Future shock: how will Covid change the course of business? | Business

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Coronavirus has changed lives and industries across the UK, accelerating fundamental shifts in behaviour and consumption that were already on their way. Debates about home working, preserving local high streets and the ethics of air travel were bubbling away before coronavirus rampaged across the world, but the consequences of the worst pandemic in more than a century have either settled those arguments or boosted the momentum behind certain lifestyle changes. Here we look at how those debates have been changed – or resolved – by Covid-19.

Streaming will take away cinema’s pre-eminence

Coronavirus won’t kill cinema, but it will forever change the movie-going experience. This year the global box office is likely to be just a quarter of the record $42bn (£31bn) set in 2019 and UK cinema admissions are set to hit their lowest level since records began.

At the start of the pandemic theatre owners were confident that once the virus had been tamed, the blockbusters and their fans would return. However, Hollywood studios, fearful of empty seats making for box office flops, spied an unprecedented chance to bypass cinemas and make films available via streaming services. This has broken the sacrosanct tradition of months of big-screen exclusivity, outraging theatre owners who rely on that model to make their businesses viable.

Warner Bros has said its entire slate of 21 films, from Dune to The Suicide Squad, will debut on its streaming service, HBO Max, at the same time as in US cinemas next year. The same thing has already happened to Wonder Woman 1984, which was simultaneously released to US theatres and living rooms on Christmas Day. A precedent has been set over separating cinema release from streaming availability.

Cinema still has a role to play. The economics of blockbusters, which cost hundreds of millions to make and distribute, means films of such scale need the multimillion-dollar returns from the big-screen global box office. But in the future it is likely that movie fans will no longer have to wait endless months before streaming the latest blockbuster from their sofa. Mark Sweney

Should rail be nationalised?

The east coast mainline has been rescued by the state before, and now the whole sector has been de facto nationalised.
The east coast mainline has been rescued by the state before, and now the whole sector has been de facto nationalised. Photograph: Murdo Macleod/The Guardian

Rail was regarded as a privatisation too far even by Margaret Thatcher, before her Conservative successors went ahead in 1994. Then state spending on the industry vastly increased after Railtrack collapsed and the infrastructure behind it was brought under government control as Network Rail, although the franchise owners who operated the trains remained privately controlled.

Private train operators liked to take credit for the passengers who flocked back in record numbers; but most voters still backed nationalisation, polls showed. Even though a decade of intermittent franchising troubles showed reform was desperately needed, and the government had to step in twice to take over the east coast mainline, only Labour under Jeremy Corbyn gave a full-throated commitment to return the rest of rail into public hands.

But Covid-19 and lockdown restrictions meant passengers all but disappeared for parts of 2020. Following years of unresolved debate and inquiry over the best format for the industry, franchises were summarily scrapped overnight in March. Emergency contracts are more or less embedded until 2022: the industry now runs on Treasury cash, and is likely to do so for some time to come. British Rail may be history but nonetheless, by July the Office for National Statistics had reclassified the industry as, de facto, renationalised. Gwyn Topham

Do we need a third Heathrow runway?

Declining long-haul and business travel could remove Heathrow’s justifications for a third runway.
Declining long-haul and business travel could remove Heathrow’s justifications for a third runway. Photograph: Chris J Ratcliffe/Getty Images

At the start of the millennium the Labour government concluded expansion of Heathrow was the answer to airport capacity constraints, granting planning permission which was overturned by the coalition in 2010. After another commission re-examined all the options, a third Heathrow runway was again approved by MPs in 2018.

A legal challenge to the policy on environmental grounds was first rejected, then upheld on appeal, before finally being dismissed by the supreme court this month.

In the long term, the climate crisis arguments might indeed prove the most compelling. But for now it is coronavirus that has all but swept aside the arguments for expansion. At its peak, Heathrow was constrained to its maximum permitted movements: a plane taking off or landing every 45 seconds, and passenger numbers growing beyond 70 million a year only through bigger, fuller planes.

Yet November’s traffic figures showed only a tenth of the usual number of passengers passing through, leaving the airport using only one runway. Given the potential for a permanent decline in long-haul and business travel since the world turned to Zoom, the airport may struggle to present a compelling business case for expansion for some time to come. Gwyn Topham

The high street is in terminal decline

Debenhams collapsed into administration as the growth of online shopping quickens the decline of bricks and mortar retail.
Debenhams collapsed into administration as the growth of online shopping quickens the decline of bricks and mortar retail. Photograph: Luciana Guerra/PA

The tumbleweed bowled down high streets this year as home working supercharged the growth of online shopping, with Debenhams and Topshop-owner Arcadia among the big casualties. And the shift is clear. In the third quarter of this year, 27% of retail sales were online compared with 18% the year before, according to the Office for National Statistics.

The pandemic pressed fast-forward on the painful restructuring process of an industry where fewer stores are needed to meet the needs of shoppers in the internet age. With each year more clothing, homeware and food will be bought online. This will create jobs for delivery drivers and in warehouses but not in shops, which employ around 3 million people across the UK.

What will happen with these empty stores? Rents have fallen sharply as landlords adjust to the post-pandemic reality, and changed working patterns show how neighbourhoods can blossom when people live and work nearby. This creates opportunities for businesses with the right offer and cost base. For instance, empty department stores are being converted into flats, food halls and crazy-golf courses. The high street is dead, long live the high street – but not as we knew it. Zoe Wood

Working from home will replace office life

Google’s British staff will mix home with office working permanently.
Google’s British staff will mix home with office working permanently. Photograph: Bloomberg/Bloomberg via Getty Images

Technology rode to the rescue for British businesses when they had to send their staff home in the spring. High-speed internet, video-conferencing, chatrooms: everything required to work remotely was already widely available.

As a result, the year of working from home has generally been considered a great success. Banks are leading the drive for a permanent shift with Lloyds Banking Group and Barclays reviewing the amount of office space they use and Standard Chartered permanently shifting to flexible routines. Google and Facebook, which have substantial workforces in the UK, will embrace partial homeworking permanently.

But working from home isn’t without its challenges. The impact on creativity, loss of interaction and serendipitous conversations, and lack of support for younger staff, are all cited as good reasons to return to offices. Workers juggling childcare and their job, and employees living in cramped flats, have also missed their desks.

Nonetheless, it appears that home working has been a bigger hit in the UK than elsewhere. British office workers were spending an average of 2.7 days per week at home in November, according to the US bank Morgan Stanley, compared with 2.1 days in France and Italy, and slightly less than that in Germany and Spain. Research found that UK workers spent just over a third (39%) of their working hours in the office in November, lagging the European average of 56%. The trend looks set to continue, with UK employees expected to request flexible working for 2.3 days per week, more than in the other four European nations. Joanna Partridge

Renewables can provide the UK’s energy needs

A woman walking along a trail lined with wind turbines
UK wind power set a new record for generation in December, following a similar achievement for solar in June. Photograph: Ashley Cooper/Alamy Stock Photo

Any lingering doubt that the UK’s wind turbines and solar farms can provide a backbone for the electricity system were cast aside during the pandemic as renewable energy set new records through the year.

The collapse in energy demand following the lockdown of office blocks, schools and restaurants – combined with the UK’s bright, breezy weather – helped renewable energy make up almost half of all electricity in the early months of the year. New records for solar power and wind generation followed in June and December respectively.

Stephen Stead, a director at energy provider SSE, said the low electricity demand levels in 2020 “gave us an unprecedented peek at a future electricity market dominated by renewables – and we learned that we can do it”.

Wind and solar power will be able to play an even greater role in the future as investment in battery storage and flexible energy use becomes the norm. But in 2020 renewables proved they are already prepared to exceed expectations. Jillian Ambrose

Cash is (eventually) doomed

Contactless payments have caught on, after fears that cash could transmit the coronavirus.
Contactless payments have caught on after fears that cash could transmit coronavirus. Photograph: Chesnot/Getty Images

The move to cashless payments accelerated this year, partly because so much spending moved online, and partly because of fears of infection through notes and coins. The contactless limit was raised to £45 and many outlets went cash-free.

According to the ATM provider Link, in the first full week of the spring lockdown withdrawals fell by 57% in value compared with the same week in 2019. Numbers went up as restrictions were eased, but by October the value of cash withdrawals was still down by 30% year-on-year.

However, throughout the year there have been queues outside banks, and the Bank of England has reported that the value of notes in circulation has increased since March, to approaching £80bn. In the days prior to November’s lockdown, cash withdrawals surged.

There is still a core of people who use and depend on cash, and holding physical money seems to be a safety measure for some. Early on in lockdown, a Link survey found 14% consumers were keeping more cash at home in case of emergencies. The decline of cash as a payment method has been speeded up, but there is still a long way to go before we give it up. Hilary Osborne



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