How Does this Pandemic Compare to Past Recessions.
Most of us will remember times when the economy took a dive. In this two part article, our CEO Simon Blair explores the effect past recessions have had on the economy and compares them to the pandemic today. To begin, here is a handy timeline.
1989 — The Housing Crash
This was a terrifying beauty where unemployment soared and interest rates screamed to over 16%. We saw relentless lines of people handing their house keys back to their banks in the knowledge that they simply could not afford to cover their mortgage costs. This was a recession that was unrelenting and utterly unforgiving in its insatiable mission to destroy everything and everyone in its path. For me, I think of this recession as the purest downturn that I have witnessed (albeit more the fallout from it as I was still at school!) as it touched every single person and it was allowed to follow its natural path without human, government or banking interference.
Dot com Bubble Bursting — 2001
We then move onto the first of what I am sure will be many recessions that are triggered by .com. This was a fairly restricted downturn, largely affecting one industry that was and continues to grow at the most alarming of rates, and in the modern-day we have seen the growth of seed-funded companies that often get sold for vast sums when actually they don’t make any material profits. Whoever came up with the phrase ‘everyone knows that tech firms only make money after 5 years’ either deserves a slap or a high five; tough to choose which one though. Just to be clear about my view here, there is absolutely no doubt in my mind that the future of technology as an industry is limitless and it will be one of, if not THE leading industry of the future, to surpass all industries. We had the industrial revolution and the late part of the 20th Century and the early 21st Century will be known as the technological/digital revolution many years from now. The journey will not be straightforward but it will be a hell of a ride.
The Banking Crisis — 2008/2009
It feels like only yesterday that on a fairly bright morning in 2008, the news powered throughout the world that Lehman Brothers was going down. The financial ripples that gathered momentum like a mighty tsunami just kept on coming and finally, again we realised that the party was over. Actually, as it turned out that with a modern day magic trick called ‘Quantitative Easing’, the party wasn’t over but simply suspended. No doubt we all had a torrid time of it and I myself was made redundant over this one, but it really didn’t feel like it had the mass destructive impact of other recessions as it was kept primarily to the financial industry. If you compare the human impact to that of the late ’80s this one really wasn’t at the races. For sure the money poured out of the banking system but other than a few tough years, the human effect was limited but it certainly created a modern breed of banker haters.
The Pandemic — 2020
Clearly, it is impossible to allow history to judge this downturn as we are very much in the early stages of it but already we are again universally being told that this is ‘the worst recession of our lifetime’. For now, I am prepared to reserve judgment on this and I seem to recall hearing the exact same claim from people apparently in the know throughout previous downturns however, perhaps one big difference between this impending recession and those that have gone before it, is driven by something so utterly unpredictable, more often than not feeling like a recession with no beginning, middle or end. Amusingly, they were probably the same people who previously felt that we had risen above recessions and as a positive irony, what has become clear is that certain bubble gum views from the WeWork generation that ‘this time it is different’, actually it transpires that this time it isn’t different at all and this experience will certainly drive some very important lessons around the idea of hard work and perhaps even humility. What we do know is that many people don’t learn from previous recessions, however, boom and bust cycles make the world go round and no one person is able to change that fact, not even Jeff Bezos!
Would we have had a downturn anyway?
Perhaps the big question to debate is whether we would have had an economic collapse if Coronavirus had not entered our lives? Of course, we will never see that timeline, but personally, I believe there would have been another trigger. Looking back, the markets felt overextended and signs were clearly there. This could be seen in abnormally low-interest rates, low unemployment, the true rate of inflation being too high, and far too many zombie companies being in circulation and not contributing to national GDP. Actually, when you think about it, the party had to come to an end and the catalyst of COVID, albeit tragic on a human level, has triggered the most natural of corrections. However in the UK with all the bailouts being given by the Government perhaps some of those companies that would have gone bust before the pandemic are being kept alive for that bit longer but it’s only delaying the inevitable, originally the end of October 2020 and now until the end of March 2021. We are now seeing the fast-tracked demise of industries that largely have struggled for quite some time.
Since the emergence of the internet and the integration of the Supermarket, retail has continued to suffer. The internet phenomenon has handed power to online shopping, which has now taken its place as the chosen form of purchasing goods for a growing number.
Film and theater have seen a devastating change as the box office movie experiences and theatrical productions are being enveloped by Netflix and the home cinema. Personally, I have given into the power of Peaky Blinders, Homeland, Billions (yes yes YES), and re-watching a mass of movie classics, both old and new.
For holidays, the emergence of AirB&B has influenced a new kind of holiday experience and due to the restrictions on travel in general, people within the UK are being forced back to the coastal towns, both forgotten and not.
The demise of some/most Airlines might result in better and more carbon-efficient fleets.
The rebirth of the high street?
For many years we have seen high streets being decimated across the UK. As mentioned above the supermarkets flexed their muscles and squeezed out the local traders and we have been left with many local areas with far too many coffee shops, charity shops, hairdressers, estate agents, and of course the all-time fav…Poundland. The high street has stared into the void and whilst the population of a City like London has migrated steadily outwards, largely speaking the shopping experience has not changed. With the pandemic and the sudden apocalyptic desertion of London, the majority of people have been forced to work close to home. This again is a fast-tracked process that felt destined to happen anyway and it turns out that people can largely be trusted not to be chained to their desk form 9–5. No doubt there is analytics required to assess productivity but there seems little doubt that the migration to work partly from home is here to stay, which in turn means there will be a large enough crowd within the retail forgotten towns to begin the rebuild that is both much needed and completely desired by the masses locally.
As with many things, when the tide changes, in this case with the out of London residents remaining close to their homes for a period of the week, the opportunities for the local economies begin to open up. If we carry on along this line the local occupiers in said areas will start to materialise and the imagination of the local entrepreneur will come alive once again. This in turn will create local wealth and a renewed sense of local community.
Do people want to work from home or simply close to home?
Having worked very successfully from home myself, I admit that the days/weeks/months of children barging into my home office, stealing my iPad, eating my snacks, and making enough noise that my target Zoom/Teams audience simply must have heard them, I’m ready to find a nice local bolt-hole to plug in for the days that I’m not traveling into London. Sound similar? Well of course it does and to me, this is a massive part of the future. We are on the precipice of a new kind of retailer that is designed to please a broad group of demographic from those that exercise, those that have young children, those that study, and of course those that work.
Great times are close
It feels like we are so close to an exciting time that you can start to almost feel it and a good as the bad times have rushed over us, the good times will be here again. For now we need to stick together both through business and for the sake of mental wellbeing, but also embrace the opportunities, of which there will be many.
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