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GERALD BREATNACH: Hello.
This is Fast Forward, where we're
looking at the numerous trends that have been accelerated
by the global pandemic, and sharing expert perspectives
that have been designed to help UK businesses
plan for the future.
I've been speaking with Robin Bew, the Managing
Director of The Economist Intelligence Unit.
That's the forecasting and research
arm of The Economist group.
I can't think of a better person to give a helicopter
view of our economic future.
I kicked things off by asking him
what the UK'S Immediate prospects were,
and what was likely to happen next.
ROBIN BEW: But I think, in a month's time,
we'll be listening to the news and you're
going to see start to see some really positive economic data
and some positive indicators.
Some of the data actually that Google predict about
into a footfall and transport usage.
And so that's all going to start moving up quite quickly.
I think the more difficult thing is, of course,
that even though those numbers will be very positive,
they're not going to get us back to where
we were before this started.
And so we've been doing some work
about how quickly we're going to really get back to that.
So we think that in the UK, Europe, and America,
we're not going to be back to where
we were before this started.
So let's say what the economy looked
like in January of this year-- we're not going to get there
until some time in 2022.
So it could be the beginning for some countries,
towards the end for other countries,
but at a level of economic activity
that we saw immediately before the lockdowns began.
We are still several years away from that.
So what that really means is that two, maybe three
lost years of economic activity.
So that's a very difficult message.
GERALD BREATNACH: What will recovery look
like in different industries?
ROBIN BEW: I mean, the first thing
is to recognize how much of the problem in each sector
is just a result of some very temporary restrictions
on activity.
So for example, hairdressers don't shut,
and they will, at some point, be open.
And you're going to see those businesses start
to return to something that looks a lot more normal.
So it's been awful, but it will get better.
And that's going to be true for a whole bunch of industries
and sectors where the immediate restriction on their ability
to operate will be eased.
And so you will see something of a rebound.
So that's been grim, and it will get less grim.
But then I think we have to recognize
that for some sectors, something fundamental has changed.
And that change is likely to persist.
And so I guess, the obvious place is in retail.
But I think the reality is this pandemic
has accelerated a trend that we all knew was there already,
which is that the bricks and mortar retail was
under a lot of pressure.
We saw more and more retail moving online.
People are sort of nervous.
Over the last three months, they've
learned how to do a lot of things
online that perhaps they weren't doing before.
It seems pretty unlikely that that sector is ever
going to go back to where it was before.
And the trends that people have been talking
about for a long time around the hollowing
out of the high street, and more and more businesses moving
online.
When that trend has just dramatically accelerated,
there is no reason to think that you're going
to see that trend reverse.
So that sector-- we just accelerated the problem there.
And hospitality-- so there are various aspects of hospitality
which are going to be affected for a very long time.
I think any kind of business where the raison d'etre
is social, it's going to find it much more difficult
in a structural way.
So even though the lockdown is easing and some
of the restrictions about how social distancing works is
changing, it's pretty clear that there
are big aspects of the leisure and hospitality industry which
just are going to be different, because people's appetite
to sort of spend time in close proximity
to others, that's going to be different.
GERALD BREATNACH: Which industries
are going to come out of the pandemic well?
ROBIN BEW: We have all demonstrated
that to some extent, we can work effectively remotely.
Or a lot of different sectors have demonstrated that.
That's going to mean that the industries which
supply the equipment, do the training, all the things that
are necessary for business to operate effectively
in a remote situation, those businesses structurally,
are going to do better in the medium term,
not just in the recovery.
And that's going to be true for a bit of the health sector
as well.
I mean, it's pretty clear, we saw a trend.
We have an interest in healthcare in The Economist
group anyway.
And we had seen a trend that diagnosis
was becoming more important than treatment
over quite a long time.
And of course, what this crisis has done
is put a lot of pressure on track and trace testing.
We talk about those sort of things all the time.
We think those parts of the healthcare industry
are going to structurally see an improvement over the medium
term.
So I think it's recognized, that as the lockdown eases,
some sectors will--
all sectors will bounce back to some extent.
I think the really interesting thing is to think about, OK,
what's changed for the long term?
And what does that mean about the relative health of all
these different industries?
And for some sectors, the long term trend is more negative.
But for some, it will be more positive.
GERALD BREATNACH: How well are businesses
adapting for the future?
ROBIN BEW: This is a space where businesses
are varying quite dramatically.
And I think that probably needs in general to be more thought.
So we talk to a lot of companies who have been decisive,
acting pretty quickly, recognizing that things are
going to be different for the long haul,
and trying to figure that out.
But we do also see a lot of firms who are effectively
biding their time.
So kind of hoping that we're going to get back to where
we were before it started.
Now they're doing temporary things.
They're husbanding their cash, all that kind of stuff.
But fundamentally, they haven't really
started thinking about what the long term answer might be.
And I guess my observation is that you've--
now's the time.
In fact, the time probably was six weeks ago or so.
But you know, now is the moment when you really
need to figure out how your business is going
to work over the medium term.
If the reality is that the fundamental drivers
of your business and the value equation, those things
are going to be different in the medium time,
then you're going to have to make some changes.
GERALD BREATNACH: Where are you seeing most innovation?
ROBIN BEW: Small, owner-managed companies are more nimble.
And you can kind of see that coming through.
I mean, I would imagine for a lot of people listening
to this, that they'll have gone out
and they will have seeing that some of their local restaurants
have re-imagined themselves as sort grocers.
And you've seen pubs setting themselves up as shops.
And a lot of the ones that have done
that are the ones which are very small
chains, quite entrepreneurial leadership,
quite comfortable to make changes,
perhaps a bit more risk-taking.
And you see some bigger organizations perhaps
where they're much more corporate,
and you're not seeing that.
So you know, you might see in your local area the big chain
restaurants, they're still shuttered.
But the local, more entrepreneurial ones
are all doing other stuff.
And I do think that the firms find it harder.
But it's going to be necessary, cause for a lot of industries,
we're not going to get back to where we were before.
I'm not seeing enough companies being creative
enough quickly enough.
GERALD BREATNACH: How will the UK's recovery compare
with the rest of the world?
ROBIN BEW: The things that you needed to do well in the crisis
are a little bit different than the things
you're going to need to do well in the recovery.
And the one thing that the UK has got
is it's got a lot of government spending firepower.
So the UK government does have a lot of capacity
to borrow and spend in a way that some other countries do
not.
So if you look say, in continental Europe,
we take an extreme example with a country
like Italy, it's going to be really
difficult for their government to really open up
the taps and deploy government money to get things moving,
because they're already in debt up to the hilt.
UK doesn't look like that.
So the UK has options.
We also control our own interest rates.
So clearly, in Europe, they have a combined interest rate
because the whole of the eurozone.
So we've got options there.
And then there are some other things that work.
Which sectors have you got which are strong?
So I said we've got sectors where productivity is low.
But the sectors that are strong in the UK, the service
sector, the financial industry sector,
they're very well connected globally.
They're very well equipped to work remotely.
So the sectors which are important to Britain
are also happen to be sectors where you can operate remotely.
So if, for example, if physical manufacturing
was really important, that might be much more difficult.
But for us, it's not quite like that.
So I think maybe the UK will do--
will recover a bit better than people think,
because the government will be more helpful.
Germany has also got a lot of fiscal firepower.
They can spend money.
If you look at places that are going
to struggle a bit more, Spain and Italy,
they just don't have the government
financial resources to do the things that need to be done.
The US has got firepower.
So they will spend to try to pull their economy forward.
GERALD BREATNACH: How will global power shift
as we emerge from the pandemic?
ROBIN BEW: China is absolutely the one to watch.
They are going to take on a position themselves--
are already positioned themselves
as having navigated this more successfully than the West.
So if you look at their death rate given
the size of the country overall, it appears to be very low.
And while there might be some dodgy reporting,
I think the reality is it is lower
than we've seen in other smaller countries.
Governments clearly demonstrated that it's
prepared to do some really very difficult things.
It will be hard to do in a democracy.
The degree of the lockdown was tremendous.
That's enabling them to say to the rest of the world
our model can work.
And what we're seeing is as a lot of other countries
around the world, which are looking at China,
and they're thinking that there was already
this tremendous tension between the Western China
or in between the US and China.
And that you could see to some extent
that the world was starting to almost bifurcate between them.
Which camp are you going to be in?
One result of this crisis is that China now has a narrative
to the rest of the world that says, well,
maybe you want to be in our camp,
because we can deal with stuff like this,
when the West cannot.
And so I suspect in five years' time
we're going to look back on this,
and you're going to see a world which is rather more divided.
Maybe not the Cold War in the way
that we had with the Soviet Union, but perhaps a bit more
commercially divided, a bit more of a sense
that you're in one camp and the other.
A lot of companies perhaps-- and Google is actually one
of them--
which can't really operate in both at the same time.
You're either in the US and European camp
or you're in China.
And I think more industries will wind up in that space as well.
And we're going to end up saying,
well actually, this was a moment when
China's leadership of the other camp
became really cemented, because they
are able to say to a lot of countries which are wobbling,
our model works.
And while-- I'd imagine a lot of people listening
to this are going to be sitting in the UK or Europe or America,
that might seem surprising.
But if you're sitting in Africa right now or in Latin America
or in the rest of Asia, it doesn't
feel like it does to us.
And you're going to be looking at China and thinking, well,
there's something there to admire.
And so I think that the end game here
is that China will be in the ascendancy.
GERALD BREATNACH: Where there you have it.
I really love Robin's international perspective.
And if there's one big takeaway for me,
it's that it's never too late to start
thinking long term about how your business is
going to work in the post-pandemic environment.
We want to help.
If you're a small business, s search
for Open For Business to find all of our resources
in one place.
And if you're a live business, what
could the team here at Google to scenario
plan for what's coming next?
Thanks very much.
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