Market Insights
Long-term impact of Covid-19
It is too early to predict the nature of a post-pandemic world. However, we can begin to consider the impact of Covid-19 beyond the very short term. Where has the crisis accelerated trends that were already underway, and where have historical trends been pushed in a new direction? We assess the impact across three key areas.
Online alternatives
Covid-19 has forced people to buy a broader range of products/services online. Some of this shift may be permanent, with ripple effects across sectors (for example, higher e-commerce penetration increasing demand for industrial property).
Work-related travel
More flexible working arrangements will likely result in higher demand for high-speed broadband and may also impact housing choices. Increased use of video meetings could lead to sustainably lower levels of business travel.
Rainy-day savings
Savings rates spiked over the summer as governments protected incomes while spending options were limited. Increased consumer caution could lead to higher savings rates ahead, although this may only be transitory.
Strong get stronger
This economic downturn has accelerated industry consolidation. Companies with strong balance sheets have been much more resilient, and we expect this trend to lead to a wider gap between winners and losers across sectors.
Digital transformation
Corporate budgets are likely to allocate more resources towards technology, both to enhance business resiliency and to lower the cost of service. Cloud-based platforms may be well placed to grow market share.
Automation adoption
Companies have long been developing machines to replace human labour, and the pandemic provides a further push. We see wide-ranging impacts across corporate margins, capex intentions and hiring among others.
Tax policy
There is little appetite for a return to widespread austerity, but with government debt ballooning we expect future tax policy changes to put more pressure on the corporate sector than the individual.
Critical industry independence
Covid-19 has identified fault lines in the global supply chain. Governments are likely to be more focused in future on ensuring that key industries (for example, healthcare) can operate without relying on overseas imports.
Heightened company scrutiny
Given huge government support, corporate behaviour is increasingly coming under the spotlight. This scrutiny includes how companies have treated workforces, the use of government funds during the pandemic and plans for future spending.
