Andrew Griggs BA FCA CF
- Senior Partner and Head of International
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In the latest of our Looking ahead series of articles, Andrew Griggs explores what impact COVID-19 could have on the future of globalisation.
We need a global economy more than ever to tackle the biggest challenges the planet faces, but it will be one underpinned by a strong sense of purpose and behaviour in society.
The rumours of the demise of globalisation were rife well before the outbreak of the Coronavirus pandemic. The 2008/09 financial crash raised questions over the impact of a globalised economy and has, arguably, created a platform for increased nationalism and inward-looking politics across the globe.
We have seen this in the US with the election of President Trump and the America First agenda and, much closer to home, our decision to leave the European Union. There are many parts of society that have seen globalisation take away jobs and opportunities leaving them disenfranchised.
And where politicians play to the crowd, a villain is often needed, and those villains are companies or countries that are on the rise, successful, or secretive. We have, for example, seen in recent months questions asked of big technology companies in the US, and a retreat from Chinese companies Huawei and TikTok.
In March this year, international trade all but ground to a halt. The World Trade Organisation reports a fall in international trade of a third, effectively taking the world back a decade. Its effects are only now being truly felt.
International trade will return, albeit slowly. Fears of a resurgent virus, a second wave, will hold back international travel, creating fertile ground for international squabbles over quarantine rules and the increased threat of trading tariffs. Some sectors, aviation and tourism for example, may take a decade to recover.
Governments around the world have pumped enormous sums of money into domestic economies to support vulnerable businesses and individuals. But that support cannot continue indefinitely. Unemployment rates around the world are rising, and it will not stretch the imagination to see governments favouring the domestic businesses it has supported over the past six months at the expense of international or overseas companies.
Or is it.
A global pandemic needs a global response, and we have seen technology and life science businesses collaborate to deliver the PPE needed in the immediate stages of COVID-19 and then further to work on a much-needed vaccine. It is unlikely that no one country could achieve this on its own.
And COVID-19 is not the only global threat to our ways of life. Climate change, child poverty and other areas of illness, such as oncology, all represent significant threats to our way of life and can only be tackled at a global level.
At a personal level there is still the strong desire to travel and take overseas holidays, and it is big business. In 2019, the World Travel and Tourism Council, a trade body, found that tourism generates US$8.9 trillion to the world’s GDP supporting over 330 million jobs. Our desire to explore our amazing planet will not disappear.
Just as we enjoy travel, so too do we love to shop. Whilst the return to the high street may be slow, the rise of online shopping gathers pace. Many online retailers are global businesses and those that operate at a domestic level will be backed by global technology and financial services businesses.
However, it is likely to take on a very different feel, with different industry sectors responding in very different ways.
Take manufacturing. China, once the factory of the world, is now seen as an expensive option. Manufacturing is being near-shored rather than off-shored. The demand for high value and highly technical manufacturing remains strong and grows at pace in the UK. Tasks, as opposed to the whole production cycle, may be offshored to remain local but coordinate globally.
The service sector is likely to respond in a different way. With staff and office footprints the primary overhead, it is likely that more services will be outsourced to cheaper jurisdictions. It is something already seen in the accountancy and IT industries, with compliance and programming functions sitting in India. Such a move requires greater global collaboration.
Our recent Trading internationally survey found that UK businesses are planning for increased international trade over the next 12 months. Whilst 55% of businesses have cancelled or delayed plans to export to overseas markets or trade internationally as a result of the COVID-19 pandemic, 51% say their view on the importance of international trade has increased.
It should also be remembered that a globalised economy has done more to lift some of the poorest nations and their people out of poverty.
Yet it is clear that there is more to be done, and I believe purpose driven businesses will become even more important to customers, consumers and our people who work within organisations. Businesses that combine profit with purpose in equal measure will drive the global agenda.
That will require businesses to not only take responsibility for their own actions, but those of their entire supply chain. The pursuit of profit to the detriment of our planet and its people will be increasingly unacceptable. Organisations will be increasingly noticed for their behaviour in society.
And that may result, as The Economist calls it, in the rise of ‘slowbalisation’.
We are hosting a series of practical webinars helping businesses to look ahead and plan for a post-COVID-19 future.
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