The global pandemic has seen businesses affected across every sector, in all parts of the world. Taplow partners across the globe have combined to give insights into how their countries/ markets are seeing the impact on business and the positives that are starting to shine through. 

AFRICA:

Although Africa has not seen as many cases primarily due to their being less travel spreading the pandemic, notable clusters are emerging. 

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. 

ASIA: 

The region is seeing several countries emerging from lockdown, we are also seeing many businesses, countries such as Singapore have seen a second wave of viral cases and re-entered lockdown.

Australia: As leaders, we all know that decisions during this time are time-critical and Emotional Intelligence (EQ) has never been more important.

Some markets and countries will see the “blue sky and the green shoots” earlier than others. When the market starts to recover, we are likely to see competition for resources, particularly skilled people.

We expect executives will look for security, but many may be forced to take what they can get and at the remuneration being offered. This is likely to hold down salary growth. Companies will hire back on new terms and conditions.

There is “a way to go” but preparation is being done now for the “return to work”. We are seeing organisations hiring now for the future and technology is a major part of this executive search and selection procedure. In this time of uncertainty and as the business world changes, leaders either lead people well or fail. For many years Taplow Australia has used an Emotional Intelligence online assessment as part of the search and selection process.

India: India’s core sector output contracted 6.5% in March, marking the worst performance by the key infrastructure areas going back to 2005, as the nationwide lockdown to combat the spread of Covid-19 stalled the economy. Crude oil production contracted 5.5%, natural gas 15.2%, refinery products 0.5%, fertilisers 11.9%, steel 13%, cement 24.7% and electricity 7.2% during the month. Coal was the only sector that grew - 4%. The pandemic is likely to impact the country’s economy through the four vectors Supply Disruptions; Global and Domestic Demand; Stress on banking, financial sectors and parameters; and Falling oil prices.

To address these adverse times, the Government Of India has been preparing strategies and action plans not only for business continuity and sectoral revival but also to improve Ease of Doing Business in the country by highlighting measures to improve the business environment in India. Measures are taken to boost Trade & Commerce, managing Corporate Affairs efficiently, providing stimulus to the Banking, Financial Services, and Insurance sector in India, and General / sectoral relief measures with an economic impact.

The Reserve Bank of India (RBI) went all out to make ample liquidity available in the market and nudge banks to lend to the productive sectors of the economy, announcing measures to inject 3.74 trillion. RBI has delivered rate cuts and more than $50 billion of liquidity injections in recent weeks.

Micro, Small & Medium Enterprises (MSME) account for a third of the country's economy and employ more than 11 crore people (and hence highly vulnerable to the lockdown). Public Sector Undertaking’s (PSU’s) have been directed to settle bills raised by MSMEs to ensure the latter’s working capital requirements are met.

The government is not fighting it alone. Several corporates are continuing to extend as much support as possible. It is envisaged that during the fiscals 2020 to 2025, sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to circa 71% of the projected infrastructure investments in India, with a total capital expenditure projected at Circa Rs. 111 lakh crores. 

India is working on improving its project preparation process, enhancing the execution capacity of private sector participants, the sanctity of contracts, dispute resolution mechanisms, strengthening quality infrastructure, and revitalising bond and credit markets.

Singapore: 3,000 FIRMS NOTIFIED MOM ABOUT COST-CUT MOVES. The Ministry of Manpower (MOM) has received notification from 3,000 firms with about 100,000 employees to take wage cuts or nudging employees to go on no-pay leave amid the ongoing COVID-19 pandemic.

Companies with at least 10 employees that intend to cut salaries by 25 percent or more during the circuit breaker period must inform MOM. 

Across industries, wage cuts are likely to happen “swiftly and sharply” in the transportation and storage, and financial services industries, where remuneration is highly responsive to changes in business cycle conditions. Remuneration in financial services is also expected to suffer, while “significant” monthly wage declines can be expected in the accommodation and food services industry due to lower hours worked, the central bank of Singapore pointed out.

Over at Grab which employees more than 3,000 staff in Singapore have been encouraged to go on voluntary no-pay leave, and the salaries of its senior management have been cut by up to 20 percent.

New Zealand: The following insights are credited to the BNZ (one of New Zealand’s major Banks) and in particular their Head of Research – Stephen Toplis who we have great admiration for his insights – Stephen tells it like it is.

BNZ reported that the business environment was atrocious in April. This was however not surprising given that for many New Zealander’s there wasn’t even a marketplace, or if there was, it was severely impeded by lockdown restrictions at alert level four (New Zealand’s highest Alert level). BNZ did state that the data they have collated, also confirmed, however, a glimmer of hope appearing toward the end of April as a move to alert level three became real.

By moving to Alert Level 3 on the 28th April 2020, meaning 500,000 more New Zealanders were at work. Of these, manufacturing, forestry, and construction were the biggest beneficiaries along with online retail, takeaways, distribution, and transport. At Alert level 4, approximately 40% of the economy was closed. By going to Alert Level 3, this they believe reduced to 24%.

For the country to move to Alert level 2 will require no community transmission and several days of zero change to the number of cases (confirmed cases in New Zealand have been tracking in single digits for the past fortnight). There will also need to be a sign that confirmed clusters are shrinking along with the New Zealand Government having confidence in its contact tracing capability. It is expected that the New Zealand Government will decide if they will move to Alert Level 2 in the week commencing 11th May 2020.

If the decision is made to go to Alert level 2, this will likely see most businesses back in operation rather than the ‘working from home’ model that exists for most under Level’s 4 and 3. It is anticipated that Schools and Universities will recommence. Larger gatherings will be allowed of up to 100 indoors or up to 500 outdoors. It is also anticipated that at this level 15% of the economy will, unfortunately, remain closed

BNZ predicts that the biggest hits for the New Zealand economy are international tourism, our hospitality industry, commercial property, and discretionary spend on goods and services. On the upside, they believe the potential winners to be infrastructure, the digital economy, import-substituting manufacturing, call centers, and online retailers,

BNZ believes that it will take years to get back to normal. The international backdrop will be problematic for some time. They predict that population growth will be much lower, and the unemployment rate will stay lofty. The income effects will be huge and asset prices thumped. International and Domestic tourism, New Zealand’s lifeline, is likely to be in disarray for some time (but we are not alone with that one).

In summary, BNZ believes the outlook is brightening, but unfortunately, the pain is yet to be fully felt. A return to “normal” is in their view years away, but one thing they are very certain about is that the world will never be the same so it is about adjusting as quickly as possible to whatever the new norm looks like.

Source – BNZ - From Rescue to Recovery – A New Zealand Chart Pack – 1st May 2020

EUROPE:

The region has suffered in unequal parts over the last few weeks, although a flattening of the curve of infections is starting to show as well as many countries starting to move out of “lockdown” periods and allowing business to reopen again. 

France: The prime minister officially announced the progressive end of the lockdown in France on 11th May 2020. Since the end of April, the number of dead from COVID19 is slowly decreasing but the government is very aware of avoiding a virus strike back if France unlocks too quickly without taking all the required measures.

On one hand, the end of the lockdown has to be very progressive on selected areas, depending on the level of COVID 19 infection, and on selected sectors (for instance, all activities involving people gathering such as restaurants, cinemas, museum, etc. will not open until further notice, and at least not before summer).

On the other hand, the French government wants to avoid the collapse of the economy (they expect a GDP decline of 16% in the second quarter of 2020 which would lead to a recession of almost 9% for the whole 2020 year!). Ministry of Labour is currently working with professional federations on dedicated guides for each sector on how to restart their activities while taking in account all the measures to protect their employees and partners from COVID 19 in the months to come (masks available, reorganizing the working space, promote remote work for all positions where it may apply, etc.).

After 11th May 2020, the government will reassess the situation every 3 weeks depending on how the infection is evolving. To sum up, it is a difficult balance between avoiding a new development of the disease and relaunching the economy as soon as possible. At the time being 93% of construction projects are stopped and the number of short-time workers has reached 10 million people.

Germany: Small and medium-large shops can open again, Hotels and Restaurants are still closed as well as conference centers, fairgrounds, and likes.

The pressure by both employer associations and unions on the politics to return to "business as usual" is growing. Predictions say that the GNP in Germany will fall by 6% (optimistic view) or more. At least more than during the financial crisis 2008/2009.

GDP is an important focus here, not GNP, The downturns in GDP in Q1 in France, Italy and Spain were reported at a higher percentage than in Germany, but as going back to business is still unclear, the per annual downturn could be highest in Germany - because of highest export and international dependencies. There exist reputable scenarios of total GDP downturn between 7 and 11 percent this year 

A lot of conversations with business partners these days. But: my standard business may start again January 2021 at the best-evaluated guess.

Financial Services, especially Private Equity, and Real Estate: execution continues for most existing deals, deals in preparation may be done or be postponed for 6 months or more, nearly no new deals are started: sellers still want high prices, buyers want lower prices and are unsure what the real values are and so they wait

Professional Services: There are some special effects in topics like Regulatory and Risk and Business Recovery, but most business there will decrease, and they will cut employment in 

Q2, especially in all advisory business including ICT which could be delayed or put on a longer scale. Producers across-industries including ICT producers: some businesses may continue or sometimes even increase employee base; many will benefit from government initiatives. 

Russia: Russian economists estimate that 30-50% of production is standing still in April. This likely makes it the worst month in the Russian economy since the collapse of the Soviet Union. Consumer goods producers are still doing fine. Procter and Gamble with two factories in Russia are one of the companies declared by the state to be a critical enterprise. This allows them to continue production 24/7 while all white collars work from home. 

Similar situations can be noted by Taplow Russia in its FMCG clients. Budget brands are doing good but there are worries about premium brands. President Putin announced a continuation of the non-working days through the May holidays until the 11^th May 2020.

Spain: The Spanish Government has forecasted a 9.2% decrease in GDP in 2020. Conversely, there will be a 6.2% rise in GDP throughout 2021.

We have good forecasts for the pharmaceutical industry (Example: Many R&D pharma companies are researching a COVID-19 vaccine, as well as new testing methods), and the tech sector (Example: Spain is ranked as one of the top countries for cybersecurity services)

Private Equity firms are resorting to liquidity to maintain results in portfolio companies. PE firms are also ready to undertake new acquisitions.

UK: Although currently lockdown, many UK businesses are reopening or have plans to reopen in May 2020. Construction, retail, fast food sectors are seeing contractors and major players restarting their businesses. The UK economy will suffer a 40% decrease in GDP for March 2020, Government departments are planning a staged easing of the lockdown, many experts believe Mid May will see the start of these plans. We have seen clients hire or take to the final stage of the hiring process many projects utilising technology that will surely become part of the “New Normal” in the hiring process as the lockdown eases and eventually finishes. 

AMERICAS:

The Americas and particularly regions in the USA are the new epicentre of the pandemic. 

Brazil: Is entering its 6th week of involvement during the Pandemic situation. As of today, about 2.200 deaths and over 35.000 cases of infection were officially registered in Brazil. Many more are occurring for sure, due to the impossibility of mass testing. Most of the cases are concentrated in the states of São Paulo, and the Northern area – States of Amazon and in Ceará. 

It is estimated that the 2020 Brazilian GDP will reach a -5,00% figure from an already low prior estimate of 1,5% growth, based on a consistent low basis from the past years. It will be a major disaster! Companies/clients are extremely far from demanding recruiting services. It is estimated that this scenario will be here for the rest of 2020.

Potential services demand, in our estimation, will be mostly related to human capital initiatives – organizational studies, adaptation to the “new normal”, coaching help and the like, before going into an actual recruitment demand period. Organizations will also be able to recompose their cash flow!

USA and Canada: As employees start to return to offices, some companies will find they need less space than before. Some workers who went remote during the pandemic will want to stay remote in the long term. Other companies will require more square footage to provide adequate spacing between workers. For the first time in decades, companies in locations with high real- estate prices may find it more cost-effective to provide individual offices. With advances in modular glass walls, it is now possible to create tiny offices that do not feel claustrophobic. 

Key Finding:

• Companies: Are planning there back to work strategies with local Government guidance. 
• Executives: Are grappling with new routes to market, the divergence of manufacturing or service offerings to succeed in the “New Normal”. 
• Companies are reassessing: Working practices, in the cessation of lockdown, new ways of producing products, servicing clients need to be quickly identified and actioned 
• No one: Is predicting the quick return to “business as usual”. 

We hope that you, your family, and work colleagues continue to stay healthy and safe, we at Taplow are here to support you and your company through this crisis and we look forward to speaking to you again soon.