In previous times of great panic, we have mainly looked to the state and big corporations to save us. But will these familiar institutions ultimately be able to act as insurers of the last resort this time round? The answer, as certain as anything can be certain right now, is ‘no.’
The Chancellor’s decision to provide billions of pounds to businesses, so they could furlough millions of workers, was an act of compassion as well as economic and political expediency. But it can’t go on forever. As we have seen in the past, governments have a tendency to run out of other people’s money when they embark on major spending sprees. It’s inevitable that the generosity of the current furloughing terms will be scaled back soon. The consequences are obvious.
As large corporations come to terms with what the new normal might look like, we can be pretty sure more working from home, smaller physical footprints and hugely reduced workforces will be on their agendas.
The Bank of England has been busy hypothesising and prognosticating. Their policy wonks are forecasting a prompt ‘V-shaped’ recovery, suggesting that very soon, we can all go back to how it used to be. They should get out more - I don’t buy the idea we will all be able to hit the reset button.
A huge rise in unemployment is inevitable as businesses are weaned off the almost-zero-cost (to them at least) of furloughing. And, as the future prospect of being on the dole sinks in, a lot of us who have been quite enjoying this enforced holiday, are having to figure out what our own futures might look like.
There will be a phoenix, that’s for sure. But currently, no-one really knows when or how. In my book, one of the few certainties is uncertainty. The way this virus has impacted on us means many of the familiar institutions of the past are not going to act as our future lifeboats. We are going to have to be our own saviours.
Creative destruction is an essential part of successful capitalism. This time round though, our recovery will not be led by companies ‘too big to fail’ (the financial crash in 2008 put paid to that idea). Instead, the catalysts will be young people who haven’t previously been conditioned by the false premise that their employers had all the answers; by new entrepreneurs who aren’t weighed down by pre-Covid debt; by impatient management teams frustrated by those employers who spend more time gazing into the rear view mirror than at the horizon; by the vast array of private companies, SME’s and family businesses who don’t have to defer to head offices on another continent; and by those nimble private equity firms and overseas sovereign wealth funds who will continue to see the UK as a safe haven, as well as a wonderful place in which to do business.
Why am I so sure about this?
-Well, firstly, the cost of money is almost nil right now. When money doesn’t cost anything, businesses can plan for longer payback terms, secure in the knowledge that interest costs aren’t going to eat into their profits.
-It’s bonanza time for insolvency practitioners. They have already started selling off physical assets and valuable intellectual property rights at bargain basement prices. Instead of being seen as undertakers, we should view them as part of the catalyst for this creative destruction - a sort of ‘auction house’ where tangible and intangible assets can be recycled and put to better use.
-We have already had a trial run at working from home. We have discovered that distance is a stone-age concept. We don’t need to fish where the fish are. Businesses can go online, building an effective electronic presence that might belie their physical size. And the fish will find us. I’ve already discovered that.
-The cost of commercial space is dropping like a stone. Freeholders and landlords are having to take a sharp knife to their raw material. It will be easier to find space almost anywhere over the next few years, and on very flexible terms. In fact, the cost of large city centre premises may well become a burden, rather than a benefit in the future.
-Agility will be everything. There are no queues at Amazon. Primark, which doesn’t have an online presence, has no queues either. But not in a good way; it also has no sales. That adage ‘if I was going there, I wouldn’t start from here,’ must be exorcising its owners right now.
Two decades ago, the arrival of the internet was said to have been the creative destruction that welcomed in our brave new electronic world. By the look of it, the arrival of the ‘C’ word will have a similar impact on the way we live now.