2020 year’s end is beginning to show who the winners and losers are in the economic impact of global coronavirus pandemic.
Notwithstanding over 1.6 million deaths so far, the effects of the pandemic are going to be felt well beyond 2021. The vaccination programmes, which started in the UK on the 8th December, will take many months to complete with millions of people to be vaccinated. It will be interesting to see if any queue jumping occurs by wealthy, favoured groups or whether the most vulnerable and most-at-risk occupations, namely medics and care workers (of a few kinds) will be provided theirs first as vaccination programmes commence and develop around the world.
However, economically speaking since the spring lockdown caused unprecedented GDP drops in the 2nd quarter of the year. With various easing restrictions implemented over the summer then reversed in the Autumn with the tiered lockdown systems for the much-anticipated second wave of COVID-19 infections across Europe, including the UK, caused certain economic sectors to prosper while others remained moribund.
Stock markets share a similar story with technology investors recording strong price gains since the early springtime sell-offs. Recent discussion is whether this trend shall stall with a rotation into cyclical and value-stocks for the wider (and much hoped for) recovery in 2021- such as for badly beaten-up travel and hospitality stocks. It is a similar positive sentiment that pervades the resilient housing markets of the UK, Germany and even the COVID hard-hit US.
As to be expected the doom-mongers predict that markets will all crash by April. Pessimists usually have a convincing story, similar with the 2009-2014 post-financial crisis era, these predictions will be correct to a degree and occur in fits-and-starts which justify their story, so best curb one’s enthusiasm.
Regarding more optimistic economic outlooks, they appear rather bold as they require social-distancing measures to ease while the vaccine is distributed throughout the world. The pace of immunisation against infections rates rising again during 2021 are an unknown only to be revealed in the coming months. How and where levels of immunity rise allowing the retractions of social distancing measures to help normalised economic activity will of enormous political and economic importance and much debated in the coming months. New Zealand, as per usual, leads the way in to 2021 reaching almost normal levels of social activity already.
Once infections rates start falling, the politicians and civil servants who introduced many new rules and restrictions for dealing with coronavirus will need to withdraw them. It will be interesting to see how quickly that happens as only then can social and economic activities such as larger weddings and mass-events such as festivals and concerts resume. Not-to-mention the resumption of mass unimpeded use of public transport systems such as London’s more than half-empty underground. Suspicions are that this may take a while.
The 2020 economic winners, perhaps a brash a term for such a tragic year, are online internet retailers with the goliath Amazon Inc to the fore. Their profits and value boosted by increased online sales exacerbated by the global lockdowns. Meanwhile supermarkets have maintained their dominance of the essential food market and have honed their online offerings and delivery services. Will they pay their essential staff more on the back of their enhanced economic value?
Notably, tradesmen whether painters and plumbers or electricians since the beginning of easing restrictions after the first lockdowns have seen a strong demand for repairs, and replacements or improvements. Proving the old-adage of having a trade at your fingertips and one will never be out-of-work. Unemployed holiday representatives may take note.
Manufacturers in niche areas, such as face masks and other PPE provision, have both seen high demand and generated news headlines over the distribution of government contracts to connected or favoured parties. A sustained recovery should see demand broaden.
Professionals who have been able to work from home easily enough, especially those working for companies with final salary pension schemes or civil servants with government backed pension provision have had their salaries paid and contributions maintained throughout the pandemic and beyond, have faired well too. Although at times a little too much time with the children. How the work/life balance tips in 2021 will a crucial social and economic development in any recovery phase.
Added to the list of winners is China who suffered first in the pandemic and were the first, seemingly if you believe the statistics, to emerge and see their economy return to growth with their large manufacturing base helping to provide the goods. There remain questions of just how did the virus enter the food chain via the wet market in Wuhan through the consumption of bats and indeed leave it and then spread around the world?
The 2020 economic losers are many self-employed people, the entire travel and hospitality industries from airlines, associated service and parts suppliers, all types of hotels and accommodation including the buy-to-let market, leisure and sports venues, bars and restaurants, high/main street retailers, specialist retailers and event companies of all types from outdoor lighting equipment suppliers-to-caterers-to-limousine hire. All have had a very tough year with many to re-open properly, if at all come the Spring of 2021. The January 2021 retail sales announcements will be grim for some.
City centres have lost their many of the daily commuters and visitors with implications that, if maintained from 2021 onwards, will begin to have dramatic impact on the use of buildings and transport infrastructure in many city centres. Property landlords may have to rethink their entire business model.
If the vaccines work their magic, could all this mishap fade-away and life can return to normal by November 2021? The assumption seems premature at this stage but again memories can fade fast too with our busy interconnected and interdependent lives have a powerful absorbing momentum.
Time will tell, of course, and even though real economies are poised to recover somewhat in 2021 stock markets have already seen a measured recovery from the late spring in 2020.
Interesting to note that events like the Glastonbury Festival are struggling to get contingency insurance for COVID-19 outbreaks from insurance companies– if that becomes standard practice in the insurance industry. How many other venues or events will need to rethink their appetite to risk or indeed survival in a post-pandemic world with an eye towards the next outbreak or global disaster which occurs with alarming regularity.
Wishing for a better 2021 is the understatement of an utterly awful 2020 for humanity.
LDC