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Coronavirus: UK/EMEA Weekly Update – Call Briefing and Recording from 6.10.20

June 10, 2020

Below please find key take-outs from our June 10th senior panel with Stephanie Flanders, Head of Bloomberg Economics and former BBC Economics Editor; James Graham, multi award winning playwright and screenwriter; Ursula Burns, Teneo Senior Advisor and former CEO of Xerox; Amber Rudd, Teneo Senior Adviser and former Home Secretary and Wolfango Piccoli, Co-President of Teneo’s Risk Practice and chaired by Principal of Teneo’s Situations and Politics practice and former Downing Street Director of Politics and Communications, Craig Oliver.

 

Listen to the Call

 

The Impact of Black Lives Matter on Business
  • The compounding effect of COVID 19 and Black Lives Matter has created unprecedented disruption and a greater chance to achieve lasting social change. BAME people have been disproportionately affected by the crisis, socially, economically and in terms of their health.
  • The murder of George Floyd by the police was a shock. In normal times there would have been a spike of anger, causing disruption to business, which then unfortunately would have passed. This may not be the case now, especially in the US where the administration has arguably made the discourse more vitriolic and stoked the flames.
  • Young people took their anger to the street, then older people and white allies joined them. Businesses are starting to speak up and the issue shows no sign of dying away like it usually would. This time is the perfect storm to create social change.
  • People are watching businesses to see what they’re saying and doing to address racial inequality. A lot of businesses don’t have a brilliant record on race and previously avoided addressing long standing inequality in their businesses, staying silent and waiting until they were held to account to act. This is no longer acceptable, and businesses are being negatively affected by not having a voice. Every business has skin in the game and real change will take time.
  • Business leaders should start by looking close to home, in their boardrooms and management teams. Most businesses have an appalling record on diversity in this area. More than half the population are not white men but this makes up most business structures.
  • Secondly, businesses must start to hire and promote a more diverse workforce. The current system of hiring and promotion will only reflect the current workforce. Businesses need to be affirmative in their actions on recruitment and career progression. This is not the same as affirmative action.
  • Only then is a business in a position to make its point of view known publicly.
The Impact of COVID-19

Political Handling of the Crisis

  • Some feel that the Government’s messaging is conflicting, which is contributing to a breakdown in trust and confidence. The Government being run extremely centrally is considered part of the problem, as ministers may struggle to defend the Government’s messaging effectively if they are sent out with partial information to defend instructions that often then change.
  • Economic recovery relies on public confidence in the Government’s mechanisms for lifting the lockdown whilst keeping control of the virus. Consumption will not return unless people feel confident. For example, in some German states, where confidence in the Government’s tracing of the virus is high, lockdown is lifting and people are returning to restaurants. The UK could end up seeing a lockdown twice as long as Germany and even once it is lifted the economy will not bounce back as quickly.
  • The two main areas of public irritation are the quarantine for arrivals into the UK, which emerged from political focus groups rather than independent scientific advice, and the Government’s handling of the return to school. The Government has failed to convince parents, teachers and teaching unions that it is safe for children to return to school. By focusing so heavily on social distancing, which is extremely difficult in school settings, teachers and parents lack the confidence to reopen. This will lead to the growth of inequality and could risk leaving a generation behind.
  • If the exit from lockdown is smooth and people have the confidence to return to work, people will say lockdown was the right thing to do. If people do not go back to work, opinions will differ. The lockdown will have been devastating for some groups e.g. those suffering from domestic abuse or cancer and there will be significant health as well as economic consequences.

Balancing the Economic Recovery with Public Health Concerns

  • There is not necessarily a trade off between economic and health concerns as a second wave of Covid-19 would be damaging to both.
  • Economic recovery must focus on younger people, a high percentage of whom are employed in jobs where social distancing is difficult, making them highly vulnerable. The Government needs to focus on training and reskilling young people to get them back into work.
  • The expected set piece speech by the Prime Minister in early July on restarting the economy is likely to come too soon for the Government to understand the long term economic impact of the crisis and assess what needs to be done in response. The Treasury will need to consider the shape of the economy once the furlough scheme has been lifted and it becomes clearer which businesses are viable.
  • Fiscal measures will be influenced by the Government’s wider levelling up and environmental agendas. Recovery measures will be targeted in communities that voted for the Tories for the first time in 2019. They feel left behind and the Government needs people to see and feel a change in their towns.
  • People will have a new attitude to debt and spending after the crisis and may have rediscovered the ‘magic money tree’. There is not the same appetite for recessionary measures as there was in the last recession and the Government may need to accept debt will take years to pay off through a national effort.
  • A V shape economic recovery which had been discounted may still be possible. For example in France a 20% increase in GDP has regained in two weeks since the reopening of the economy, partly because fiscal stimulus has bridged the loss of income gap. However, on current projections any initial V shaped recovery prior to finding a vaccine would still plateau and leave Western economies around 10% lower than their GDPs prior to the pandemic.

Impact on the Arts

  • It's a very challenging situation for the arts and for theatres in particular. As long as social distancing continues, theatres can operate at 20% capacity maximum. Based on that, there is no economic argument to opening theatres for at least the rest of the year. Industry also has to tackle public confidence around spending time in an enclosed, poorly ventilated space.
  • The arts sometimes have a perception problem, but there are 1,100 theatres outside London and they are often major employers. In a world where social and physical infrastructure has diminished, theatres are often one of the few places people can gather. Many in the artistic community missed out on job and business support schemes and this makes them particularly vulnerable.
  • It may seem frivolous, but the arts are one of the UK’s most important public facing exports, something which will only increase in importance in the future as our political clout potentially diminishes. The economic case for supporting theatres as well as museums, galleries and other parts of the world of arts is a strong one.
  • Online streaming of theatre productions has done wonders for introducing theatre to new audiences but cannot complete with the likes of Netflix. It is part of the solution but no replacement for physical performances.
  • The extension of theatre tax credits would help this, as would an extension of the furlough scheme for businesses that simply cannot open due to public health advice. Beyond that, an emergency relief package would support the cash shortfall.

Global Outlook

  • Internationally, we are facing a contradiction. Cases are increasing around the world but we are seeing greater calls for the loosening of restrictions to restart economies.
  • Last Sunday we saw 137,000 new cases worldwide, of which around three quarters were in ten largely developing countries. COVID 19 is now majorly affecting those countries where health infrastructure is struggling to meet demand, lockdowns are impractical due to a large reliance on the informal economy, and there is no way to put in place financial shock absorbers. This is a huge political challenge.
  • Even in those countries perceived as having managed the pandemic, there are still some troublesome developments. Last week, the R rate breached 1 in Germany, while there were continued spikes in Italy and Greece, and a Polish mine was shut due to an outbreak.
  • Closer to home, the UK currently has the lowest levels of public confidence globally in the Government’s handling of the crisis. A recent poll showed that 41% of the public believes that the UK government has handled the crisis well, with 56% disagreeing. This is much lower than other countries including Germany, Greece, the USA and Vietnam. The UK still has a lot of work to do to build confidence.
The views and opinions in these articles are solely of the authors and do not necessarily reflect those of Teneo. They are offered to stimulate thought and discussion and not as legal, financial, accounting, tax or other professional advice or counsel.

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