any traffic jams or rail delays, productivity can often increase.
A recent survey of over 6,000 workers showed that 41% of employees said that remote working proved to be just as productive as traditional environments, whilst 29% said they got more work done when at home. Having said this, the opportunity to increase productivity does seem to be linked to the nature of the role being performed and the circumstances at home.
Of course, no one is saying that face-to-face meetings and centralised work environments are a thing of the past. Physical contact, or at least proximity, is a fundamental human need and building strong relationships often depends on spending at least some time together in the same location.
In the end, what’s really changed is the default option. Having decided to meet, it is no longer a question of when and where but whether a video conference would be quicker, easier and just as productive.
In the Home
The pandemic has meant that the way we live, shop, entertain ourselves and engage with others has changed beyond recognition. Weekly trips to the grocery store have become booking an online slot. A trip to the cinema has been replaced by streaming a box set, and a phone call to family or friends has become a group video chat or time spent together on a shared entertainment platform.
None of this is new, especially for the generations who grew up with technology being an essential part of their being. The key difference is that even Baby Boomers are getting in on the act and, in many cases, changing the habits of a lifetime.
As the lines between home and work have blurred, some have struggled to adapt. Not everyone is blessed with a spare room or a garden building that keeps work in its place but, as time has gone on, new skills and disciplines have been learned, creating an alternative way of living and working.
Some of these changes have been easily adopted and have even become a preference, but one thing that many of us struggle with is the loss of spontaneity. Everything needs to be planned and booked in advance. We need to know what the rules are for every event and how social distancing will be maintained.
For example, the current ‘rule of six’ means that even an impromptu get-together between friends and family needs to be conducted like a large-scale project with controlled times, limited numbers, and the agony of deciding who’s coming and who’s not. It’s not easy, but at least we know that this particular restriction will pass.
Out and About
It’s fair to say that restrictions on movement has been one of the most difficult aspects of the last few months. Whilst some things that we would normally travel for were quickly replaced with an online alternative, this doesn’t work for everything or everyone.
With countries coming in and out of restrictive measures, booking any form of foreign trip requires extensive planning and close scrutiny of insurance policies. This sudden and severe drop off in international travel has brought airlines, hotels, tourist attractions and many more to the brink of bankruptcy. And, whilst oversees travel is slowly coming back to life, the International Air Transport Association (IATA) has downgraded its 2020 traffic forecasts again, estimating that it will be at least 2024 before air traffic reaches pre-pandemic levels.
Closer to home, as lockdown took hold, car usage fell by up to 75%, with both national rail services and London’s underground being virtually empty. That was back in April and a lot has changed since then, with September seeing road usage approaching normal levels.
The same cannot be said for any form of public transport, where some travellers still feel uncomfortable with sanitisation levels and capacity is reduced due to social distancing measures. To put this into perspective, Transport for London (TfL) has asked the government for a multi-billion-pound bailout to get the network through the second half of this financial year.
All of this will change in time and it is interesting to note that Prime Minister Boris Johnson has recently launched an independent road and rail review but, at least for now, whether travelling by car, or by joining the bicycle revolution, personal transportation methods seem to be the order of the day.
It is often said that change is the only constant in life, and it has never been truer. What has surprised us all is how quickly everything we thought we knew could be turned on its head.
Whether we are inside or away from the home, at work or at play, the key word now is flexibility. Not just being flexible about what we do but also how we do it.
Learning this lesson will not only help us deal with the challenges of today but it will prepare us for the post-pandemic world ahead.