23 May 2022

What will our new economy look like when the coronavirus crisis is over?

Derry News columnist and leading local businessman John McGowan gives his view on what the future holds for our economy

What will our new economy look like when the coronavirus crisis is over?

How will our pubs look in the months to come?

Coronavirus still dominates the news around the world and it's no different here in Ireland.

In a week where oil prices dropped to below zero, we saw many economies begin the process of reopening.

Some countries have suppressed the virus enough to allow some limited opening of their economies.

For others the numbers are still growing so any thoughts of reopening are a long way off.

With the lockdown extended for another few weeks, here in the North our attention seems to be shifting towards how we begin to get our economy going.

There is always the public health angle to consider but it's clear the costs to completely shut an economy are not sustainable even in the short to medium term.

It requires vast amounts of subsidies from the government which burn a huge hole in public finances and lumbers future generations with huge debts.

As we speak, bean counters in the treasury will be urging politicians to develop plans to get the economy back up and running as soon as possible.

In the absence of a vaccine however, this may not be as easy as it sounds.

In trying to visualise what the economy will be like in the next nine months I have had to make a few assumptions.

Assuming for example we have no vaccine is probably a good idea.

Also, assuming that social distancing as a tool to control spread will not be relaxed.

I have also assumed that we will have a plentiful supply of PPE and that testing kits will be readily available and that results will be instantaneous.

I'm assuming a lot in the last two based on the record of the government but I'm trying to be an optimist here.

Regarding PPE, I think the easiest way to have solved this would have been to have gone to the buyer for Primark in early March and asked them to use their considerable purchasing muscle to mobilise their supplier network to make PPE for the entire country.

It was clear then that their Spring/Summer range would not be flying off the shelves.

Primark really have the clout and the know how to mass produce low cost items but the chance was missed.

So, let's now with the assumptions I have made attempt to see what the local economy could look like between now and Christmas.

The sectors I believe which will be hardest hit will be tourism/hospitality and leisure. 

Take restaurants for example.

It may be necessary to cut capacity in order to allow a safe two metre space between tables etc.

Not every restaurant will be able to do this.

Some at present are closed and others are offering take-away services, but it remains to be seen how many could be profitable if they had to stick to social distancing rules of two metres.

The other thing to consider is the ambience that such measures might create.

The whole idea of enjoying a meal with friends may be totally lost.

And how many will be allowed at a table?

Eating two by two in a half empty restaurant with waiters all wearing PPE and masks may not be so appealing.

So what about bars?

Again, the question that needs to be asked is how much the government will relax rules.

If we assume the two metre rule it's hard to see bars having people sitting two metres apart having a beer.

Also bear in mind mask wearing would be difficult when slugging a beer.

The virus would thrive in a bar and spread very quickly so it’s hard to see them reopening anytime soon unless the virus is totally suppressed.

Then of course there is the issue of confidence in people to return.

Bars in my opinion face a tough nine months and it may be a case that certain ones, if allowed, would open.

Personally, I don't see normality anytime soon in this sector.

Cinemas will also find it problematic.

Assuming they do practice the empty seat in between each seat rule that many had done weeks prior to total shutdown, it doesn't take away from the fact that families like to sit together.

Also, cinemas will also have to provide PPE in my opinion and it's the confined space with people behind you potentially coughing that will put most people off.

Going to the cinema and having to spread out, wear a mask and potentially PPE really doesn't appeal to many.

Also bear in mind studios may not want to release movies which subsequently bomb at the box office due to poor sales so the supply side (not having films to show) could be their biggest problem.

A lot of movie sets and production has completely dried up so there will be less movies being made.

Music events, festivals and large gatherings will definitely be hit hard.

I really can't see any return to this in 2020.

Many artists will find it hard to convert these online concert watchers into real income, but I see no government or local council allowing hundreds or thousands to congregate to watch events/gigs.

Same goes for churches. Have you ever been in church where you haven't heard lots of coughing?

Offices too with high headcounts will find it difficult to implement the two metre social distancing rule.

The reputational damage an outbreak would have may deter many from packing staff in to what was a safe working environment pre-coronavirus.

Many of us have watched programmes showing how far a sneeze of cough spreads droplets and people are anxious to avoid getting the virus.

Many large call centre type organisations with large open plan set-ups have had to react quickly and reduce head count within these spaces.

I was speaking to one large employer recently who had over 400 staff in one building.

Their organisation has adapted quickly to home working for the majority of staff and productivity has went through the roof.

It seems when your home and bored and can't go out the basic instinct is to work harder.

It's likely that if productivity continues to be high then any quick return to one site for large amounts of people remains a long way off.

Hotels, guesthouses, B&B's and tour guides etc. are another sector that will find it difficult for the next nine months.

The whole tourism sector has lost the season.

Many will probably not reopen at all.

Most of us in this sector are reliant on tourists and it remains to be seen when they will start flying in the numbers required to make a profit.

Also bear in mind airlines have cancelled many routes across key tourism markets.

Weddings which were a great source of incomes for many of these hotel venues have also been badly hit and having a large wedding is at present not allowed.

Add to this a complete cancellation of any sort of civic lead tourism programme and the task becomes even more grim. It's hard to see business as usual within this sector until sometime in 2021.

Playparks and facilities for young children will also struggle.

Many parents will see this type of activity as high risk and with kids known to be carriers of the virus there will probably be a reluctance to use them.

With thousands of touch points, it's hard to see how spread can be managed.

Airlines and Cruises will also find life under social distancing very difficult.

Some airlines have announced the middle seat will be blocked off but others like Ryanair have dismissed this and have stated they won't fly if this is the case.

Confidence in flying and taking a cruise may be the biggest problem for this sector.

Being in a confined space on a boat or plane with numerous touch points may deter many travellers.

Even being able to wear PPE (masks etc.) won't convince many who see an aeroplane as just one big petrie dish, even with a third of the seats out.

The outlook for airlines for the rest of 2020 doesn't look good and many will need bailouts by government.

Quite a few more may actually fold. Airlines and airports will really struggle as many will prefer to staycation at home rather than risk being stranded abroad.

Manufacturers and large factories have more chance of returning to some semblance of normality.

Many can implement shift patterns which call centres can’t.

Two or three shifts can really reduce headcount in a space. Industrial environments often are larger with better circulation of air.

Having PPE widely available and reducing head count by putting on more shifts could mean a return to normality much quicker.

Construction is another vital sector of the economy which will have a mixed return to normality.

Large scale projects with high numbers of workers under one roof will struggle to meet the social distancing rules, however smaller projects will meet them quite easily.

It really depends on the project.

Overall, I do think this sector will return sooner than most as protective clothing is used widely already.

Small offices like accountants, solicitors, surveyors and architects etc. will find it easier once restrictions have been lifted to return to work.

Many can allow some home working to reduce the number of staff in a confined space and can adapt to seeing clients by using many of the online meeting tools that are now part of our work armoury.

The biggest problem for a lot of these firms may not be the ability to reopen as normal but to get paid from customers who have suffered as a result of the slowdown and shutdown.

Shopping centres may also reopen but this again depends on the individual shops within it.

Mask wearing will I assume be mandatory, shops will also regulate the numbers of shoppers and make modifications to protect staff and shoppers.

At present, many shops and businesses are receiving support from government through furlough schemes etc.

This means they can remain closed without incurring payroll costs.

In my opinion, the catalyst for reopening will be a combination of restrictions being lifted and a withdrawal of the furlough scheme. 

The last sectors I will comment on are gyms, hair salons, spas. nail bars etc.

Due to the nature of this service it may be difficult to return to normal. I do however think many will adapt.

Take hairdressing for example. It's almost impossible to wear a mask while getting your hair cut but most hairstylists can take precautions and clean down after each client.

Appointments can also be spread so people don't congregate.

They will adapt in my opinion.

I'd say that if restrictions are lifted there will be a surge to many barbers and hair salons unseen in the history of hairdressing!

Gyms unless regular cleaning regimes are implemented is a difficult one.

Viruses thrive in these types of environments and having large numbers of people sweating and the air filled with moisture particles doesn't seem sensible.

One carrier could infect many.

Again, customer confidence may be the biggest factor in normality being restored at gyms.

So, trying to predict what the economy will look like for the rest of the year isn't easy..

I am assuming there is no vaccine and that we still have to abide by the social distancing rules.

I have also assumed that PPE is widely available and that testing kits for the virus are everywhere.

The ability to test track and trace is the biggest weapon we have in our arsenal, if we want to return to any semblance of normality.

Without it, businesses will be blind.

A suspected case for example could be quickly tested and if positive isolated while others are tracked and tested.

This wasn't the case before the lockdown.

Hopefully we have learned from that.

And the new normal for some people for a while may in fact be constant mask wearing and remote working.

For others finding the new normal will be the challenge.

Adapting is possible for many professions but for others the absence of a vaccine may mean the absence of their livelihood.

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