U or V that is the question....

Spring is upon us and the green shoots are emerging. This would normally see us all rushing out to enjoy the sun but instead we are all facing a quarantine that is seeing a decline in GDP, rising unemployment and social isolation at a level that has not been seen since the Great Depression in the 1930s. Equally, there are some signs (I say "some" with caution) that the number of Covid19 cases and the number of deaths arising from it are starting to plateau.

The Government is at pains to point out that it is too early to decide when our social distancing laws will be relaxed but hopefully over the next few weeks we will see some removal of the shackles and a return to a degree of normality. Inevitably the question we will all be asking is what this "normal" will look like. We will undoubtedly be in a recession and, irrespective of Government intervention, jobs will have been lost, relationships destroyed (and strengthened) and finances will be in disarray.

Economists have started to debate whether we will see a "V" shape bounce whereby the economy effectively hits the buffers but recovers rapidly whilst others suggest it will be a "U" where we see the economy bounce along the bottom for a while and then start to climb and recover. So which one will it be?

In reality, this is unchartered territory and no one really knows. Everyone will have a view but there are too many factors to be definitive. Certain sectors will see a quick recovery. Manufacturing, restaurants, hairdressers and those sector areas that are fundamental parts of a "normal" life will see an immediate return and "bounce". The release valve allowing us to get back to a standard way of living will see all of us wanting to feel a sense of normality and a return to the freedom that we have taken for granted for so long.

Equally, one impact of the virus is that there will be (for some time) a change in the way we all live - many lives have been decimated because people live (often comfortably) month to month and do not have the savings or back-up to deal with this sort of crisis. It is hard to believe that these people (even with jobs) will not be more cautionary going forward and will be reluctant to spend money until they have a reserve to protect them if, for example, we see a winter outbreak emerge later/early next year. Other areas of business will undoubtedly have been destroyed or severely impaired by the outbreak and their strength and ability to recover will be driven by a range of factors from bringing staff back from furloughing, access to bank funding (still an issue) and customer/consumer appetite to purchase.

Whether the economic return is a U or a V is going to depend on the relevant sector, the extent to which the Government removes social distancing, whether the virus stops or reignites as we end social distancing and how quick the general consumer regains its confidence and forgets the disaster we have endured. What is guaranteed is that we are resilient and the economy will bounce back. The question will be whether we learn from what has happened and do not resort to type and the inevitable cycle of boom and then bust.

For businesses preparing to either start up or reignite their business then we need to be using the time we currently have to prepare. When the world does reopen - there will be opportunities and businesses need to assess where they are now and what new opportunities will exist and prepare for them. It will be tough going forward but opportunities will exist.