What is the difference between a Depression and a Recession?

recession and depressionBoth a recession and a depression are characterised by an economic decline but the difference between them is down to the length of their duration with depressions lasting years.

An economy is defined as being in recession when there have been two consecutive quarters in which growth as measured by GDP (Growth Domestic Product) has contracted.

This is usually caused by a reduction in business activity and consumer confidence, such that businesses may start laying off employees and cutting back on production and on investment as their focus shifts almost entirely to their cash flow and balance sheet.

In the most recent recession, in 2008, the precipitating factor was a liquidity crisis that began in the USA where banks had lent what was perceived to be too much money on what came to be seen as risky mortgages on which borrowers then defaulted. This resulted in a loss of confidence in banks, which declined to lend to each other which in turn led to a liquidity crisis.

Recessions are much more frequent than are depressions, indeed, according to an article in Business Leader in March this year: “In the past 100 years, there have been dozens of recorded recessions (both national and international) – compared to just one depression in the same time period.”

The last depression was in the USA beginning in 1929 and lasting for a whole decade. While not strictly defined, a depression is characterised by very high levels of unemployment such as 25%, a dramatic fall in international trade such as by as much as two-thirds, and prices falling by more than 25%. They are also characterised by significant declines in stock market values and a large numbers of bankruptcies.

There has been some speculation that the Coronavirus pandemic could precipitate a depression given how much economic activity has ceased as a result of the lockdown rules imposed by many countries. However this is simply speculation and the short term nature of its impact is unlikely to be the sort of once in a one hundred years event that causes dramatic and long term economic collapse.

The IMF (International Monetary Fund) has warned that the situation could provoke a recession as severe as in 2008 but none of the serious pundits are predicting a depression.

In fact, some economists argue that a repeat of 1929 could not happen because Central banks around the world, including the USA’s Federal Reserve, are more aware of the importance of monetary policy in regulating the economy and will therefore step in with support and stimulus packages to forestall this.

 

The Phases for dealing with a pandemic involving Zoonotic diseases

dealing with a pandemicIn 1999 the WHO (World Health Organisation) devised a blueprint based on Phases for dealing with a pandemic, subsequently updated in 2005.

It set out six Phases, to provide a global framework to aid countries to prepare for a pandemic and plan their response.

The first three Phases cover animal transmission escalating to domesticated animals and eventually germs spreading to humans defined as a Zoonotic disease. These initial phases also deal with the preparation, capacity development and response planning activities, while the last three Phases deal with the response and mitigation efforts when a disease transmits from human to human.

Phase 4 deals with verified human-to-human transmission of an animal or human-animal virus and its ability to cause “community-level outbreaks”.  Phase 5 deals with the human-to-human spread of the virus into at least two countries in one WHO region and the sixth Phase is the Pandemic Phase where virus transmits from human-to-human in at least one other country outside the region identified in Phase 5.

These are relatively straightforward definitions, but how different governments, businesses and people react to them is another matter altogether.

As has been clear during the current Coronavirus Pandemic state-level reactions for dealing with a pandemic have varied widely both in the state measures adopted and how stringently they have been implemented, with countries like South Korea at one extreme imposing a strict lockdown and restriction on movement from fairly early on when there were just a few cases, to Sweden, which has imposed relatively few restrictions and no lockdown.

However, the disparity in various state reactions to dealing with a pandemic has arguably informed the way both citizens and businesses have reacted. In the UK much of the initial focus was on the economic impact with the Chancellor introducing a wide range of financial support measures for both businesses and employees. However, some argue that the initial infection control was not as stringent as it might have been.

Scientists at Harvard university have mapped the behaviour of people in response to a Pandemic and also identified similar Phases of reaction to those set out by the WHO.

Initially, their research found that in the case of a severe Pandemic, the initial reaction by people when they become aware of a risk is to overreact. They become hypervigilant, pause “normal” behaviour, and “take precautions that may be excessive, may be inappropriate, and are certainly premature” – such as panic-buying toilet roll and other supplies as happened in the early stages in the UK. This, they say, is not the same as panic.

The scientists argue that this is entirely appropriate early in such a crisis because it means people then become able to cope with the crisis.

However, the alternative reaction is denial or even anger and in the early Phases inaction as a response is counter-productive since people don’t take precautions. Examples include those, such as in Michigan, USA, who protested against lockdown measures.

Michigan epidemiologist Sandro Gales has identified five Stages of reaction to a major disaster: starting with self-preservation, moving through group preservation to blame setting, justice seeking and finally “renormalizing” which can mean adaptation to the threat.

These are similar to the five Stages of grief: denial, anger, bargaining, depression and acceptance as identified by Elisabeth Kübler-Ross who also found that a lot of people get stuck in one phase or another and some take a long time to reach acceptance of the situation.

How well a country copes with a crisis, therefore, depends on how its leaders manage both individual perceptions as well as vested interests such as those of business. This is improved by radical transparency when they don’t know the answers but their honesty about what they do and don’t know and what they are doing will help reassure everyone that they are doing their best.

The fact is they will make mistakes but so long as they make the best possible decisions based on expert advice and the information available then they will convey confidence that they will eventually find a way through the crisis. There is no doubt that many with the benefit of hindsight will seek to hold them to account but there are lots of armchair warriors and very few leaders who stand up and take difficult decisions.

Understanding and managing the different Phases of a Pandemic and the different stages of reaction to a crisis are particularly important as they inform what messages to convey, where people may misunderstand messages such as when restrictions, as now, are being eased while at the same time there is a need for maintain a level of vigilance.

Perhaps we shall know the Pandemic is over in UK when we see the House of Commons packed with MPs given that so many are classified as vulnerable being over 70.

 

Potential Coronavirus pandemic business winners and losers

winners and losers in business after lockdownGiven the slight easing of Coronavirus-related restrictions a week ago, some businesses are in the very early stages of preparing to return to “normal” but which businesses are likely to emerge as the winners and losers in the future?

The Insolvency Service is now publishing its figures monthly and the April figures were released last week. They reported that “numbers of companies and individuals entering insolvency in April 2020 broadly returned to pre-lockdown March levels for most insolvency types” and their figures showed that total company insolvencies in April 2020 had decreased by 17% when compared to April 2019, with a total of 1,196 company insolvencies of which the majority were CVLs (Company Voluntary Liquidations). These numbers suggest no influence in insolvency from Coronavirus yet.

The figures come with a warning, however, that the operation of courts and tribunals had been much reduced, HMRC had reduced enforcement activity and there were likely to have been delays in documents being provided to Companies House by insolvency practitioners.

There is some illuminating data from Cebr (Centre for Economics and Business Research) which showed lost output figures, which include 50% in construction, 58% in wholesale and retail, 79% in accommodation and food services, and 81% in arts, entertainment and education. Communication and information, however, is down just 7% and professional and scientific activities are down just 10%.

Perhaps worse are the UK Composite PMI figures which are an indicator of health for manufacturing and service sectors and reported 13.8 in April, down from 36 in March which in turn were down from 53.3 in January. A reading of above 50 represents expansion and below 50 represents contraction where the lowest figure in the last three years was 49.2 in July last year when industry was gloomy about Brexit.

Of course, there is a long way to go before the picture becomes any clearer and the above is just a snapshot at a specific point in time.

Nevertheless, there are some clues to possible future businesses winners and losers and some of this depends on how deep-rooted the changes are in people’s behaviour as we emerge from the crisis.

Clearly, the lockdown has particularly affected the travel, holiday, retail and hospitality sectors as well as theatres, cinemas and the like. The question is whether these will be able to survive for much longer despite the various financial support packages, especially when they still have rents and other overheads to pay.

Similarly, commercial landlords may be affected as it has become clear that many businesses can operate with employees working remotely. According to the BBC last week “Many companies are struggling to pay the rent with 63% collected within 10 days in March and early April compared with 94% a year ago.” It also reported “Office and retail landlord Land Securities has said less than 10% of its office sites are being used as people work from home. This is unlikely to lead to a closure of 90% of offices but it highlights scope for huge cost reduction by businesses

In the meantime, such a rent burden is a major factor for the survival on many businesses and most likely will result in many companies going bust.

Another potential longer-term loser may be the cruise industry. Will people feel comfortable taking holidays on a large ship in a confined space in close proximity to hundreds of others?

While there may eventually be some recovery in the travel and holiday sectors once countries open their facilities and airlines are permitted to resume operations, the question is whether they will ever return to their pre-pandemic volumes since this will dependent on consumer confidence as well as affordability given the likely increase in travel costs and the fact that many people will lose their jobs.

To an extent, also, there is a question mark over the viability of airlines if they have to introduce some social distancing measures and cannot cram their cabins to maximum capacity.

The weaknesses that have been exposed in the global supply chain may also have a negative impact on freight transport.

But this last gives a clue to potential future winners among the business winners and losers.

It is possible that manufacturing may be brought back to UK and more stock will be stored here as a result of the exposed supply chain issues, which may well boost various types of local production and by extension the construction industry which will have to build the greater capacity that will be needed. Indeed, this in turn may benefit those parts of the country that were devasted by the closing down of industry during the Thatcher years.

Similarly, the UK’s pharmaceutical industry and research may become a winner as the search for a Coronavirus vaccine continues, not to mention worries about its availability if one is ever devised, and the Government has already announced £93m to help speed up the construction of a not-for-profit Vaccines Manufacturing and Innovation Centre in Oxfordshire.

The lockdown has also exposed the amount of pollution that had been generated previously and may bring an upsurge in greener energy production.

According to the Guardian last week, “Britain’s biggest green energy companies are on track to deliver multibillion-pound windfarm investments across the north-east of England and Scotland to help power a cleaner economic recovery.”

Another loser is likely to be the car industry as I cannot see as many cars being needed in a future if more people work from home and unemployment rises.

Finally, given the exhortations for people to find alternative ways of getting to work, such as cycling or walking, as lockdown is eased it is possible that another winner could be bicycle manufacture and the retail outlets that provide both bikes, accessories and aftercare.

There will undoubtedly be business winners and losers but the scale of fallout will only emerge when the future becomes clearer. The above are just some preliminary suggestions.

 

How will work patterns change once Coronavirus restrictions have eased?

work patterns changingWhen working life resumes properly once Coronavirus restrictions have eased people may find that their work patterns are substantially different from previously.

While, sadly, some SMEs will not have survived others may find that their agility and perhaps new innovations introduced during lockdown will have given their businesses a new lease of life for the future.

Those who have shown consideration for their employees, suppliers and customers will have built up a level of goodwill that will stand them in good stead for the future.

I shall examine in another blog those businesses, sectors and processes that may benefit from the changed landscape but in this blog I am focusing on the likely changes to business work patterns and the relationships between employers and their stakeholders.

Because, of course, employers are also people, they will have discovered that they and their families are no more immune to the health risks of the pandemic than any of their employees.

This may well result in an increase in empathy between people at all levels and result in closer and more considerate working relations.

Indeed, an article in Forbes highlights this among the many beneficial changes in work patterns likely to be the result.

It identifies key positives that could result including increased support from businesses for employees: “Companies have been forced to consider employee wellbeing more holistically—in terms of not only the physical, but also mental and emotional wellbeing.”

Employees may find that their employers are much more aware of their different family responsibilities and more understanding of the ways family and friends are critical to life and happiness.

At a more basic level, if employees are to return to their workplaces, their health and workplace safety will be a high priority, suggesting an end to hot-desking, for example, leading to safer workspaces.

Desks could become spaced out, partitions could go up, cleaning stations stocked with hand sanitizer and antibacterial wipes will become the norm, and workers may seek out new places for focused work.

At a more basic level, safe travel to work may mean more people cycling or walking and less use of public transport, which is something that employers may have to take into account.

Dealing with the crisis, Forbes argues, could result in more effective leaders, especially those who “communicate clearly, stay calm and strong, demonstrate empathy, think long-term and take appropriate decisive action.”

Arguably, it says, relationships with teammates will also be stronger and closer after people have faced a common enemy.

New work patterns will also allow for more diversity and flexibility where businesses have discovered that it is perfectly possible to run effectively with employees working remotely, perhaps also having discovered new skills and strengths among their employees as a result.

Similarly, the new “normal” may have made it clear how few physical meetings are actually needed compared to pre-pandemic working life. This may well lead to employees’ work patterns involving far less bureaucracy and offering more opportunities for them to innovate and suggest ideas for future development.

It may also lead to greater use of new technology based on the new skills learnt while in isolation lockdown at home.

Savvy SME owners will be those who assess the good things that have come out of the crisis and incorporate them into more flexible work patterns for those valued employees who have stuck by them in difficult times, to the benefit of both the business and all those who work in it.

 

Is it likely that there will be a permanent change in people’s behaviour post lockdown?

post lockdown behaviourHow people’s behaviour might change post lockdown is something that may be crucial for SMEs in planning ahead.

While it may be a long time yet before the Covid-19 lockdown is removed completely, following the Prime Minister’s briefing at the weekend, the process of relaxing the lockdown restrictions is now underway.

Despite the financial support that has been provided to businesses and workers it is becoming clear that we shall not return swiftly to a pre coronavirus level of business for some time and before we do many businesses will not survive, especially if the recovery takes a long time and the post lockdown landscape is substantially different.

Much depends on businesses’ ability to recover, on how long it will take them to recover and on how much people will change their behaviour as a result of the crisis.

A key to business survival is communication by leaders to deliver the information and direction everyone needs when a large scale crisis hits. While they are unlikely to know the answers, leaders reassure everyone by sharing facts and the rationale for decisions in a way that allows them to change direction as the crisis unfolds and more information is available. Essentially they need to be agile.

A PwC investigation of leadership behaviour during a crisis suggests “When disaster hits, an all-hands-on-deck, everyone-to-the-rescue reaction is understandable — but such good intentions will most likely lead to a chaotic response.”

The website emergency cdc emphasises the importance of clear, simple messaging from the start: “Because of the ways we process information while under stress, when communicating with someone facing a crisis or disaster, messages should be simple, credible, and consistent.”

Messages should be repeated, be supported by a credible source and be specific, it says, and should offer a positive course of action.

To this extent, this is exactly what the UK Government has done with its repetition of the simple message “stay home, protect the NHS, save lives” and its daily briefings reiterating the message as well as giving updates on the numbers of cases that justify the advice.

That it has been doing its job, perhaps almost too well, is indicated by the findings of an Ipsos Mori poll in early May that “two-thirds (67%) of Britons say they will feel uncomfortable going to large public gatherings, such as sports or music events, compared to how they felt before the virus.”

However, things become more difficult as the messaging changes, especially when it becomes more nuanced as we are seeing with the change of message to allow for a partial relaxing of the lockdown rules.

The proposed new message “Stay alert, control the virus, save lives” has already been rejected by the UK’s devolved governments (in Scotland, Northern Ireland and Wales) as being too vague as well as being perhaps premature given the continued high numbers of positive diagnoses being reported. Indeed, the Evening Standard last night reported confusion over the “back to work for some” message that led to commuters being packed on the London Underground.

The packed tubes may be linked to other reports that the country’s transport infrastructure is operating at only 10% of its former capacity post-lockdown. The biggest four trades unions have united to warn that people should not be going back to work without adequate safety measures in place and despite the troubles in the High Street retail sector, the British Retail Consortium has also warned against allowing shops to open without clear and adequate safety and social distancing rules.

In addition to any return to work message, different age groups are interpreting the message differently with many young adults going out to meet each other while older age groups remain at home.

The longer that the return to post lockdown normality takes then the more likely it is that people will change their behaviour permanently.

It is becoming clear that it will take quite a long time before everyone will do all those things that they did before Covid-19 appeared so a return to normal is a long way off.

Therefore, it is highly likely that there will be a permanent change in many people’s behaviour post lockdown.

Is it time to introduce more resilient business systems for post-lockdown?

business systems need to become more resilientJust in time (JIT) business systems of supply for everything from supermarket stocks to manufacturing components and raw materials have been the dominant model for some years.

While it offers huge benefits, including less storage space needed and less capital tied up in stocks, the disruption caused by measures to contain the coronavirus pandemic has revealed some major flaws in the model.

When such an integrated global supply chain breaks down as has happened recently the impact on business is considerable where shortages of stock have arisen due to road, sea and air freight grinding to a near-halt.

Indeed, JIT relies on many different components arriving on time often from myriad sources such that any one item can bring all production to a halt. The current situation has magnified the vulnerability since all the different supply chains will need to be fixed before production can resume..

Systems resilience describes a system’s ability to operate during a major disruption or crisis, with minimal impact on critical business and operational processes and the pandemic has revealed that in many cases it has been sadly lacking.

While many businesses have ceased to operate as a result of the pandemic, thus reducing demand for some categories of stock, there will come a time when those that survive will need to resume, and where different business systems may need to be developed to make the production more resilient and perhaps protect it from future similar shocks.

So now is the perfect opportunity for businesses to consider how to make their business systems and models less vulnerable in the future.

Firstly, this will take a change of mindset away from profit at all costs towards sustainable profits that factor in risks and resilience rather than simply focusing on cost reduction. The profit at all costs mindset has many short comings, not just vulnerability but safety also and was a causal factor behind the Piper Alpha Disaster that led to 167 oil rig workers dying.

It is also interesting that the US investor Warren Buffet, of Berkshire Hathaway, has sold his firm’s entire holdings in the four major US airlines in the belief that the post-pandemic world is likely to be very different, saying “We will not fund a company … where we think that it is going to chew up money in the future.”

Buffet is widely respected for his investment skill over the decades, so it is worth paying heed to his decisions.

As part of the longer-term thinking about business systems, companies will also need to improve their balance sheets to help withstand future shocks like the banks have been forced to do since the Global Financial Crisis of over ten years ago.

However, business should also, in my view, consider the benefits to be gained from nurturing relationships with reserve suppliers as well as perhaps maintaining larger reserve stocks of those materials or parts they need to sustain productivity during interruptions to supplies.

It may be that this will mean larger onshore storage facilities than they have been used to, but while this might mean lower profits and lower dividends for investors in the shorter term, it will provide greater security for the business and its owners in the medium and longer term.

The so-called “new normal” is likely to be very different for businesses and economies as the restrictions on movement are gradually lifted and it is likely to be a considerable time before we get there, but arguably this is an ideal time for businesses to rethink their business systems and prepare for a more sustainable future on many levels.

 

Has the Coronavirus lockdown exposed the weaknesses of many business models?

business models weaknesses exposedRobust business models should be based on a clear proposition with a plan for profitable activity.

Each model is essentially a road map of how money will flow from activity.

Business models are a financial expression of the company’s business plan in a way that summarises the strategy, funding, organisation and processes used to achieve objectives.

Given that unforeseen roadblocks and successes will occur, business models should be reviewed regularly and adapted depending on new circumstances and new information.

Tools for refining the model are also useful, such as a SWOT analysis to identify Strengths, and Opportunities to be exploited and Threats and Weaknesses to be avoided.

While arguably, few businesses and especially SMEs, will have had plans to cope with the coronavirus pandemic, it has affected most businesses in ways that were not foreseen. The lockdown has also exposed how little resilience they may have built into their business models to protect from such a crisis.

To a large extent, the situation has exposed a lack of financial resilience but it has also highlighted a lack of character among leaders. The behaviour of leaders in particular will be remembered by those who deal with them, whether employees or other stakeholders.

It is alarming how many directors have been paralysed by the situation and not taken calls or failed to answer with awkward questions, often hiding from the fact that their problems will not go away.

While leaders may not know the answers, they should be visible, they should be looking for the answers and telling everyone what they are doing to find them.

The government is a good example of leaders trying to communicate, I leave it you to decide whether or not their messages are believable or they are doing a good job of leading in a crisis.

James Ball, writing in the Guardian, provides an excellent illustration of two examples of flawed business models, Uber and Deliveroo. At a time when it might be expected that their services would be more in demand than ever as people are required to stay at home and preserve social distancing, he points out that they are not structured to make a profit, but instead rely heavily on growing rapidly, not growing sustainably.

“This is the entire venture capital model,” he says. “….This is a whole business model based on optimism. Without that optimism, and the accompanying free-flowing money to power through astronomical losses, the entire system breaks down.” Indeed, this reinforces my view that the Silicon Valley approach to venture capital has parallels with a giant Ponzi scheme by using new investors’ money to provide returns to early backers.

Will Hutton also looks at business models and considers how the economy might recover from the lockdown in a more sustainable way: “equity investment: the venture capital and private equity industries must transmute themselves from their default role as predators and asset-sweaters to long-term, patient investors”.

I believe the short-term, profit-driven motives of early investors looking for a return before their investment makes a profit is a flaw in most companies’ business models and has contributed to the weaknesses that have been exposed by the measures that have been needed to contain the pandemic.

Some might say ‘buyer beware’ in a world where animal spirits and greed drive behaviour but this argument exposes a lack of character among leaders who should show courage and moral fibre.

Perhaps it is time for a bit more moderation and longer-term thinking in the construction of business models for the future.

The latest insolvency statistics for the first quarter of 2020 don’t tell the whole story

insolvency statistics not the whole storyAstonishingly given the news coverage of a financial fallout due to the Coronavirus pandemic, the latest insolvency statistics for Q1 January to March 2020, show a decrease both when compared to the previous quarter and to the same quarter in 2019.

The figures, published by the Insolvency Service yesterday, showed a total of 3,883 company insolvencies with the majority again being in CVLs (Company Voluntary Liquidations).

This was a decrease of 10% compared with the last quarter of 2019, October to December, and of 6% when compared to January to March quarter of 2019.

Construction continued to have the highest number of insolvencies, followed by the wholesale and retail trade and accommodation and food services.

While these insolvency statistics cover the period before the lockdown due to the Coronavirus pandemic was imposed a drop in insolvencies is still surprising given that economies in the UK and EU had been slowing in previous months.

There is more clarity, however, from the latest Begbies Traynor Red Flag alert figures published on April 17.

They reported their highest-ever numbers of businesses in significant distress at 509,000 with the impact of the lockdown showing 15,000 more businesses in significant distress (3%) compared with Q4 2019. The vast majority of these, they found, were SMEs with under 250 employees.

There is even more concern in the Red Flag figures for businesses in critical distress, which Begbies Traynor regards as a precursor to falling into insolvency. They reported a 10% increase in the last quarter alone, although, as they note, “creditors have been held back from taking court action due to the lockdown”.

The most notable increases, they report, are a 37% increase in bars and restaurants, 21% increase in real estate and property, 11% increase in construction and 8% increase in both general retail and manufacturing.

All this is despite the various financial support measures of grants and loans announced by the Chancellor who has sought to help businesses survive the pandemic.

Having said that, loans need to be repaid and many are concerned about the future prospects for businesses and for some industries that may take some time before they return to normal, not least the Banks who understandably might be reluctant to lend to those who are unlikely to repay their loan. This might explain the numbers of businesses that have been turned down.

In the middle of an unprecedented situation like the current pandemic it is difficult to draw conclusions from trends or make meaningful assumptions about the future number of insolvencies but there is no doubt they will rise significantly.

Historically the rise has been an indicator of the country coming out of a recession although most recessions have been ‘V’ shaped where some are predicting a ‘U’ or even an ‘L’.

Clearly much will depend on for how long the lockdown continues and we should prepare for many companies, particularly those relying on travel, events, hospitality and an already-struggling High Street, to disappear altogether as Warehouse and Oasis have most recently done.

Much will also depend on consumer confidence and spending power – and how many people have lost their jobs but clearly economic and business recovery will be prolonged and painful.

 

Time for a rethink? The global supply chain and short-term thinking

global supply chain rethinkA time of crisis, such as the current Coronavirus pandemic, exposes the weaknesses of inter-dependency and systems and in this case, the global supply chain.

There is perhaps also no better time to review things and perhaps change from the short term thinking that seems to have dominated economics and businesses, especially in those economies like the USA and UK that rely heavily on the purchase of foreign goods.

It is clear that it will be a long time before life returns to normal and it is not yet clear what that “normal” will look like.

In the previous “normal” it was possible to rely on adequate supplies of raw materials for the production of various types of goods, such as food stocks on supermarket shelves.

But one of the first signs of the disruption to come was the rapid emptying of supermarket shelves as people panicked and bought large supplies of various items, for example toilet paper, hand sanitiser and pasta, in anticipation of the coming lockdown.

Another sign of disruption is the price of oil which has plummeted leaving tankers around the world mooring off-shore waiting for prices to rise before offloading their oil.

There has also been the saga of medical equipment such as ventilators to treat those hospitalised seriously affected by the virus and of personal protective equipment (PPE) for medical workers treating them.

Similarly, as various crops were ripening, it became clear that there might not be enough seasonal workers available to pick them, as many farmers had been relying on seasonal workers coming into the country from Eastern Europe.

All these examples provide lessons in the inter dependence of supply chains that support a “just in time” model of global business.

As Larry Elliot wrote in a Guardian opinion piece in mid-April: “The past 30 years have seen global markets – especially global financial markets – increase in both size and scope. Long and complicated supply chains have been constructed: goods moving backwards and forwards across borders in the pursuit of efficiency gains”, meaning that capital flowed in and out of countries equally quickly and there was no thought of building any capital reserves.

In an era of weak growth since the 2008 global financial crisis, he says, “What this amounts to is a world clinging on by its fingertips, even in what passes for the “good times”.

The global supply chain, just in time model effectively did away with large, local warehousing attached to manufacturing units as much as to food stores. It relies heavily on a continuous supply of materials and ingredients being delivered by a well-functioning international and national transport system.

In the UK, particularly, the manufacturing sector has been shrinking for years as the economy has pivoted to rely more heavily on the tech and financial services industries.

The reasons for the decline in manufacturing are myriad but largely down to the long-term investment needed and short-term expectations of investors of a swift return on their investment.

The lack of planning for a rainy day has also been highlighted. This observation is not just of the UK government that has failed to invest in the storage of equipment supplies but it also applies to businesses that have not built up capital reserves and consumers who do not have any savings.

In fairness, it has also brought out the best of those many businesses that have adapted to survive through agility by quickly re-designing their business models and production lines such as those who are now producing hand gel or selling goods outside their shops, restaurants or pubs.

While a short blog cannot hope to analyse all the flaws of a global supply chain model in detail, it has become clear that there are vulnerabilities both to businesses and to national economies that rely on international suppliers and the short term thinking that has driven it.

The return to ‘business as usual’ that is increasingly being demanded may not be possible given how long social distancing may have to continue. How many businesses will cease trading altogether as a result and how many people will lose their jobs will be major factors when we get round to reviewing our trading relationships.

This could therefore be a good time for businesses, economists and politicians to give some thought to creating more robust, longer-term, and perhaps more locally-based systems for the future.

Five top tips for working at home efficiently and maintaining your mental health

remote working and mental health Many companies have adapted to the Coronavirus lockdown measures by asking staff to work remotely from home, but how do you do this efficiently and also protect your mental health?

Much as we love them, a prolonged period stuck in one place with our families can sometimes be stressful, especially if remote workers are combining working with home schooling their children.

Of course, another complication can be the facilities and space available at home, where cramped conditions can add to the stress of trying to work efficiently while staying healthy.

Here are some tips to help you maintain you mental health and efficiency:

  1. Discipline and routine are important: Creating and following a timetable of tasks and activities gives structure to the day, and on that note it is much easier to get into “work” mode if you can work at a desk or table and if you don’t do it in your pyjamas!

Lists are also useful, not least because if you break down your day’s work into tasks and complete them, there is a great deal of satisfaction and a sense of achievement to be gained by ticking items off when completed.

  1. Variety: You should include other activities and what psychologists call micro-lifts into the structure of your timetable. In the normal working day when you are going into work in an office, you may be in the habit of picking up a coffee on the way in, or maybe have a regular break for a few minutes at the coffee machine at work for a chat with friends. Don’t underestimate the importance of giving your brain a few minutes’ rest.

It is also important to take regular breaks from a screen if your work is mostly being done on a computer/laptop.

  1. A healthy diet: It is tempting to snack more when you are working from home, but this may mean that your diet is less healthy and that is not good for either your physical or mental health.  This relates also to the importance of having discipline and a routine that builds meal breaks based on a healthy diet into your timetable.
  2. Exercise and fresh air: These are also important for physical and mental health albeit they are restricted to the social isolation rules that allow for one hour of outdoors exercise per day. You would be likely to get that during a day at the office, by walking from transport to the office building or going out during your lunch hour. If you are working from home and have children with you, involving them is a great way of treating exercise as a family activity while at the same giving children the opportunity to burn off excess energy.
  3. Try to get at least seven hours’ sleep: Sleep is a major component of mental health and of working efficiently especially when in a time of crisis.

The secret of working at home efficiently is in many ways intimately connected with your mental health.

For many people this will be a new way of working and you may find that it takes a good deal of self-discipline and organisation to maintain your productivity, but if you follow the guidelines in this blog you will find that you can settle into a routine that enables you to carry out your work tasks as well as the other demands on your time that come from being in your home with family around you.