The Slow Return to Work

As the Covid-19 situation continues to unfold, the most recent change has been the gentle lifting of restrictions to try and get economies back into gear. On both sides of the Atlantic progress in getting back to work has been slow and patchy.

This is not going to be a sharp V-shaped recovery from the second quarter plunge in employment and output.

One reason for this is the growing tension between regional or state governments and national governments in many countries. In the USA, President Trump abandoned his preference for organising a rapid and comprehensive return to work at the federal level, partially because he was advised that the individual states have many of the powers needed to order lockdown and its end. Mr. Trump settled for placing the full onus on State Governors, expecting Democrat Governors to keep lockdown for longer and hoping that Republican Governors would get some benefit from letting people return to work earlier. Polling shows considerable support for a cautious approach so it was not as helpful to him as he had hoped.

In Germany, Mrs. Merkel favoured a slow and careful path to relaxation, only to find several Lande governments wanted to limit the economic damage more quickly. She had to compromise, with more lifting of control than she wanted, balanced by an emergency brake to reinstate controls if the rate of cases and deaths leaps up again.

In the UK, the Prime Minister found the SNP leadership in Scotland wanted to avoid any relaxation, and the Labour leadership in Wales wanted only very limited changes. This has resulted in modest change throughout most of the UK with the devolved Administrations beginning to differentiate their approaches. In Brazil, a President keen to lift controls has encountered state government resistance.

The underlying reasons for removing controls is a slow flow from the scientific advice and the attitude of the public. The epidemiologists and some of the medical advisers understandably want to concentrate on controlling Covid-19, their immediate concern. The safest thing for them to recommend is continuing with tough controls to stop or severely reduce social contact to cut the spread of the disease. Once there is some success in this policy, they see the need to prevent a second wave or upsurge of the infection, a danger if important controls are relaxed too soon.

Governments understand there is an economic crisis as well as a pandemic, and are being lobbied by some in healthcare worried that tackling the virus is stopping other treatments and medical consultations. Having committed so much to the fight against Covid-19, they are also worried that if they start to tackle the other problems they could lose their initial battle and throw away gains so far won. It makes decisions difficult to agree within Cabinets and between governments.

Meanwhile, authorities worldwide have been so successful at portraying the virus as a uniquely deadly stealth killer that could take any of us to an early grave, that the majority of most populations are very afraid of the pandemic. This makes the public willing to put up with large controls over their lives, and to accept the price of safety is a lot of economic damage. This reinforces the advice to hunker down against the disease and to regard tackling the virus as the overriding priority. The public has also been cushioned from the immediate economic impact in many cases by furlough, state subsidy, and cheap loan schemes which influences their thinking so far. This may change when the economic cost becomes more visible.

The UK’s document setting out a course to relaxation draws on recent research suggesting that the virus does not spread so easily out of doors. This gives more space to let people undertake recreation and leisure in the open air to keep fit and allows businesses with an out of doors option more chance to meet social distancing rules. One of the biggest constraints on getting people back to work in offices or factories is the transport system. There is general agreement that the virus can spread easily in crowded trains or on buses. There is no simple way around this, so it means a longer period of more people working at home and more factories and offices having to accept much lower staff numbers coming in at regular times. Employers who need staff to travel are asked to stagger hours, expand parking facilities, and make space available for bicycles.

The UK guidance makes clear that people should work from home where they can, and sets out several major restrictions on using offices that limit their utility to employers. Companies are advised to hold virtual meetings rather than physical meetings even for those in offices and to avoid the use of shared social and canteen facilities. There is detailed guidance on more entrances, fewer people in lifts, fewer desks, and much more cleaning and hand washing.

It has become apparent that a factory or building site returning to work in a compliant way is unlikely in the short term, at least to exceed half the output it used to have. Bentley, for example, has an order book to work through, but have decided they can at best manage half the previous output level to reduce the number of people in the factory and to create bigger gaps between people and processes.

Restaurants and hotels in the UK have to wait at least until early July, and then face having to find ways to remodel their businesses drastically to allow proper social distancing. Those with outside areas where tables can be spread out have more scope to develop viable business plans, but will also need ways of handling wet and cold weather.

All this reinforces the notion that there is going to be no early return to the old normal, and continuing substantial reductions in cash flow and profitability of traditional businesses depending on social contacts for employees and with customers. Technology, protective clothing suppliers, and hygiene and cleaning companies have good prospects.

GPFM update

For now, our office in Hertford will remain closed with all staff working successfully from home, and all client activity taking place online or over the phone. We continue to use Zoom for our client meetings with mostly positive feedback. If you would like to talk to one of our advisers, please don’t hesitate to get in touch at or call 01992 500 261.

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested.

About gpfm

gpfm are an independent financial planning company dedicated to the provision of personal, professional, and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.