Lockdown – reflections at the end of week 8
This time last week, as we enjoyed the bank holiday sunshine and ingenuity was being directed towards lockdown compliant ways in which neighbourhoods could mark the 75th anniversary of V-E Day, we were also looking forward to see what the Prime Minister’s Sunday announcement on the lockdown would bring. At the heart of the matter was (and still is) the immensely difficult job that the government has in balancing public health and our economic interests. Amidst a crescendo of media noise and no shortage of advice, what the announcement initially brought was a degree of confusion, with the enunciation of broad principles but little detail and some early inconsistency in messages delivered by Cabinet members. Clarity has emerged during the course of the week with the publication of supporting documents and there has also been the key announcement by the Chancellor this week to extend the furlough scheme into the autumn.
A few thoughts at the end of an eventful week.
It will be interesting to see how many people do actually return to work during the next few weeks. A number of businesses which cannot function using people working from home have continued through the lockdown, observing social distancing guidelines and adapting to include other measures such as handwashing. For those who have closed down operations or sites, there are complications in handling a return to work such as:
the need to create detailed risk assessments and workplace plans which accord with detailed sector specific advice which will take time;
how can employees and the trade unions who represent them be made to feel safe returning to work, including their travel?;
what will be the position of employees who are in vulnerable health categories or who live with people who are in vulnerable health categories?; and
it is likely to take some time to build up both order books and stock.
The announcement to extend the furlough scheme will be welcome to many employers and the extension is more generous than many commentators had anticipated. There are clear indications that changes to the scheme will be made in August, with the introduction of part-time furloughing, which many employers will welcome as part of a graduated return to work, and higher employer contributions both seeming likely.
For those who can work effectively from home, there is a growing likelihood that they will continue to spend at least part of their week working from home after the lockdown ends. There have been announcements this week by sizeable employers in the service sector that they will switch future investment away from property and into IT to enable this to happen and to enable them to reap the financial benefits of lower property costs.
Whilst the incidence of formal insolvency is low, a number of businesses who have seen their order books collapse due to their customers not being able to trade in the lockdown are struggling and do not yet have any certainty as to when things may change. Their directors and owners face a truly difficult task in knowing whether to carry on and it is unlikely that Sunday’s announcement will have helped to ease that burden as many of their customers are still unable to trade.
For those with funding, investment opportunities are emerging, either in the form of distressed businesses or new businesses that are being planned to start up from the end of the lockdown. Watch out for those new businesses, particularly in sectors where barriers to entry are low and they can compete from a clean start with established players who are burdened by the many costs of getting through the crisis.
We must all hope that the move out of lockdown goes well and that we can avoid a serious second spike of Covid-19 infection. Whilst many of us will not be thrilled at the return to the tyranny of the paintbrush and bedding plant that comes with the re-opening of DIY shops and garden centres, their re-opening nevertheless represents one of a number of small steps back towards a less restricted life. The most important job for many business owners to do now is to start to plan for a return to more usual working and, besides the many other things which they have to do at the moment, to think about how their business needs to adapt its operations and working patterns both for the return to work and beyond.
Ian Waine leads Prettys’ Corporate Services Team and has advised on a large number of corporate recovery and corporate restructuring cases over the last 30 years. He can be contacted on 07979 498817 or firstname.lastname@example.org.