A few months into lockdown and things may seem to be quite rosey for some people. You might think that being furloughed is not that bad after all – you may have even decided that the kids are actually quite decent people – and as each day ticks by you get closer to things returning to normal and getting back to work…

Alternatively you may be an investor deciding to jump in on the next property deal or diving head first into a (slightly) depressed stock market whilst plotting how you’re going to purchase (finance) the next luxury car…

We have entered into lockdown delusion – where the safety of many is put second – and people want to return to normal because they are ‘bored of the pandemic.

All may not be as rosey in this garden though…for the following reasons:

  1. The expectation of the furloughed one is that he/she will return to work as usual – back into the usual day to day grind. This is unlikely to be the case with many businesses restructuring entirely, budgets cut and old businesses having to change the way they work. This means that many will need to pick up more work, retrain or look into alternative industries.
  2. The period immediately after the government support ends (October) is just before the bumper Christmas season begins in the retail sector. With many people out of a job, it is likely that sales targets will be missed leading to further job cuts (up to 9%) and business losses (of up to 50%).
  3. The ‘unprecedented’ government grants will need to be paid back – this is a must from the governments perspective since they have basically thrown all previous expectations of ‘cutting the deficit’ out of the window. Expect there to be further income tax hikes and corporation tax hikes. There needs to be a fine balance here to bring about the required business growth to stimulate the economy – some other taxes could be cut (such as SLDT) in exchange for increases to income tax / corporation tax.
  4. The stock market numbers are yet to reflect the actual goings on in Q2 of this year – the half year will be coming to a close on June 30th – and then we will be able to see the actual damage of this. Furthermore, the confirmation will truly come in the Q3 results after September 30th. Fully expect there to be a huge cliff dive at this point – when the grants run dry and demand has not returned. Watch out for profit warnings…(and here)
  5. Last but not least – there is the ‘new normal’ – everyone’s favourite phrase. What will every industry look like? Huge impact on the leisure industry – super shopping centres which bring together restaurants, shops and cinemas are at extreme levels of risk – whilst single unit high street shops may be able to manage better with open air walk ways. We know that factory output has already seen huge drops in output – and there are issues all the way through the supply chain. These are not going to be resolved overnight. In addition, the problem with airlines and the travel industry are causing eye-watering daily losses at the moment – with 44,000 airline staff currently furloughed!
  6. The number of mortgage products have already halved – meaning that lenders are already tightening the purse strings due to having to cover losses elsewhere and hold extra capital. This is inevitable with many financial services companies issuing profit warnings in the last few weeks.

So whilst the sun is out, summer is in bloom and the government props up the economy…be sure that winter is coming – and it’s not like anything we have ever seen before.

Book

To receive support during this time – book in for a consultation to better understand your risks here