Andrew Griggs BA FCA CF
- Senior Partner and Head of International
- +44 (0)330 124 1399
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The business landscape and the way we work has in just a few short months changed beyond recognition. But don’t think the way we work now is the ‘new normal’. The COVID-19 pandemic has yet to run its course and the impact of Brexit is only just beginning to be felt.
We are in a ‘pre-new normal’ phase and that will mean a continuous re-evaluation of the way we work and the structures that support businesses before a new normal settles.
We do not yet know what tomorrow will look like, when exactly that tomorrow might be, or what kind of world will emerge. But we do know businesses are more likely to have to collaborate to a much greater degree to better understand that world.
Take, for example, economic recovery. The UK came out of the first lockdown fast – the so-called ‘V-shaped’ recovery. It is likely we will do so again when we emerge from this third lockdown. Economists call this a ‘W-shaped’ recovery.
But is that recovery more likely to be ‘K-shaped’, with some sectors recovering at a faster rate? Just as the Roaring 20s followed the horrors of the First World War, will the leisure, hospitality and travel sectors recover faster than others, for example, retail? Are we about to witness once again the Roaring 20s when COVID-19 restrictions are eventually and finally lifted?
Whilst the demand from relief of the tedium of recent lockdowns is undoubtedly there, that does not mean behaviours adopted over the past 12 months will disappear. The future of work and retail are likely to be irrevocably changed.
The ease of online shopping that was gathering pace well before the COVID-19 pandemic is now a staple for households across the country. Barely a day passes without the ubiquitous white van man making deliveries. It is difficult to see us reverting to the traditional Saturday afternoon trip to the shops, having to pay for parking, queuing at the checkout and struggling with heavy bags back to our cars.
But today’s online retail shopping experience is far from perfect and will continue to evolve. The fun, ease of returns, online financial security and, of course, carbon emissions, are concerns that have not yet been fully addressed. Online retail is still in its pre-new normal phase.
And so too is our place of work. Many of our homes are not suited to home-working all of the time. There is a strong desire to see some return to office-based working from both employers and employees, but perhaps not five days a week.
That will have a profound impact on office space and the business parks and city centres in which they are located.
Office space will change from being a ‘work factory’ to one of learning and development, collaboration and entertainment. The Square Mile trophy offices are unlikely to disappear, but they may well become smaller, with a network of hub offices across the country. Redundant retail space may yet find a new home.
Employees will demand a greater choice of when and where to work, with some wanting to work entirely from home or in an office, with others, perhaps the majority, choosing a hybrid approach. It will be difficult for employers to refuse these demands.
Changes in the way we shop and work, matched with the rapid advancement and adoption of technology will force governments to invest in essential infrastructure – roads, rail, and, importantly, fast and reliable broadband across the whole country.
The question remains whether government can afford this investment and the role the private sector can play? Again, we have yet to see what the new normal might look like.
And then there is Brexit.
Viewed through a global lens, Brexit is just but a minor blip in the global supply chain, albeit one that is felt a little more keenly in the UK and particularly here in the South East. Businesses in the UK, if not already doing so, needs to build resilience into supply chains through near-shoring, and multi-shoring and even re-shoring. Your accountants and advisers can advise you here.
Brexit may in fact help lift productivity in the UK and Europe as the threat of an economic expansionist China continues to be felt. Countries cannot afford to lose trade to an increasingly dominant China.
At a time when it is cheaper to ship goods from France to China than France to England it is entirely likely that China will recover from COVID-19 at a greater pace than the USA and many European countries, including the UK. This will allow them to help other countries around the world recover.
Trade sanctions and tariffs may appease voters but do not solve the problem. Lifting our own productivity levels will be the only effective remedy. For those businesses that have been hesitant about investing in digitalisation and robotic process automation there may never be a better time to take that leap of faith.
As we move into a new normal, we should expect, perhaps demand, that government ideologies and policies change too.
A considerable driver behind the increased wealth in the UK is as a result of rampant inflation on idle assets – for example, property, the stock market, and bonds. Some would argue that these assents do little to create entrepreneurial wealth and should be taxed.
But this should be done in a way that encourages a culture of equity and risk investment to stimulate economic growth. This can be easily achieved through greater tax incentives on investment in business or in R&D, or face having that wealth taxed.
I believe, post-pandemic, society will be more accepting of taxes targeted towards carbon producing products, emission taxes, and morality taxes. Putting aside the obvious – alcohol, tobacco and gambling – this might include consumption taxes with an increase on VAT or a tax digital sales and trades.
Taxes alone should not be a part of the country’s new normal recovery – the appetite for a return austerity will be unpalatable. Debt, as followed the first and second world wars, should be rolled forward across future generations, taking advantage of historically low cost to government.
We are on hand to help businesses and individuals navigate today’s pre-new normal, helping you prepare for tomorrow.
If you would like to discuss any of the topics explored in this article, please contact us.
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