Taplow Group – Pandemic Business Overview
The Taplow firms have been active throughout the pandemic, this is the sixth in our Business Updates series from our partners around the world. The situation is showing clear signs of recovery although nuances exist in every country and region.
- Business Leaders: With re-start plans under way across sector, leaders are watchful of subsequent “virus waves” and revising their plans to carry on working if sub regional lockdowns occur.
- Employees: Those that have restarted work, employees are juggling employer and government advisory notices with delivering within their roles. There is a growing impatience from those still in lockdown and governments seem to be seeing restlessness across workforces to return to work.
- Companies: Positive signs from countries that have ensured they were active in locking down their countries, point to a V shape recovery, problematic recovery is seen where governments are not controlling the virus and economic indicators point to a L shape economy in 2020 with hopes of a bounce back in 2021.
- The pandemic is seeing countries in Africa going into various versions of “lockdown”. The business community is striving to come to terms with the situation with the backdrop of little or in some countries no assistance.
- Although Africa has not seen as many cases primarily due to their being less travel spreading the pandemic, there are notable clusters emerging.
- Progress continues to be made in Australia on economic recovery and movement. Several state borders have been opened for travel internally.
- There continues to be some community transmission of Covid-19 that is untraceable, and this is slowing progress for a return of office workers. Major Central Business Districts continue to have government directives to work from home if you can. Traffic has noticeably increased indicating there is increased movement of people for work.
- The equities markets continue to rally towards pre Covid-19 levels. June 30th is the end of the Australian financial year. Companies and individuals will be finalising affairs for this. There have been some indications Government will continue the fiscal and economic stimulus, particularly with the reporting that unemployment has reached 7.1% nationally.
- There were some large protests held in Australian major cities that resulted in large gatherings of protesters. The timing of the protests has been questioned when the health of the Australian people has been such a high priority. Major sporting codes have resumed competition with crowd attendance at the stadiums.
- Australia’s international borders remain closed with very limited air travel services available.
- India, the third biggest oil consumer, expects fuel demand to return to normal earlier than projections by the International Energy Agency and OPEC. At the end of June, India has already achieved 85% of demand compared to June 2019.
- For defence procurement, the government has enhanced the FDI limit through the automatic route from 49% to 74% to help global players to set up manufacturing facilities within the country and thereby supplement the domestic manufacturing capabilities.
- As a positive indicator; Reverse Migration has started in India i.e. several trains bound for major Indian cities housing Industrial complexes have started running with over 100% booking, since migrant workers are coming back to work showing signs of revival of economic engine.
- India’s first Payment bank - Airtel Payments Bank's revenues rose 87 per cent to Rs 474 crore during FY20, driven by surge in digital payments, money transfer and offtake of new services, The payments bank sees a "massive headroom for growth" and its promoters remain committed to unlocking this potential.
- Indian Government is planning to launch Bharat Craft, an e-commerce portal, on the lines of Alibaba, and should soon see turnover on the platform to the tune of Rs 10 lakh crore in the next few years and this would benefit MSMEs in a big way. State Bank of India is working on setting up an e-commerce portal for marketing of products manufactured by micro, small and medium enterprises (MSMEs) in the country. The portal called Bharat Craft would be jointly run by the bank and the government.
- Up to S$920 million has been set aside to extend foreign worker levy rebates for firms in the construction, marine shipyard, and process sectors until the end of 2022. This will help these industries cope with significant higher costs of implementing safe management measures at workplaces.
- A Fair Tenancy Pro Tem Committee under the Singapore Business Federation, SBF has been set up to develop a tenancy framework to deal with current and long-term issues, as well as establish industry norms on tenancy practices and terms between retail tenants and landlords. The formation of this new committee comes after months of simmering tension between retail tenants and their landlords.
- Singapore’s manufacturing output fell 7.4 per cent year-on-year in May after two straight months of increase as demand weakened across most segments, with only the biomedical manufacturing cluster reporting gains. Excluding this cluster, the country’s output fell 10.4 per cent.
- Singaporean’s will be heading to the polling station on 10th July. This comes shortly after the announcement by the Singapore Government to dissolve the Parliament last week, paving way for the elections to be held just as Singapore emerges from Phase 2 Circuit Breaker.
- BNZ (one of New Zealand’s major banks) states that it is fortunate New Zealand is so exposed to the Asian region (especially China) and less exposed to the “old-world” countries of the United States, Europe, and United Kingdom. To put this in perspective, at the end of the June quarter, US economic activity is forecast to be 10.7% down on year earlier levels. Over the same period, the UK takes a 15.9% hit and the Eurozone 15.8%. Compare this with China +1.2% (though admittedly, its big hit was in Q1 when the annual decline was 6.8%), Korea -2.2% and Taiwan -2.2%. Putting all this together, New Zealand’s trading partner activity decline troughs at an annual -5.5%.
- According to BNZ forecasts, New Zealand doesn’t get back to its pre-Covid starting point until Q3, 2022 but BNZ concede there are upside risks to our GDP growth view. To start with, BNZ have weaker-than-consensus expectations for New Zealand activity. BNZ are forecasting a contraction of 8.0% for calendar 2020 followed by a bounce of 4.8% in 2021. The consensus view is -6.1% and +5.9% respectively. Secondly, if the trading partner forecasts that are being espoused prove accurate and, in particular, if China takes off in the manner assumed, then it may be that New Zealand’s export performance will turn out to be stronger than BNZ have anticipated.
- Domestic air travel capacity in New Zealand continues to recover with expectations that it will recover to just under 80% of its pre-Covid-19 levels by the end of 2020.
The EU region has seen a remarkable recovery in the past few weeks, governments have reopened borders with neighbouring countries and regionally business life is returning in stages with positive results. Recent changes to regulations by the EU look to have saved Europeans “Summer Vacation plans” which are incredibly important for Southern European nations.
- The French economy is expected to experience one of the worst recessions in the world in 2020, according to the new forecasts of the International Monetary Fund (IMF), which now anticipates a 12.5% drop in 2020, compared to 7.2%, initially announced in April, in its latest global forecast. A recession close to that of Italy (-12.8%) and Spain (-12.8%).
- IMF anticipates a rebound in growth for France of 7.3% in 2021, a figure close to that expected by the Banque de France (7%). This would be one of the strongest growth rates among developed countries. France is thus ahead of the United States (+4.5%), Germany (+5.4%), Italy (+6.3%) and Spain (+6.3%), according to IMF forecasts. However, "this apparent strong rebound would not allow the level of activity at the end of 2019 to be restored before mid-2022," the French central bank has already warned.
- The business climate in France recovered significantly in June, although it is still at a low level, according to data published on June the 23rd by the National Institute of Statistics and Economic Studies (INSEE) : the synthetic indicator of the business climate in France gained 18 points in June, to 78. If it "exceeds the level of the trough reached in March 2009 (70)", it "remains well below its long-term average (100)," INSEE said. The rebound in the indicator "is explained in particular by the more optimistic view that companies have of their business prospects, in all sectors, under the effect of the deconfinement," says the INSEE.
- The deconfinement having "mechanically led to a recovery in employment in a number of sectors", these figures "are a sign of a gradual recovery in activity, but the situation remains difficult", the Labour Ministry stresses in a press release. Another indicator suggesting that the recovery is beginning on the French labour market, reports of hiring for more than a month in the private sector, excluding interim workers, jumped 75.9% in May in France, after two months of sharp decline.
- To accompany the recovery, while trying to spare public finances heavily impacted by the measures put in place to try to avoid an explosion in the unemployment rate, the government has notably decided to lighten the health protocol imposed on companies since June the 22d and is changing the partial coverage of activity with new regulation that will start from the first of July. Discussions are also under way with the social partners to change the unemployment insurance rules.
- Lufthansa gets funding of 9 billion EUR to support the aircraft sector.
- The government's economic stabilisation fund is to acquire 20 per cent of Lufthansa shares worth 300 million euros, plus two silent partnerships worth 5.7 billion euros. Three billion euros will be borne by the development bank KfW. In addition, the Federal Government will be represented on the Supervisory Board through two mandates, whereby the mandates will be awarded to independent experts.
- The EU Commission's competition authorities have released the Lufthansa rescue package. However, the EU Commission has made its approval subject to conditions. The release of the recapitalization aid in the amount of six billion euros is subject to the condition that the largest German airline complies with obligations to avoid distortions of competition. These include that Lufthansa must relinquish take-off and landing rights at its main locations in Frankfurt am Main and Munich.
- Taplow Germany are seeing that clients are reviewing there HR-strategy for 2020 and that they are starting to hire again – e.g. Electrical engineering and IT-companies. Others planing to hire from September again.
- With the daily infection rate slowly decreasing since the beginning of June, Russia is further easing restrictions, and more companies start shifting back to working from the office. The country is now also allowing a one-time entrance to foreigners that are holding a highly qualified specialist Visa (HQS). This is an incredibly positive and essential step for businesses, as many expatriate General Managers were not able to return to Russia before this.
- Like in many other countries was the automation and robotics industry able to grow during the time of pandemic due to the high and urgent demand of mask and disinfectant producers to increase production capacities. Further, we can see the trend towards automation growing in Russia also in other industries, as for example the first fully automated “no-contact” KFC opened in Moscow this month. Other sectors like pumps and pipelines have not been affected by Covid-19, but the ongoing low oil prices are influencing their business negatively. The fashion retail industry did suffer losses during the pandemic; however, leisure and sportswear producers were able to stabilise and, in some cases, even increase their business due to strong online business and advanced delivery services. In general companies in Russia are trying to the maximum extent to keep their staff and are aiming at returning to business by the autumn and restart recruitments by then.
- Taplow Russia is receiving more requests for targeted salary research by local subsidiaries as the salary statics provided by the headquarters are too general and not specific enough for crucial positions. Salaries in Russia are varying a lot with wide ranges strongly dependent on the Region. Hence a general overview can seldomly showcase the real picture.
- Spain will be one of the countries that will suffer the greatest recessions among the main advanced economies and emerging markets
- 12.8% contraction in gross domestic product (GDP) in 2020.
- CEOE gives green light to the extension of the ERTE (Temporary Employment Regulation Scheme) until 30 September.
- The UK government announced a reduction to the pandemic risk, this now sees retail, holiday venues, cinemas and importantly restaurants and pubs. These all reopen from July 4th – dubbed “UK Independence Day” by the media.
- The airline industry is restarting but the government 14 day “self-Isolation” scheme on entering the UK will severely restrict the travel industry to relaunch. There are plans being announced to form “Air Corridors” with EU and other European Countries, this will see UK summer holidays being saved and could see a return to European business travel in Q3 2020.
- Recruitment sector has returned, many projects that were “stopped” have been reactivated and some businesses are starting to reassess their growth strategies now they can see how the business has survived in the lockdown period.
Latin America is the latest centre for the pandemic, North America is seeing signs of recovery but with numerous states seeing a rise in pandemic numbers, the situation could deteriorate quickly without clear leadership and plans.
- Brazil is seeing its fourth month of the pandemic impact. Number of cases and deaths are relatively high, comparable to the countries of highest indexes in Europe, but still below the US, in terms of absolute numbers. The State of São Paulo responsible for a little over 20% of all cases in Brazil, both in infected population and in deaths started its gradual, well-structured recovery plan back in June 15th. There is no collapse of medical or hospital/intensive care attendance, but only in a few cases in the Northern area some weeks ago.
- The Brazilian economy has shrunk 6% in March and another 10% in April, according to bona fide sources. The month of May numbers are still being analyzed but should not be worse than April. According to the INC (Industry National Confederation), in May, the country has seen more industrial activity, an almost regular activity in the field. As a matter of fact, our crop this year will be a all times harvest record, estimated to reach 246.4 million tons of cereals, leguminous, and oleaginous crops, higher than 241.5 million tons in 2019.
- Our official annual interest rate/SELIC has dropped to 2.25%, and our current annual deflation rate is -1.6%, the smallest rate since 1979, due to the current stage of depression. In fact, our 2019 unfinished recession was hit by this current pandemic recession.
- Current key world-wide and our own strategic concern points out to the potential, eventual second Covid-19 pandemic wave and its consequences to the world economies.
USA and Canada:
- North American markets have been very measured during the last almost 90 days since the covid19 disruptions and lockdowns have been in place. Several phenomena are noticeable.
- Current executive search and consulting assignments are moving slower as our clients are being very measured about adding to staff and team availability to participate in consulting efforts has been limited. New roles are being actively considered but timing for hiring is still reasonably uncertain. Action oriented consulting on new markets and new approaches to market are moving at a sub-optimal pace.
- Some of our clients appear to be using the current environment to release their less successful employees and are being incredibly careful to avoid legal risk with re-alignment of functions.
- Opportunities to revise organizational design and realign functions are being hampered by the lack of certainty.
- The recent and continuing racial discord is distracting as corporations and faith communities are taking centre stage rather than leadership from national or in some cases, state officials.
- Curfews and “stay at home “ orders are still in places in some areas causing significant distractions.
- The news of this week about an increased rate of new covid19 cases is not surprising as the lifting of “lock downs” is now elapsed over 14 days.
- Cautious optimism is just beneath the surface, but the unnecessary distractions must be mitigated.
We hope that you, your family, and work colleagues continue to stay healthy and safe, we at Taplow are here to support you and your company through this crisis and beyond, we look forward to speaking to you again soon.