Sunday, July 12, 2020

Changing face of Britain in the face of COVID-19

Despite furlough schemes, bailouts and tax breaks UK businesses are struggling in the face of the pandemic that has tightened its noose around the world. But with no sign the virus is going away and with a hard Brexit on the horizon there are greater uncertainties ahead.

Job cuts and closures

Almost everyday in recent weeks there have been headlines reporting the closure of familiar high street names or the shedding of jobs.

In June thousands of jobs were lost with Rolls-Royce, BP, BA, easyJet and Ryanair amongst those announcing redundancies [Guardian].

In early July fashion giant H&M said it was planning to shut 170 of its stores across Europe after accelerating closure plans in the face of coronavirus.

Takeaway outlets have been particularly hard hit. Uppercrust owner SSP Group has said that up to 5,000 jobs could be cut across its UK outlets and head office as it struggled with the reduction in passenger travel [BBC]. Meanwhile Pret A Manger has announced it will close 30 shops and cut up to 1000 jobs after a steep fall in sales [Ev Standard].

Fast food outlet Burger King has also said it could be forced to shut one in 10 of its 530 UK branches with loss of up to 1,600 jobs [Daily Mail]

Even the popular Greggs has been hit by the pandemic and the resulting lockdown with some 50 stores set to close permanently and plans to open further stores put on hold [Food Service Equipment Journal / Guardian].

Reopening issues

Reopening has presented an enormous challenge to many businesses, even those who may have used furlough, or had rent waived. When the doors open, the bills will come in again. In many cases, the limitations of social distancing guidelines will mean operators can't seat enough customers to match their outgoings.

As such it is not cost effective for businesses to reopen and it is likely that reports of heavy redundancies will grow as those in the hospitality industry look to cut staffing costs.

Even with such measures, not every business will be able to reduce their outgoings sufficiently, and cannot afford to operate at a loss [Ev Standard].

Retail sector hit

It's not just the hospitality sector that's been hard hit. Retail has also been severely affected by the lockdown. With many people shifting to online shopping, physical stores have struggled to draw customers back.

Harrods, Boots, Debenhams and John Lewis have all announced job cuts with John Lewis to close eight stores permanently. Boots have meanwhile said it is to shed some 4000 jobs and close around 40 of its opticians [BBC].

Changing habits, brought about by weeks of being trapped in one's home, has had a marked effect on how people shop and even what they buy. Uncertainty over employment has also resulted in a slowing of public expenditure.

While there was a mad rush for some to queue at IKEA, Primark, JD Sports, Nike and other stores as they were allowed to reopen, customers have since dwindled.

Even the numbers hitting cafes, restaurants and pubs have dropped sharply since so-called Super Saturday [Ev Standard / Business Live].

Some restaurants, however, did not even make it to the 4th of July and boarded up pubs and closed restaurants are now a common sight across the country.

People have become used to drinking at home. And even with pubs open who wants to run the risk of catching the virus for the sake of a pint or even be advised they might have to self-isolate should someone in the same establishment be found to have contracted the coronavirus? The same is true of restaurants as people have learned to make do with cooking at home. Cost might be one factor for some customers. But fear is another hurdle as is the issue over how comfortable customers might feel as they sit in an environment with waiters walking around in PPE.

Other businesses are set to open soon but will customers return? Pools, gyms, nail bars and tattoo parlours are set to open in the coming weeks [BBC]. 

But while there may be a trickle of customers desperate to get back on the running machine, have their nails manicured or obtain that much desired tattoo, it remains to be seen whether enough numbers return to such businesses for them to break even, let alone make a profit.

Risks remain

As Britain, and other nations open up it is clear that the increase in numbers of people mixing is pushing up the numbers of coronavirus cases and deaths. The US in particular has seen a dramatic rise in the number of cases and fatalities in the past month. Britain and a number of European countries have also seen numbers spike.

As such there have already been lockdown and restriction reimposed. And the much debated issue concerning the use of face-masks has been reignited with the UK government now pondering whether to mandate the wearing of face coverings in shops and other indoor environments.

Efficacy of masks

The UK in particular has been slow to advocate the use of masks. Initially their position was that masks had little if any benefit to prevent transmission or infection. This position was likely not based on science but rather attempting to prevent the depletion of much needed PPE stocks for health professionals.

However, it is clear from the numbers seen in places  where masks are commonplace that the rates of infection are much lower. The Czech republic imposed rules concerning the use of masks in mid March and has kept numbers of infections to below 50,000 whilst the numbers of deaths is only a little over 1,600 [Euronews]. Britain by comparison has nearly 45,000 deaths and some 290,000 cases.  

No mask is 100% effective in terms of preventing infection. But masks can seriously impact the spread from symptomatic and asymptomatic carriers [UCSF].

Indeed in May the Czech republic relaxed its rules on masks [Guardian].However, within days cases began to increase dramatically [Reuters].

Moreover, the number of deaths seen in the nearly two months since the relaxing of mask restrictions [May-July] has nearly quadrupled from the number of fatalities registered between March and mid-May.

Given the recent reports that the COVID-19 virus might be airborne, the use of masks, especially in a confined space, might well reduce the number of infections considerably [Guardian].

Much of what the West is now doing to combat the spread is somewhat late in terms of slowing the spread and 'defeating the virus'. Many Asian countries - most notably South Korea, Singapore and Taiwan - implemented rules on masks and rolled out Track & Trace programs as early as January.

But perhaps it's better late than never if the West is to prevent a total collapse of the economy and get things working to some sense of normality. 

The 'New Normal'

Like it or not - and there are few who revel in the so-called 'new normal' - the way life is conducted is going to be very different for some time.

Social Distancing, hand washing, hand sanitiser, masks, face shields and queues will be with us for some time to come.

How much this 'New Normal' further affects the economy remains to be seen. But the pandemic will certainly hit some economies more than others.

Britain is in a far worse position than most given its decision to pull out of the EU and go it alone. And with a so-called No-Deal Brexit almost certain at the end of the year, Britain's economy will face far greater challenges as prices rise and UK exporters struggle to sell their products overseas with punitive tariffs in place until trade deals are established.

tvnewswatch, London, UK