During the COVID-19 pandemic, I have been asked on a number of occasions by the media, and clients, about the economic prognosis and the economic trend in society. I am not going to make a prognosis but by understanding the situation, and what is going on, with my academic knowledge of economics and the way that life is progressing I have made some conclusions and note some lessons learned. I would like to share those lessons with you here. I thought I would put an article together to provoke some food for thought, discussion or maybe to prevent any unnecessary mistakes. So I am putting it all together here for your consideration.
The first lesson we have learned from COVID would be the chaos created in cities. The bigger the city the bigger the damage. Big cities make policies because of the higher volume and rotation of people hence the larger level of threat. According to the Office of National Statistics the death rate in larger cities, that interlock and merge with suburban areas is much higher at 64.3% compared to an urban small city or town where the death rate is much lower varying between 9-19%. A lot of people have understood the crisis and taken action. Maybe they did not draw that conclusion but they have definitely taken action on it. The actions here would be as soon as they heard about the lockdown, or in preparation of the lockdown, they moved out of the city where possible. Perhaps they had the luxury of having a second home and used the opportunity to be closer to nature. Undoubtedly those people left in the flat during the lockdown have found it extremely hard to cope. Those people may have a high level of anxiety and depression. Whereas those people who have a garden are spending a little time outside and considering the government guidance feel a little bit happier. I do foresee the trend developing that people, perhaps down the line will consider getting rid of their city flats. Working remotely will become more popular. Because of that, there will be less commuting. Perhaps resulting in people getting rid of their city property moving to the surrounding areas with the opportunity to have a bit of outside space and be closer to nature.
Another trend will be in consumerism. Being in the lockdown people have realised that we don’t need as much stuff, we don’t need that many clothes, even that much food. We don’t need to have a large variety of stuff, material things that we previously wanted or needed to have. I am sure a lot of people will reconsider their wish-list and think a lot about previous priorities and shift them accordingly. So what trend does this manifest into a lesson? I think a lot of industries will be affected. Retail, luxury and material industries will suffer. Instead, items which have more meaning behind them will benefit. Will people appreciate quality over quantity? It no longer matters how many shirts you have. People working remotely will care less about their outfits. People will be more inclined to spend their money, not on the quantity but on quality. Things which they can really appreciate. So I suspect that industries like the fashion industry will be affected. Companies that are working on quantity such as George, Primark will see a change. People who used to buy there, because they can buy more stuff, and more often rather will consider investing in quality pieces but have only a few of them. They will maybe buy less often. The consumers who are more affected by the frequency of buying and the quantity of buying I think they will reconsider the trend. The low price items in shops will still be appealing to those who can’t afford higher prices with their current climate. There will be the demand for low-cost items but at the same time what is important to note is that those low-cost items will not stay as low, because of less demand.
I am not going into detail those businesses I think will go out of business. What’s important to understand, as we enter this new world there will be a knock-on effect - no more cheap flights and clothes. If we consider flights and transport, for example, their reduction is likely to remain in place for some time. Once the travel industry slowly opens up they are going to have to follow strict guidelines and recommendations from the government. So the low-cost flights on the likes of Easyjet and Ryanair are probably not going to be sustainable. They are likely to have to maintain 2 metres between passengers and it's a no-brainer this will result in less capacity on the flight. This will in term lead to an increase in the cost of a flight. It’s likely that because of this we will see an increase in individual travel in personal cars. So the holiday industry, travel and hotels will be significantly reduced. We have to understand that demand drives the price. So in order to maintain the industry, the price will start increasing. This is the trend we are following now and it will probably remain. In the beginning, petrol will go up and then peak and the cars which are environmentally friendly and electric cars they are going to be at the top of the chart. Don't forget the government has invested a lot of money in business and they will have to go through the situation and maintain the reserves. Whilst we are in a deep crisis and surviving and rebuilding and reinventing our businesses most probably the government will lower interest rates. They will perhaps reduce tax obligations and liabilities including reduction of corporation tax and income tax rate. But then they will build it back up and potentially to an even higher level.
So I mentioned luxury goods and I think it depends on the economical status and formula and the business formula that luxury goods have behind them. Whilst we all know that luxury items are good quality they are often overpriced. But if the luxury brands are prepared to sacrifice the profit margin then they might be in the position to maintain the same price. However considering that cheap high quantity goods will go up in price it makes me believe that the luxury project, greedy by nature, will not give up on the profit margin. So they will probably go up and be an even higher price. It’s worth noting that this is likely to be the trend. Luxury and quantity goods go up in price but demand will go down. As an effect of all this going up I would suspect that the segregation between wealthy and poorer will be higher.
The business will change drastically. It’s likely they will look at remodeling the structure and reconsider the way the business operates. Most of the time they will realise they don’t need that big of a space, they don’t need an office, the more proactive businessmen have already served a notice to end their business spaces. The business owners who are not as proactive or perhaps have a commitment to negotiate will maintain the previous standard and ultimately they will go to the end of the queue. The business owner who is brave will reconsider without thinking that they have a commitment for the longer offices because this is how the future would be. This will be the same with people as your employees.
The business owners and employees will consider the relationship they have. You are now no longer going to have the team member who has been there and done that. There will be extra pressure on the employee because they will have to be very tenacious and passionate about the business. The new era of business is going to be technology lead and depending on how good you are at embracing that. How good is the business owner at reinventing the business?
The third trend is very important personally to me. I think we learned that people with emptiness inside them have found it most difficult during the lockdown period. This is because they don’t know how to entertain themselves or spend time with themselves. The way people find entertainment for themselves during the period. The people who don't have a lot of content around them or inside. They will jump on TV or social media and very few will pick up a book. The reason they had the hardest experience of the lockdown is that it is well-known TV will make you consume even more. The more TV the more you binge – like food containing lots of sugar and fat. The more TV you watch the more you want. There is a limit of how much Netflix you can watch or listen to breaking news. That is why those people who have been doing it a lot have a very difficult lockdown period. There are people who have had a revelation and decided they are not going to go down that route. They have decided they are going to limit and detox themselves from TV and from social media. In the beginning, this will be a difficult period breaking the habit and even addiction. You physically feel sick withdrawing any of those from your life: TV, social media, same as cigarettes, chocolate, doughnuts. But then they will become stronger and they will enjoy lockdown more. People who had little to think about or little to share, before lockdown, they would go and spend time in the restaurant, go shopping or to the pub and do a lot of social meetings. I am not talking about occasional visits. I am talking about all those shopaholics and those who submerge themself in one type of activity on a regular basis or another such as shopping, eating, drinking, entertaining they had a difficult time during the lockdown. That is the trend I see here.
A survey was carried out which shows that 60% of people surveyed indicated that they are scared of returning to restaurants, shops and entertainment activities. They have indicated they would rather spend more time at home. Given this, and the fact that restaurants are likely to be the last industry to reopen to the public, they are going to have a difficult time. As will the travel industry. They all will have to adapt and implement restrictions. So all those tiny cute little restaurants where you can sit 10 people in 2 square metres will be long gone in history. Those businesses will not be able to survive. I appeal to those businesses to reconsider, whilst remaining in lockdown and have the support of the government to rethink and reconsider. How can you utilise the space, the team you have, your resources and the passion you have in that business? Can you reinvent your business? If it’s no longer a restaurant can still prepare the extraordinary takeaway food? You will need to reconsider aspects of your business. The previously successful restaurant in the West or East End still has potential. Because you do have clients, a following, you have the passion and you do have a brand. It doesn’t take a lot to reconsider and reinvent your business. This is the trend I see in hospitality.
I think gyms and personal trainers will suffer. After having been on lockdown for almost 6 weeks now people have gone without going to the gym. They have changed their routine and habits. Perhaps realised that they no longer need such an expensive membership and with the weather permitting they no longer to pay the membership. They can run, do online training and have such a big level of free resources they are able to maintain physical activity. They can make it varied and exciting and hence gyms will suffer. Again, gyms will probably be one of the last businesses allowed out of lockdownPersonal trainers might suffer less but it is definitely going to take them out of the comfort zone. They are no longer going to be comfortable selling their services to the public. Unless they do have the profile and resources. They need to understand how they can provide their experience and knowledge and expertise to the public potentially free of charge. They will need to reconsider how they will make money out of it. So again they will have to think about reinventing their business.
I saw a funny boomerang video where the door of the hen house is released and all chickens come running out. One of my friends forwarded it to me saying this is us when the lockdown is released. But looking at the statistics it looks like a lot of people are not very keen on socialising right now and they would like to keep and maintain social distancing. It might have been a difficult lesson initially but by now it is getting easier. People have been distracted and removed from themselves from consumerism and distractions going on around them. I think with the lockdown, people have the opportunity to reconnect with themselves. Being in lockdown we have been in the environment where we have been forced to spend time with our family. With our kids, with pets and people have been rejuvenated and found a different meaning in life. This is a very important lesson. Because you don’t need all these external environmental things. People are finally enjoying spending time at home and the very proactive and enthusiastic have found ways to spend time at home.
Private healthcare is one of the industries that will go up in price significantly and the National Health line will become much, much longer. The reason being that Personal Protective Equipment will be required and extra time is taken to put it on and take it off. There will be additional gaps between patients. So I'm afraid in the very distant future the health would be a luxury. In order to prevent the disease people with low income will find the solution in the source. What I mean by that is: it's cheaper to stay healthy than to treat the disease and once that’s realised people will opt for a healthier diet and exercise regime and change their lifestyle. As a knock-on effect to this sugar and fat producing industries will suffer.
As I have said, the medical industry and private medicine will be very expensive. The government will be in the same position because the level of demand for NHS medicine will be much higher. There are potentially two choices.
If they have not done it in the lockdown period then the harder the transformation is going to be for them. Once the lockdown is lifted all those trends I have mentioned in the article will start to appear. It might take 1, 5 or even 10 years for all trends and predictions to manifest themselves and take place in our life. So the sooner you recognise it the sooner you can make the change and transform your lifestyle.Once lockdown ends the cost of everything initially will go down. This is because demand will drive price and demand will be low. This is for two reasons:
People have learnt how to substitute things and be creative and found pleasure in that process. It means they do not necessarily want to go back to the old ways. Maybe I'm drawing a very Utopian picture and only time will tell. But I wanted to put my thoughts down and share it with you. This is for two reasons:
