A view from the desk: Getting Britain back to work
“ There’s a right old ding-dong going on in the Conservative MPs WhatsApp group....the London MPs are very worried about how you convince people to come back to Pret.”
It is now nearly two months since Boris Johnson announced what he believed would be the end of “our great national hibernation”. However, it is becoming clear that life will not be returning towards anything like the pre -Covid normal soon, if at all. By far the most effective message that the Prime Minister and his team has communicated to us over the past six months has been “Stay home, protect the NHS, save lives” and should we, therefore, be surprised that it has served to put some lasting fear into both employers and employees?
I started taking the train back up to the London head office from my Tunbridge Wells home for one or two days a week as soon as travel opened up again. The reasons were two-fold – to break the “working from home” monotony and spend time with some real people (socially distanced of course), and because there are still elements of my day-to-day role that are better done in the office. I have embraced the compulsory mask-wearing with not quite the air of a zealot but certainly with an acceptance that it goes with the territory. I have finally found a filtered one that enables a more comfortable journey – I just need to find a remedy to the steaming up of my spectacles now?
However, what has intrigued me has been the reaction of several of my closest friends. These are not your usual “scaredy cats” (far from it) but they have been genuinely taken aback by my decision to use public transport when for all intents and purposes I could have continued working 5 days a week from home. To them the signal that you have to wear a face covering indicates elevated risk that is not worth taking and they, consequently, currently have no intention of returning to public transport ahead of a successful vaccine. From passenger and “return to work” figures it is evident that they are not alone.
As of the middle of August, a Sky News report indicated that as few as one in six workers had gone back to work in cities. Overall, a recent study suggested that only something like 40% of people were back to their usual place of work by the end of last month. There is every likelihood that the re-opening of schools will see this figure increase but with it might well come a spike in cases. Is it just coincidence that the likes of France, Spain and Germany now have infection rates back to where they were when they started to re-open their economies (although, of course, well down on March-April levels) when they now have something around 80% of workers back in situ? Students returning to university could also, inadvertently, lead to spikes especially as Public Health England figures now show that two-thirds of confirmed infections are in the under 40s.
As I write this, Britain’s virus case rate is around 13.5 per 100,000 – not too far from the 20 per 100,000 limit ministers are using to determine whether to impose quarantine restrictions on arrivals from other countries. People’s feelings and preferences need to be considered. Not only will some be too scared to take public transport but there is little doubt that many have found themselves to be more productive in the spare room or on their kitchen table. Others are delighted to have back what they can now point to as “wasted” commuting time. The Government’s own guidelines serve to reinforce the case for working remotely for longer as an employer’s duty of care to their employees combines with the plethora of measures required to enforce adequate social distancing within the workplace. At one metre of distancing then office occupancy levels of even 50% could become a serious stretch.
An on-line article in The Spectator this week quoted a government source saying 'People need to understand that working from home is not the benign option it seems. We need workers to be alert to what decisions their bosses may take in the weeks ahead. If they are only seeing workers once a fortnight then that could prove problematic for some employees in the future.’ As The Spectator so eloquently put it “This modern 'on yer bike message' sounded strangely un-Conservative: what business does a Tory government have in suggesting it knows better ...../cont. than bosses about who is worth holding onto and who isn't? It also did not make much sense given many workplaces are having to operate with fewer people present in order to adhere to social distancing guidelines. And surely there is a law of diminishing returns in firstly telling people that they must stay at home or bad things will happen, to then telling them they must go into the office or bad things will happen - and then switching back to telling them to stay at home and save lives when their area goes into a local lockdown.”
However, what we do all know and accept is that steps must be taken to renew and bolster economic activity across the country. Businesses are recovering but it is slow. Pre-Covid when I chatted to the owner of the coffee shop at Tunbridge Wells train station it was usually a quick 30 seconds on the previous evening’s sport whilst he and his team of three efficiently dealt with the orders of the throng rushing through the station for their train to town. These days we have more time. It is now just him running the shop and as passenger numbers have been creeping up his business is, more or less, washing it’s face. Last Tuesday was a good day for business as both his kiosk (and my train) were inundated with Extinction Rebellion campaigners! However, this also masks the reality that in no longer employing part-time support that’s two less people earning an income that they would then spend within the local economy too.
Which brings me to the Pret-A-Manger quote. This is not a violin-playing moment for that chain in particular (although for total disclosure I am a big fan of their Egg Mayonnaise Sandwich and the Very Berry Breakfast Bowl!) but more a reflection upon the travails affecting the industry as a whole. The hospitality sector epitomises the struggles that face employers and employees alike. Having suffered an 80% drop in sales, Pret, today, announced the 30 of its current 410 sites that will close permanently, with something like 1,000 baristas and servers losing their jobs. 11 are in London but the identity of many of the regional ones is just as significant – Edinburgh’s Shandwick Place, Gateshead’s Metrocentre, Glasgow’s Fort Shopping Centre, Cardiff’s Capital Centre. The last places to resume economic activity look like being our previously thriving city centres where people do not reside and only previously travelled in to for work or shopping. With the acceleration of the move to on-line retail and the aforementioned reluctance to return to work, our city centres are pale imitations of what they once were and to quote yesterday’s Evening Standard “a ghost city is no city at all”.
Kate Nicholls, the Chief Executive of UK Hospitality, has referred to this as the “donut effect” with suburban areas seemingly thriving to the detriment of city centres. Schemes such as the “Eat Out to Help Out” have proven hugely successful for local pubs and restaurants, reaching a crescendo of 216% growth on Bank Holiday Monday (the last day of the scheme). It is notable that the 13 days of the scheme produced an average growth of 63% year on year, and as interesting are that in the last week of the scheme Thursday - Sunday also showed 7% growth even without the subsidy and for the first two days in September the market has remained in growth (albeit by just 2%).
Many businesses are now extending the offer off their own back and this is how it should be. The scheme has cost the taxpayer in the region of £520m but I do not think anyone would argue that this was not a subsidy worth paying. However, just like the impending end of the furlough scheme, the government’s safety net has to be withdrawn at some stage – if only so that it has the same tools in the kit bag should the winter lead to second waves of the virus requiring more than what are seemingly proving to be effective localised lockdowns. We also have Brexit to consider........
The sooner we can get the economy back to normality (or at least approaching the “new” normal) then the sooner we can start to address the levels of debt that has been necessary to tackle the stresses of the past 6 months. It is not all doom and gloom. The economy is picking up. David Smith who has been Economics Editor of the Sunday Times since 1989, is certain we are seeing the initial signs of a “V” shaped recovery. To him this is “straightforward and logical. When the economy was in maximum lockdown, economic activity would be most severely curtailed, naturally picking up as lockdown measures were eased.” He continues “The beginnings of a V were seen in the monthly GDP data for the second quarter. These and other data led Andy Haldane, the Bank of England’s Chief Economist, to declare his confidence in a V-shaped recovery”.
Graham Withers – Investment Manager September 4th 2020