The Taplow firms have been active throughout the pandemic. This is the fifth in our Business Updates from our partners around the world. The situation is showing clear signs of recovery although nuances exist in every country and region.
Key Finding
Business Leaders: As business restarts after lockdown, leaders are grappling with new business practices and employee welfare, security, and roles in the workplace. Inspirational leaders are focused on ensuring their teams feel part of an important stage in the company’s development and clearly understand the business strategy and that it is understood and embraced.
Employees: Employees are dealing with restarting work. Family security is another factor that’s causing stress. Following long periods of working from home or being furloughed, returning to working life causes mental welfare issues and organisations should show empathy, support, and embrace colleges concerns.
Companies: Companies are dealing with post Covid19 regulations, reigniting their business that are often unrecognisable from pre lockdown times, all whilst ensuring their clients “new normal” situations are recognised and can be met.
AFRICA
South Africa:
• The pandemic is seeing countries in Africa going into various versions of “lockdown”. The business community is striving to come to terms with the situation with the backdrop of little or in some countries no assistance.
• Although Africa has not seen as many cases primarily due to their being less travel spreading the pandemic. However, there are notable clusters emerging.
ASIA
Australia:
• Australia has experienced a move to “Big Government” during the pandemic with Government setting the agenda. We have seen over the last ten days the focus of Government shift from containment and suppression of the virus to rebooting the economy. It is expected to be a long process and with some staggered results. There is a concern that delay continues to set back the potential economic improvement.
• The various regions of Australia have different restrictions, activity and requirements that are challenging the resumption of commercial activity and the restart of tourism. There is a strong desire by the Governments of Australia and New Zealand to open a “Bubble” of cross border travel sooner rather than later and this prospect becomes more realistic week by week. Other international travel looks to be delayed probably much longer.
• Equities markets are showing positive signs of recovery already. International trade is recovering even with setbacks and tariffs being implemented in a new international protectionist climate. The large Government financial stimulus to the Australian economy is having a material impact boosting recovery prospect.
India
• Government of India has announced an economic package of INR 20 lakh crore (~$265 billion) including those announced earlier which accounts for 10% of India’s GDP.
• This package brough in some relief for MSME (Micro, Small and Medium Enterprises) by infusing collateral-free automatic loans, subordinate debt for stressed MSMEs, equity infusion for MSMEs through a "Fund of Funds", and Rapid clearance of dues of MSMEs by Government of India.
• GOI also made some tax reforms to maintain liquidity.
Singapore
• As Singapore emerges from its Circuit Breaker and enters Phase 1 Re-opening in June, the resumption of work is expected to go back up to 75% for various sectors such as Finance and Construction.
• However, not all of it is positive news as business cessation could see an “uptick” in the coming months as the COVID-19 pandemic continues to put a severe strain on the Singapore economy.
• The coronavirus pandemic is set to weigh on many sectors in the economy for the rest of the year. This includes outward-oriented sectors such as wholesale trade, air transport and tourism sectors, retail and food services.
• On the other hand, sectors such as biomedical manufacturing, and information and communications will continue to grow.
• The Government has slashed the country’s growth estimates in quick succession over recent months and is now expecting the economy to contract between 4 and 7 per cent this year. This will have repercussions for the job market.
• The Government is implementing SG United Jobs and Skills Package that aims to support close to 100,000 jobseekers. The Package will include schemes to expand job opportunities in both the public and private sectors.
• It will also provide a range of traineeships for jobseekers to gain industry-relevant experience and build up professional networks, while providing skill-upgrading opportunities.
New Zealand
• A fortnight with zero new COVID cases, and just a solitary active case, gives obvious grounds for optimism. So does the gradual easing of previous restrictions including the move to allow gatherings of up to 100 people (up from 10 previously). It is highly anticipated that New Zealand will move to Alert Level 1 at some stage this week, which will mean business is back to the new normal with the exception that our border will remain closed. There is a possibility that the border may be opened to Australia and possibly some Pacific Island countries in due course but that is still some time away.
• With the recent movement down alert levels, and with restrictions beings relaxed, it is no surprise to see many timely indicators showing marked improvement. From large jumps in domestic accommodation bookings (faster than the rest of the world according to Airbnb data) to retailers reporting a strong pickup in sales since the move to alert level 2 on 14 May.
• There has been a massive policy support coursing through the system at present. This includes the exceptionally large wage subsidy programme that is supporting jobs and activity. The wage subsidy policy is being extended out to September, but with narrower conditions. Meanwhile, last week the Government announced that it will make temporary tax-free payments to workers who lost jobs because of the pandemic. Economic activity levels ahead will be influenced by such changes in policy support as well as the reopening of the economy.
EUROPE
The EU region has seen a remarkable recovery in the past few weeks. The Governments have reopened borders with neighbouring countries and regionally THE business life is returning in stages with positive results. There are even plans from the EU to reopen the Schengen “borderless” system for their 26 participating countries.
France
• Bruno Le Maire, Minister of the Economy and Finance, announced a support plan for French start-ups. The State is going to release 1.2 billion euros between now and 2021, in addition to the first aid programme for French Tech of 4 billion euros announced in March.
• The focus is on preventing the takeover of French startups by digital giants. This new support plan has two objectives. First, "to guarantee our technological sovereignty. As we emerge from the crisis, we cannot afford for innovative French companies to be taken over by digital giants or foreign funds. There are approximately 13,000 start-ups in France, employing more than 100,000 people. In detail, a "French Tech Sovereignty" fund will be created. Managed by Bpifrance, it will be endowed with 150 million euros to finance companies developing "future technologies of a sovereign nature". The fund could then reach 500 million euros by 2021 "according to need".
• After eight weeks of mandatory closure due to the pandemic, almost all non-food businesses have been allowed to receive customers since May 11. The results of the three weeks of phase 1 of the deconfinement are rather encouraging. While store traffic is certainly lower than in the same period in 2019, the decline is much less than the distribution professionals feared. In most outlets, the proportion of visitors who actually buy is well above the average observed before containment, and those who buy spend more. As a result, some stores have seen an increase in turnover in the last three weeks compared to the same period last year. And this, without having to multiply promotions. Stimulated by the good weather and the good news on the health front, French consumers seem to be increasingly enthusiastic about consuming. Children's fashion, toys, household equipment and sports have clearly recovered, while clothing, already in crisis before the confinement, remains in trouble. Despite this good news, the financial situation of many businesses remains precarious.
• Economy Minister announced that the recession would be deeper than expected this year, with a decline in activity of 11% against -8% expected in mid-April. The State deficit will reach €220 billion, that of the Social Security 52.2 billion. The Government expects a debt close to 120% of GDP by the end of 2020. While these prospects are bleak, the Government does not intend to review its economic course. "The Government's policy can be summed up in three words: it is a supply-side policy," Bruno Le Maire told the National Assembly. He had promised "a recovery plan to modernize our production tool". Behind the scenes, both the Minister of Economy and Emmanuel Macron have been more concerned in recent weeks by a decline in competitiveness vis-à-vis the rest of the euro zone than by the level of French debt. It is estimated that the situation of the French economy at the end of 2019 (growth revised upwards to +1.5%, a record level of foreign investment) is pushing to deepen the policy pursued since 2017. Economy Minister should therefore continue to push for a reduction in production taxes as a part of the recovery plan.
Germany
• Due to the existing visa restrictions business with the US is partly limited and effecting certain people/companies who need to travel to the US.
• The construction industry is doing quite well compared to several other industries; hospitality and tourism are most effected by Covid-19.
• The chamber of commerce expects a recovery of most industries in the coming months; with a new normal in 2020 or 2021, depending on the industry.
• A positive outcome of the 130 billion Euro stimulus package is its focus on consumer spending. That may work! The issue of unemployment has reached about 3 million people plus 3 million still under employed ones plus 7 million under short-term working that may result in unemployment as well. Some consumers therefore may try to save money instead of spending it. Experts have already communicated that the effect for communities and small companies shall be positive. There are 50 million Euros included in the times package for future technologies, developments and ventures which is target oriented.
• In Private Equity, the capital is on hold; some of it has been retrieved out of funds to wait for good opportunities. In Real Estate Logistics & Infrastructure, most Office and Residential investments should perform relatively positive. Banking face strong demand on workload in restructuring the loans to corporates and are putting their focus on cost cutting. In Consulting business some face short-time work. If not, switching is possible to more demand on tasks in regulatory and risk, operations improvement, digitalization, infrastructure or FMCG internet and marketing topics.
Russia
• More companies in Russia are working in offices again but most international companies plan to stay on distance work until September or even until end of this year.
• Some companies’ business volumes are increasing again, and managers are a little more positive.
• Restrictions in Russia are being eased, starting with Moscow where non-food shops and some of the service sector companies can re-open.
• Major factories in Russia re-started in May and this week the IKEA stores and Manufacturing reopened in Moscow.
• We are seeing business confidence return , new Sales management and purchasing management projects have started in Estonia, Latvia and in Tatarstan, Russia in the metal and oil/gas sectors.
UK
• UK has implemented a recovery programme. Phase one has seen construction, garden centres and manufacturing return to work. Some school age groups return to school depending on social distancing. Phase two will see small shops and services reopen on 15th June and phase three will see restaurants, bars, gyms and all other businesses return from July 4th.
• Major sectors such as hospitality are seeing businesses not reopening. The airline industry is restarting but the Government 14 day “self-Isolation” scheme on entering the UK will severely restrict the travel industry’s prospects to relaunch.
• A “Business Bounce Back” loan scheme has been released giving SMEs the ability to borrow up to £50,000 at 2.5% interest (repayments to start in 2021), the loans are 100% Government backed.
• Recruitment sector has returned. Many projects that were “stopped” earlier have now been reactivated. Some businesses are starting to reassess their growth strategies as now they can see and evaluate how the business has survived in the lockdown period.
AMERICAS
Latin America is the latest centre for the pandemic. North America is seeing signs of recovery and returning to normal.
Brazil
• Is now onto its fourth month of the pandemic situation. Cases are still concentrated in the Southeast region – states of São Paulo, Rio, and in the North and Northeast areas – states of Amazonas, Ceará and Pernambuco. It seems that Brazil is approaching its critical point of the curve in June. The State of São Paulo has prorogated current lockdown to June 30 and the City of São Paulo extended its municipal lockdown till June 15th.
• Brazilian GDP has drop by 1.5% in the first quarter of 2020. According to specialists, for total 2020 this indicator may reach from 7.0% to 9.0%.
• Effective June 01, the Government of São Paulo State has instituted a plan with strategic action to start the recovery of the businesses under a technical, safe, but gradual form, based on a periodic evaluation of the various (about 10) pre-determined individual regions’ pandemic conditions. Due to its large size, the City of São Paulo will be considered as an independent region, taking into account its self-sufficiency and structural health condition.
• Technical Criteria – there are two criteria in order to calculate the risk phase and the fitting of each region: “Capacity of Response of (respective) Health System” and a second one: “Evolution of the Pandemic”. The first one, “Capacity of Response of Health System” is based on the following indicators: (1) Covid-19 - Occupation Hospital Bed Rate; and (2) Available Amount of Hospital Beds destined to the intensive care of Covid-19 patients per 100 thousand inhabitants. The criterion “Evolution of the Pandemic” is composed by the following indicators: (1) Contamination Rate; (2) Internment Rate; and (3) Cases of Deaths.
• Recovery flexibility authorization will follow the phase procedure: Red Phase: only essential activities, according to a published list, can stay open. Orange Phase: in addition to the previous phase: shopping centers (without food service activity), street commerce shops and services shops, but limited to 20% of working capacity, business periods reduced to 4 consecutive hours. (activities not allowed to function bars, restaurants for local services, beauty shops, barber shops, sports academies). Yellow Phase: shopping centers (except for local food services), street commerce and services shops may function with limitation to 40% of working time; working hours reduced to 6 consecutive hours and adoption of standard protocols and specific sectorial ones. Beauty shops, barber shops, bars and restaurants are allowed to function only in outside areas. Green Phase: All commerce and services activities, including gyms and shopping centers food services limited to 60% of working time and adoption of standard and sectorial protocols. Events generating social agglomeration are not allowed to function. Blue Phase: Normal economy recovery activities under the “new normal”.
USA and Canada
• North American markets have been very measured during the last 90 days, i.e. since the covid19 disruptions and lockdowns have been in place. Several phenomena are noticeable.
• Current executive search and consulting assignments are moving slower as our clients are being very measured about adding to staff and team availability to participate in consulting efforts has been limited. New roles are being actively considered but timing for hiring is still reasonably uncertain. Action oriented consulting on new markets and new approaches to market are moving at a sub-optimal pace.
• Some of our clients appear to be using the current environment to release their less successful employees and are being incredibly careful to avoid legal risk with re-alignment of functions.
• Opportunities to revise organizational design and realign functions are being hampered by the lack of certainty.
• The recent and continuing racial discord is distracting as corporations and faith communities are taking center stage rather than leadership from national or in some cases, state officials.
• Curfews and “stay at home “ orders are still in places in some areas causing significant distractions.
• The news of this week about an increased rate of new covid19 cases is not surprising as the lifting of “lock downs” is now elapsed over 14 days.
• Cautious optimism is just beneath the surface, but the unnecessary distractions have to be mitigated.
We hope that you, your family, and work colleagues continue to stay healthy and safe. We at The Taplow Group are here to support you and your company through this crisis and beyond. We will be back with more updates soon!