Strange things happen in a crisis. For one, it can dawn on Mike Ashley that pretending that a sports shop is an essential public service is absurd. Friday’s apology from the Sports Direct founder seemed to be more about communication – “ill-judged and poorly timed” emails to overworked government ministers – than his original ludicrous attempt to keep his shops open, but it was still an uncharacteristic climbdown.
Even JD Wetherspoon’s Tim Martin, who has never previously appeared to give a damn what anyone thinks, paused to consider he may have made a mistake. Having announced staff would only be paid until the moment the pubs were shut, he then said they would get their wages at the next payroll date provided the government agreed a reimbursement scheme in time.
Can anything be read into these examples? Perhaps not. It is possible that freewheeling entrepreneurs, and British business in general, will revert to pre-crisis ways when the coronavirus emergency passes. There will, after all, be huge pressure from investors to recover lost revenues and restore battered share prices in the recovery phase.
But, equally, this period of intense public scrutiny of business behaviour – where companies have been divided into heroes and villains – may produce lasting changes. One can speculate on a few.
First, tolerance for corporate tax minimisation tactics will be roughly zero. The government will be facing a towering increase in public debt, plus a demand that more cash be spent on the NHS. It will need money from somewhere and could feel emboldened to chase perceived underpayers and financial engineers.
So look out, private equity: a tactic of loading companies with debt to minimise tax payments may no longer be tolerated. Corporate Britain has been running too lightly on its shock absorbers. A tax system that rewards well-capitalised firms that can withstand a crisis would be an obvious improvement.
Second, appetite for state interventions will increase. Train operating companies’ franchises have been suspended for six months, but one doubts that rotten system will ever be restored. There is a strong case for seeing what the state can achieve instead. Privatised social care also looks ripe for a state takeover.
Third, the balance of power could shift in the eternal battle over pay differentials. Will it still be considered acceptable for a chief executive to collect 100 times what the median worker in a firm is paid? Bosses at some firms have already volunteered for salary cuts during the crisis phase. Pressure to re-set pay arrangements permanently will be intense. Unions in the supermarket sector, for instance, would be well-advised to use the crisis to press for more for their members.
Fourth, big companies’ treatment of suppliers may come under the microscope. The crisis has exposed the fragile position of small firms that trade with the giants of their industry. Supermarkets have generally behaved honourably by accelerating payments, but Wetherspoons’ refusal to pay suppliers until pubs reopen was as shocking as its approach to staff. The government now has an opportunity to change the rules of the payments game.
Finally, the big unknown is how, or if, consumers’ behaviour will change. Cheap trainers and cheap beer have perennial appeal, so it’s probably fanciful to think that Sports Direct and Wetherspoons will suffer a backlash that causes them real difficulty.
All the same, shoppers have had a rapid education in how companies behave when it matters most. Ethical radars have become more finely tuned. Companies that treat their workers and suppliers well should shout about it. They may find they are rewarded.
In future, state aid must only go to firms making green commitments
The economic contagion of the Covid-19 virus threatens to claim green investment as another casualty. Disruption to the environmental agenda is inevitable; the key question is whether the outbreak will slow the pace of clean energy developers for a few months only, or whether the renewable energy industry – and general progress towards green goals such as the Paris agreement – will be derailed for years.
Last year was a record year forBritain’s renewable energy generation in Britain: the UK’s wind turbines, solar panels and bioenergy plants contributed more than a third of the nation’s electricity. But if records are to continue being set in the UK, and across the world, then global leaders will need to make explicitly green policy choices.
At the most basic level, the clean energy industry will face the same hurdles as many other sectors in the wake of the pandemic: a reduced workforce; a reliance on vulnerable, concentrated manufacturing hubs; and a greater struggle to access finance. But even as restrictions ease, deeper challenges will remain. The companies that the world relies on to meet our green ambitions will be financially battered by this sudden crash and the collapse of commodity prices. Governments too will be stretched by demands for bailouts to keep economies afloat.
The answer must be to incentivise the progress of the clean energy industry by offering government support only to companies which promise to meet green targets. Airlines could commit to emissions reductions, carmakers to accelerating the shift to electric vehicles, and all companies should be sourcing at least some of their electricity from renewable generators.
No company should be offered access to taxpayer life-support without proof that they can help find the green shoots in the rubble of the global economy.
More US jobs will be lost if employers can’t trust the White House
The shocking US unemployment figures reported last week only look like getting worse as March draws to a close. Jobless claims surged to almost 3.3 million in the week ending 21 March. This week, the workers who could not previously contact state agencies to register for unemployment will join those more recently laid off, potentially pushing the increase nearer to 6 million or 7 million.
The prospect of several months out of work will leave scars on a country where workers are expected to fund their skills training and education as much as their healthcare and housing.
A $2 trillion bailout agreed by Congress that includes $250bn of cash to be paid directly to households is expected to limit the economic impact of Covid-19. It may also restrict the growth in unemployment if companies cut wages in the light of the government handout in order to keep staff on the payroll.
What it won’t do is leave workers in a position to simply pick up where they left off whenever the lockdown is lifted. Their employers may no longer exist. Their credit bills might have skyrocketed.
That is especially true when businesses are receiving mixed messages from local, state and federal officials. White House economic adviser Larry Kudlow says a rebound in the US economy in the second half of the year is possible, once counties with only a few virus victims end their lockdowns. This analysis defies what we know about the virus and how it works.
Kudlow seems to believe the virus stops being transmitted when people cross county lines. Andrew Cuomo, the governor of New York, grappling with a major outbreak of Covid-19, would beg to differ.
It is a message that must change before too many business owners, increasingly sceptical of the advice from federal government, lay off staff at an even faster rate. If the US fails to stage a solid recovery, the rest of the world will struggle to mend itself.