Will the coronavirus change the way we spend, shop and invest our money, long after the virus is history? Will we abandon city centre offices, with many more permanently working from home? Or will we return to all our past practices once this grim episode is over?
Guardian Money asked experts in finance, the workplace, property, food and the environment to set out what they think will emerge in the medium term.
Frances O’Grady, general secretary, TUC
‘We can’t go back to business as usual’
Right now the priority has to be fighting Covid-19. But we also have to prepare for the coming recession, and the impact it will have on working families’ jobs and living standards.
One thing is clear: even once we’re through this crisis, we can’t go back to business as usual.
Individualism, nationalism and free market economics couldn’t surmount this crisis. Instead, in an emergency, it was common purpose, collectivism and social partnership that stepped up.
We’ve seen what we can achieve working together and thinking differently – people staying at home to protect our NHS, businesses and unions working together to keep people in their jobs, manufacturers switching production to life-saving ventilators, neighbours all over the country shopping for older people nearby.
We’ve been reminded of how much we all depend on the labour of ordinary working people to keep our homes and our country running. It’s not right that many of the workers we have needed the most – carers, shop workers, cleaners, warehouse staff, delivery drivers – still get paid the least.
During this crisis a Conservative government found it necessary to bring unions and civil society into the room – as well as business. The solutions we found together aren’t perfect but they show the potential of a different kind of leadership.
After this immediate crisis is done, we need to remember what worked in an emergency – and use it to bring in a new era of sharing power, responsibility and wealth. After all, in the aftermath of the pandemic, we still need to tackle the challenges of inequality, new technology and the climate crisis, too.
That means finding a new role for collective bargaining, to protect livelihoods. It means making sure businesses aren’t just profit-making machines but instead have a social purpose.
We can’t repeat what happened after the 2008 crash, when big banks and corporations bounced back but working families paid the price. Real wages only returned to their pre-2008 levels in early 2020 – immediately before coronavirus hit.
While right now many of us simply want things to return to normal, the reality is that some things have changed for good. We know the years ahead won’t be easy.
But together we can build a new normal, where we all get our fair share and can provide a decent life for ourselves and our families. Collectivism is for life – not just in a crisis.
Terry Smith, manager of the £17bn Fundsmith Equity
‘No one seems able to sell everything and buy back at the bottom’
What should investors do in the current market panic? Four strategies spring to mind:
1. Sell everything and buy back at the bottom
2. Try to buy those companies which will benefit from the crisis
3. Buy so-called “value” stocks which have been hit hard in the market fall
4. Just own high-quality companies and try to ignore events
The first strategy suffers from one major drawback – no one seems to be able to do it. It takes more foresight, mental flexibility and emotional stability than most investors possess to be able to foresee a disaster, sell and then buy back in when things look at their bleakest.
Trying to pick companies that might profit from the crisis is maybe easier. Think disinfectant manufacturers like Reckitt Benckiser and mask manufacturers like 3M. But the crisis will be temporary and they have other businesses, some of which were already challenged before the economy turned down.
Buying so-called “value” stocks has fared very badly and has not shown any improvement so far in this market downturn. The Fundsmith Equity Fund year to date has outperformed the Benchmark MSCI World Index by nearly 8% but it outperformed the MSCI World Value Index by over 14%.
I have never been a believer in the philosophy that so-called “value” investments would perform well in an economic and market downturn. Shares that are lowly-rated are so mostly for good reasons. Their businesses are mostly heavily cyclical, highly leveraged, they have poor returns on capital and/or they face other structural or management issues. It’s not a combination likely to protect your investment in difficult times.
Which brings me to the final strategy. I haven’t a clue what will emerge from the current apocalyptic state. Rather like some of the companies I most admire, I try to spend very little time considering matters that I can neither predict nor control and focus instead on those that I can affect. I just try to own good businesses.
Phil Spencer, TV property expert
‘The market is likely to take a fair while to recover’
It seems that for all intents and purposes the UK housing market is shut. It is temporarily closed for business. Nothing more, nothing less. It has not crashed, slumped or even slowed down. It has just stopped.
Aside from physical viewings not being allowed to take place at the moment, the real crunch point is that surveys and bank valuations cannot take place. Which basically means you can’t raise a mortgage … or certainly not under even half sensible terms. It doesn’t matter what market you’re dealing in – whether its wellington boots or bags of popcorn – for a marketplace to function, people have to be able to trade within it. There has to be liquidity. While the banks are unable to safely lend money, the housing market is unable to function. It’s as simple as that.
The primary question in my mind is how long will this situation remain?
Working on that assumption – it begs the question, how comfortable are the banks going to be lending money to individuals whose future income may be uncertain? And then added into that perfect little storm, will be the fact that even when things do get going again, how long will it be before borrowers, valuers or lenders will be able to trust any price or reliable market data?
This does not necessarily mean a price crash or a fall in underlying property values. But it does mean transaction volumes will dry up for a period of time. To give this some context, in China, property transactions were around zero for the three weeks following movement restrictions and have since (two months later) recovered to 50% of their four-year average.
So my expectation is that while the actual pandemic and social lockdown etc may even turn out to be short-lived, the property market itself is likely to take a fair while longer to return to full health. I’m absolutely sure it will get there – a combination of low interest rates and rising inflation will certainly help – but it might be a wee while yet. Hold on tight folks! In the meantime, there’s a wealth of free information on my advice site moveiq.co.uk
Peter Hargreaves, founder of Hargreaves Lansdown
‘Coronavirus is going to change things dramatically’
Right now I’m in total isolation because I have a heart condition, as well as my age. I think coronavirus is going to change things dramatically. At the very least it will make luddites embrace the internet. Even I’ve shifted to doing internet banking for the first time. There’s still an awful lot of people not on the internet.
It was sheer luck that I sold a lot of my shares just before the crash. [Hargreaves sold £550m in Hargreaves Lansdown shares in early February, when the price was around £17.50 a share compared with around £13 now]. It was the biggest sale by a single private investor in the UK of all time. I’ve had a lot of stick about it. But I started work on it in December – it was not the sort of thing of thing you can do overnight.
When the world comes out of this, more and more people will be converted to the new economy, how everything can be bought online, and how we won’t need the high street. If you are in retail today, you are done for.
I’ve put £20m into the Blue Whale Growth fund [Hargreaves co-founded Blue Whale in 2017]. The team there are keener on some of their tech stocks than they have ever been.
Some people are saying buy the cyclical stocks that will recover after a recession. But I’m not sure a lot of the cyclical stocks are going to come back in the way they used to.
Jo Whitfield, chief executive, Co-op Food
‘Budgets will be tighter and the biggest change will be the shift to online’
It’s easy to see the longer-term picture as one of doom and gloom, and there will be challenges, but there will also be much change for good and a great party to kick things off. Once freed from lockdown, we can expect shoppers to celebrate in some style with family and friends who they haven’t seen for some time. Restaurants and cafes should experience a boom as we go mad for a while on eating out, but home cooking is also becoming a way of life as we face into staying at home, and this shift will continue.
Consumers are having to prepare more meals at home and are falling in love with baking and home cooking. Dusting off old family recipes and involving the family more in creating meal occasions. We see this growing as people shop differently to make more meals themselves from scratch.
Neighbourliness will also be a big theme post-coronavirus. There is a thriving community spirit as people look after their own and their neighbours. The street party spirit of older generations could well return as we enjoy being free from the confines of our homes but also strengthen new-found friendships.
Budgets will be tighter, given the economic fallout from coronavirus, and we will look for value for money. And we are moving to an “only when necessary shopping” mentality. In the future, this little and often approach could help accelerate the move to less frequent big shops and an increase in top-up shopping. Local producers are seeing uplifts in sales and local farm shops and other community stores will benefit beyond coronavirus from a new customer base which will stay loyal.
The biggest change will be the shift to online. Demand is outstripping delivery slots but this will see many move into home-delivered or click-and-collect services in the future.
Caroline Lucas, Green party MP
‘Even Conservative MPs are calling for a universal basic income’
Coronavirus is changing us as a society, but it’s also revealing who we can truly be. We are seeing people’s roles and jobs afresh . People who yesterday were “unskilled” are now essential workers – and rightly so. I hope that will lead to a reassessment of jobs and wages, so that in future no one working in an essential role is undervalued or left in poverty.
We’re very lucky in Brighton to have a huge range of independent food shops. I don’t necessarily think the panic-buying and early response to coronavirus will see them replace supermarkets. But I think people are appreciating how fragile our food supply system is and how dependent it is on invisible armies of poorly paid people.
But I know there are no guarantees. We’ve seen too many false dawns, ignored too many warnings in the past. And there are some responses to this pandemic which, if they become hardwired and permanent, will do huge damage to the environment and to people’s lives.
There are things being said now, though, which cannot be unsaid. Michael Gove asserting on the Marr programme that “we’ve got to put the lives of the vulnerable ahead of everything else”; Conservative MPs calling for a universal basic income. The coronavirus may turn out to be the locomotive of history which accelerates the transition to a better, fairer society. But we will have to fight to ensure it happens.
Edwin Booth, head of family-owned supermarket chain Booths
‘A sharing of value will save mankind, greater wealth in fewer hands will not’
Customers are and will continue to be anxious, seeking reassurance that the food that they buy is safe, healthy and from a trusted source. In the aftermath of Brexit, there is an opportunity for the government to collaborate with food industries and farming to create a framework for increased food production throughout the United Kingdom.
Consumers are going to be more aware and conscious than ever before. Food retailers will need to understand how they make customers feel, while front-line workers will have more responsibility for running “their business”.
In my personal purpose there is a line that reads, “There is no such thing as a dull person”. At Booths I describe empowerment as “legitimising common sense”. After three weeks of facing into Covid-19, this simple sentiment has accelerated our responses. Remote working and the use of modern video technologies has enabled our business to run at a high pace despite there only being a team of some 12 people physically attending our central office.
It has not been a smooth ride for those having to maintain a physical presence either in distribution centres, manufacturing areas and the stores. Distancing and safety routines have made many tasks more difficult, and the attitude with which colleagues have carried out their daily tasks has been heart-warming.
The future of food retailing will be fast-paced. Overarching everything will be the need for customers to feel loved. Family and friends are going to mean more to all of us, and communities will be rebuilt with a keener awareness of local values. Globalism will not die but should become a way of understanding diversity as opposed to a means by which to direct wealth to the few. A sharing of value will save mankind, greater wealth in fewer hands will not.
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