COVID-19: The future of business

Wednesday 17 June 2020

As we move towards the lifting of the lockdown restrictions, predicting the timing or robustness of the economic restart is somewhat akin to looking into a translucent crystal ball.

What COVID-19 has done however, is provide an opportunity to clearly identify the rising trends. Life after lockdown may well have some semblance to life before lockdown, however our attitudes and approaches to business may well have changed.

Moving towards the lifting of the lockdown restrictions, it is expected that businesses will suffer COVID-19 aftershocks, though many have speculated that the economic contraction and recovery are likely to take a V shaped or U-shaped trajectory, meaning that the prospects of recovery are reasonable in the circumstances.

Below we briefly summarise the emerging picture of the landscape of life after lockdown and outline those trends that are on the rise and fall.

Rising

1. Technology:

Zoom has benefited significantly from the lockdown and work from home (WFH) initiatives. It gained approximately 290 million participants, rising from 10 million in January 2020 to 300 million in April 2020.

Similarly, Google has stepped up its advertisement of its free Google Meet service, and Microsoft Teams has seen user numbers rise as people continue to WFH.

This virtual way of working is likely to stay. Many providers have and will be further striving to improve the quality of their virtual experiences. The COVID-19 crisis has arguably simply added impetus to a pre-existing trend to move from the physical to virtual.

One can expect a further trend toward smart business, with a rise in touchless technology, digital payments, ecommerce, and self-service. Digital health and distance learning will benefit significantly as businesses look to minimise travel, improve employee development and support employee well-being.

The trend towards technology is likely to see expansions in areas including healthcare (Artificial Intelligence) and public health, supermarkets (online shopping) life sciences, robotics, logistics, IT & cyber security, and software.

2. Flexible working:

This has become the new way of working. It is no longer just tolerated, and it has been embraced during the crisis.

Smart businesses are likely to embrace the change and develop a winning formula to benefit from this change whilst potentially saving overheads by, for example, cutting down costs by reducing workspaces.

3. Risk management:

People are likely to fear returning to work without effective social distancing and health measures for obvious reasons.

Businesses offering support in risk management and health sectors are likely to see a rise in business opportunities as we acclimatise to the new risks posed by the virus.

4. Dispute resolution:

As with the 2008 recession financial crisis which fuelled a steep rise in regulatory investigations and other disputes, the COVID-19 crisis is likely to follow suit. The crisis is likely to have induced contract defaults and there will be unpaid claims that will need resolution.

If you need to discuss any concerns about potential disputes, whether arising out of COVID-19 or not, please contact our Dispute Resolution team.

5. Insolvency and Restructuring:

Put simply, distressed businesses are likely to need assistance in terms of rescues. Law firms, accountancy firms and other businesses offering business recovery services are likely to shift resources from less busy disciplines to those departments and teams offering recovery services, in order to meet demand and help struggling businesses.

If you need advice in relation to any insolvency or business recovery steps, our Insolvency team is here to help.

6. Robust supply chains, resilience and reshoring:

It’s likely that we will see a trend in businesses transitioning from global supply chains and moving production closer to home.

There was already incentive to do this in following the US and China trade war which led to many businesses reconsidering their options.

However, many businesses which rely on supply from foreign countries such as China may wish to consider utilising suppliers that are closer to their customer bases. They may consider using suppliers that have robust contingency planning measures and surplus capacity to withstand future crises.

If you need advice in relation to terminating or renegotiating your business contracts, putting new contracts in place as you change your suppliers, or reviewing your contracts and processes, our Commercial team will be able to assist you.

7. Mergers and acquisitions:

Whilst lockdown has seen European mergers and acquisitions at their lowest in a decade, it is expected that as lockdown eases and businesses get back on their feet, stronger businesses will look to expand their market shares benefiting from distressed asset sales, purchasing their suppliers and/or their competitors.

If you would like to discuss potential business expansions or sales, our Corporate team is here to help.

Falling

8. Business travel:

A combination of climate change concerns and businesses embracing technology is likely to result in a downward trend in business travel which is likely to negatively impact the transport sector.

9. Office space:

Flexible working could render big, expensive office spaces redundant. Some customers may require face to face meetings and so the need for office space is unlikely to completely disappear, however, many businesses may consider downsizing in order to save costs following the crisis.

10. Oil:

It is no secret that the oil industry has suffered for a while, however, the COVID-19 crisis has dealt it a further blow, leading many to question whether it will ever recover. Faced with plunging profits and a decrease in demand, the oil industry may well have passed its peak.

11. Luxury goods:

With an international increase in unemployment level and/or decreases in wages, the luxury goods market is expected to suffer anywhere between a 20%-40% contrition, especially as China (which accounted for approximately 90% of the growth in that sector) and Italy (where the majority of luxury brands are based) were some of the hardest hit countries. Needless to say, in the current market, few will prioritise purchasing a £7,000 Chanel bag.

Although accurately predicting the business in the landscape of today’s market is not possible, what is certain is that COVID-19 has brought about changes to how we operate business and many of these emerging trends are likely to continue in the near and possibly far future.

If you have any questions regarding  any of the above, please email or call our Corporate and Commercial team on 0113 207 0000.