Coronavirus: UK/EMEA Weekly Update – Call Briefing and Recording from 6.17.20

Below please find key take-outs from our June 17th senior panel with Sir Peter Bazalgette, Chairman of ITV and former Chair and Creative Director at Endemol; Baroness Nicky Morgan, former Education Secretary, former Chair of the Treasury Select Committee and Commissioner for the People's Commission on Life after COVID-19; Orson Porter, Senior Managing Director and head of Teneo's Washington D.C. office; and Simon Levine Global Co-CEO of DLA Piper and chaired by Principal of Teneo’s Situations and Politics practice and former Downing Street Director of Politics and Communications, Craig Oliver.

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The Impact of COVID-19

A New Crisis, Different Challenges

• Over the last three months, the significant challenges to business have been made somewhat easier by the banks. In contrast to 2008, the banking system is working and there is liquidity in the market, but the issues facing companies are no less systemic.
• Firstly, in stark contrast to 2008, there has been a complete lack of global co operation. Businesses, particularly those with an international footprint, have suffered increased uncertainty due to variations in decision making across jurisdictions. This is because of the lack of alignment between governments on scientific and economic action.
• Secondly, businesses were hit by the suddenness of the crisis. Whilst liquidity is sound, many businesses are facing contractual, structural and commercial issues, with revenue taking a greater hit than during 2008.
• Currently, businesses are reacting to the crisis with a certain level of cooperation, but it is likely that we will likely see a rise in litigation in the longer term. This will both be a result of contractual conflicts between businesses, but also as a result of questions around staff safety, return to work, and other questions raised by the post pandemic world.
• Despite the challenges, the crisis has also forced businesses to think differently. For many businesses, COVID 19 has led to years of modernization taking place in a matter of months, in particular around the use of digital technology and AI.
• The crisis is also forcing a reappraisal of previously accepted norms. For example, many businesses will be looking at their office estate and whether this is an area where they can make major savings.

An Era of Purpose and Restraint

The Role of Businesses in the Post-COVID World

• The pandemic (and movements like Black Lives Matter) has accelerated a growing trend away from businesses simply considering their responsibility to shareholders and towards a greater focus on societal impact.
• One obvious impact of this will be on executive pay. Investors, shareholders, and the public will expect companies to show more restraint on remuneration particularly for businesses considering redundancies, or those which have relied on state aid to survive.
• Even for those businesses who have not taken state aid, the next few years will see greater pressure on pay restraint, with executive pension contributions emerging as a key battle line. It is increasingly unacceptable for senior management to be seen to receive significantly higher contributions than their average employee.
• The Government will need to reconsider its strategic role and purpose as well, across a variety of policy areas. The decision on Free School Meals may be short term, for example, but it will need to form part of a longer term strategic solution. What role will schools play in education, but also in enabling working families to manage during social distancing, to help ensure vulnerable children are kept safe, and to prevent growing inequality in the long term?

A New Working World

• The decision to move into lockdown was an easy one, but adapting to a longer term "flexible" working environment is much harder. Many are suffering due to difficulties with childcare, or because internet connectivity is poor.
• The responsibilities of businesses towards their staff are changing. What equipment will people need to work from home safely? What mental health support do staff need while at home? There will also be a huge, changing, impact on the culture of businesses that will need careful management.

The Impact on Creative Industries

• Covid-19 undoubtedly poses an existential threat to the UK creative industries. The sector, which was worth £112bn to the UK economy in 2018, will see a frightening fall in revenue through 2020.
• Whilst many institutions, including TV, radio and the creative arts have provided a lifeline through this pandemic, their future remain uncertain. At the heart of the challenge is a need to ensure consumers are comfortable attending events in person, once the lockdown has ended. Whilst many venues have plans for ensuring social distancing, this doesn’t mean people will feel safe to return.
• In practice, this means that government support for the sector may be required even after it is withdrawn in other areas. This could potentially include an extension to the furlough scheme, funding guarantees or tax credits.
• Even some of the most established elements of the creative sector are under threat. During this crisis, public sector broadcasting has been crucial to providing information, entertainment and learning to people and families at home. However, with the future of television set to be dominated by foreign owned streaming services, it is vital we ensure that public sector broadcasters are guaranteed carriage, prominence and fair value on platforms. Without this, they may not be there to offer this vital service during a future pandemic.
• Supporting the UK creative sector is about more than safeguarding cultural heritage. The UK’s creative industries are a vital tool of soft power, a major export opportunity and a driver of innovation. The previous government’s sector deal led to greater partnership between the digital creative industries, universities and small businesses. It fostered innovation clusters and increased productivity for the regions involved. It is vital that the government also look beyond short term need and work to build on this sector deal for the long term.

Geopolitical Trends and the U.S. Presidential Election

The Key States That Will Decide the U.S. Election

• In keeping with previous presidential elections, the battle will be won or lost in a number of key swing states e.g. Florida, Wisconsin, Michigan, Arizona and Pennsylvania. According to state-by-state polls, Biden currently has a comfortable lead in these areas – but so did Hilary in 2008.
• The main issues likely to dominate the agenda in the coming months are; the US Government's response to Covid-19, race relations, the healthcare industry, and the economy. Joe Biden's choice of running mate is also attracting more attention than in previous campaigns, with Kamala Harris the current favourite.
• While the President and the Federal Government would previously have led the US and global response to a crisis like Covid-19 (as was the case in 2008 and with other health crises, like Ebola), it has instead been left to state governors to drive the response. This has led to further polarization between 'Red' and 'Blue' states, especially regarding decisions to re-open businesses after COVID-related lockdowns. The varying performances of state governors has given rise to an unexpected wave of potential future presidential candidates.
• If Trump can demonstrate progress to voters, e.g. by finding a solution to getting children back in school or make progress in the route to a Covid-19 vaccine, it's plausible that he could win another presidential term.

Black Lives Matter

• The outcome of the upcoming presidential election will fundamentally impact the way in which the Black Lives Matter movement and race relations will be addressed in the US. Already, as a result of the mass protests across the country, the Trump administration has started to act by introducing a new executive order to tackle police brutality. However the implications could be far wider-reaching. If Vice President Biden were to win the Presidency in November, or should the Democrats win control of the Senate, it is likely that greater legislative action will taken which will have an impact on businesses.
• Similarly to the #MeToo movement, elected officials haven't found an easy way to join the conversation. As we've seen over the past few weeks, corporates who have put their head above the parapet to speak in support of the Black Lives Matter Movement have come under scrutiny, especially regarding their own senior management and representation across boardrooms.