Coronavirus is exposing British business’s ‘underlying health issues’

It usually takes months for big firms to move in the direction of laying people off. But in 2008 Chris Blackhurst saw how quickly they did it, and he’s seeing it again now

Streets have been left virtually deserted as people have to busy themselves at home (PA)

Every shop, except those supplying food and medicines, and every bar and restaurant, except those offering takeaways, is closed.

It’s an unsettling spectacle. What I find myself wondering, though, is just how many of them will reopen once the war against coronavirus is over. For, just as the terrible daily toll is accompanied by the words “underlying health issues”, the fact is that many of these outlets also had underlying health issues of the financial kind.

Some outlets may pick up where they left off, but an awful lot, I suspect, will never open their doors again. This is especially true where the bigger retail chains are concerned.

Well before the virus struck they were locked in a death spiral, as far as a large number of their branches were concerned. It’s not a path that can be shifted – no matter how generous the business rates, holidays and stalled rental reviews (if they’re lucky). Their market had moved elsewhere, to different brands, to out-of-town, to online.

The head of a well-known retailer once mapped out for me the agonies he and his colleagues went through every time they closed a branch somewhere. It was not, he stressed, a simple act of laying off the staff and turning off the lights. The local community saw the demise as a vast snub to their area and prospects. The press would get involved, so too would the council, MP and unions. Other shopkeepers would chip in, declaring it a serious blow to the shopping centre, to confidence and their own ability to continue. Executives would have to be dispatched from the regional office or even headquarters to try, without much success, to soothe the pain. Inevitably, the red line on a spread sheet would become an agonising, protracted cause celebre.

That was merely arising from one location. Now replicate that by a programme of closures running into higher numbers. With shedding on that scale, as well as the individual, localised controversies and name-calling, come negative national headlines and the impression the business is collapsing totally, when in reality it may be refocusing. That, too, requires careful and exhausting handling of the media, politicians, suppliers, employee representatives, industry groups and investors – the list of bodies to be contacted and reassured is long.

What was striking was how some corporations that seemingly had nothing to do with financial services chose this moment to announce cutbacks

Today, as coronavirus takes hold, they’ve all shut, rightly, without any protest, no one raising so much as an eyebrow. To ease their closing, the government has come up with a package of emergency financial measures. The short term is one concern, but the dilemma for the government, the economy, and for all of us, is the degree to which their disappearance is final.

It isn’t only a retail problem. Our manufacturing sector was similarly week. It too may see factories cease production never to restart. Likewise, in other industries where there are weak businesses.

This is what happens. I covered the 2008 global banking crisis day after day. What was striking then was how some corporations that seemingly had nothing to do with financial services chose this moment to announce cutbacks.

Apparently, they were not in the direct line of fire, their activities were unlikely to be dramatically reduced, yet they chose to press the button and make sweeping job losses.

The giveaway for me was the speed. No large company can move that quickly. Decisions take months of board review and discussion. But I recall almost from the off in the banking crash, a major aero-engine maker declaring thousands of redundancies and blaming the move on the crisis. It simply did not ring true – this was a cut long in the planning, that had little do with the financial implosion that no one saw coming.

I can go back further, to the dotcom collapse, when again firms that you might not have supposed would be damaged, implemented cutbacks.

This is the worry for the government. Even before the outbreak and lockdowns, the argument raged about the real strength of the UK economy. It was at best ticking along, dogged by uncertainty on Brexit and the structural weakness of being strong in some areas but not necessarily strong enough in the ones that were promising growth in the global marketplace.

Then came Boris and the election triumph, and the restoration of a degree of certainty and optimism. No sooner was there promise then, hopefully for the short term at least, it was dashed.

The corona scourge is an enormous test of the NHS, and our ability as a nation to respond in an all-enveloping healthcare trauma. That reaction has been magnificent, and has come as well, in finance, from the Treasury. Moves that would have taken months to complete are now thought of and executed in days. Remarkable.

Another examination is taking place: of our businesses and how well-placed they were going into the virus schism. Putting the essential businesses on one side, the others now – with their premises shuttered, and their workers at home – all appear the same. How they’re different will emerge when permission is given to open again. The extent of the premises that remain boarded up, and the size of the job losses, will provide the answer.