Welcome to the resurgance of my blog. Like many a bad date it will be full of my thoughts on business and economics and as well as sharing these with my poor readers will allow me to reflect somewhat on the road ahead. It also saves my poor fiancé from having to listen to the boring drival as nothing ruins the mood more than GDP forecasts!.
Speaking of GDP/GNP I was certain we’d see a decline of 35% Year on Year on econonomic activity as a result of the pandemic and the latest numbers are just 7% for GNP and 2% GDP. Its great to be wrong sometimes. However such metrics cant possibly reflect the true cost of economic deterioration. For example during lockdown although many were able to work from home they had trouble spending, hence the extra 20bn of savings on deposit in Irish Banks. This lack of spending, driving the kids to hurling practice, nights out and participation in events from sport to church make up almost 50% of our income spend. The big winner here was DIY, a new couch, something for the garden and when the time came, it turns out Irish are very generous tourists, albeit for the 2 and 1/2 months they got to splurge. But despite this theres big gaps in the balance sheets Year on Year and the piper will need to be paid, evidence of the simple math is the number of businesses claiming the wage subsidy, a condition being that their year on year, month on month turnover must be down at least 30% to qualify. I expect in real terms the 35% reduction in economic activity to stand when all the sums are done. However given its a once off there are hopes that much of the slump and defferred payments can be written off to common sense. A vaccine will come in Feb/March next year, the pandemic will go away, all those weddings, funerals and lets not forget the Olympics will all have to be played out. Even the 2020 Hurling final might go to extra time. The slump of 35% activity will be counterbalnced with 135% next year. In the mean time we play for time.
The second wave has been well flagged nationaly and internationally from the beginning. NPHETS advice is clear, an immediate level 5 locdown. Our new coalition government has pinned its opening salvo on getting people first back to school then back to work. The problem with a coalition is that nobodies really responsible. Heck I wouldnt be surprised if they managed to pin the latest cockup on the Greens. And with cockup I mean uncertainty. The financial crisis was exasperated by uncertainty due to polititcal inaction and chopping and changeing. Last weeks showdown basically said that we’d rather see a moderate amount of people die or get sick rather than loose all the jobs in hospitality and retail. Indeed over 200 angry hotels had co-signed a letter for the prevention of lockdown. However as NPHET continue to make their case the penny has dropped that Christmas is under threat. Many business owners if given the option between the two most useless trading months of the year, Oct and Nov or Christmas they would hapily sacrifice the next 8 weeks to see a full retun of the holiday season. A meadiocre one just wont cut it. I suspect by the time you read this that letters and representations will already be made to governement for a complete and immediate u-turn in order to guarantee Christmas. 3 weeks wont cut it, it needs to be 6-7 for suppression and schools will need to be closed. Will the government have the balls? With this in mind I’m looking at the following three possible scenarios:
Scenario 1: Full lockdown now. Christmas guaranteed and we rise out of lockdown on the 30th November. Party Time!. Restaurants, Pubs, Retail Full. Critically this is certain. We’ve done it before. After which we can party for 6 weeks and lock down again. Nobodys going to miss end of Jan and Feb. This would be the optimal trading environment but the politicians will probably muddle it.
Scenario 2: Level 4 next week sometime or extension of level 3. When the HSE finally shout fire in three weeks time, level 5. But its too late and too late to save Christmas.
Scenario 3: Level 5 next week but with schools open. This will be enough to bring numbers down but will still simar below the surface and numbers wont come down enough to have certainty. Xmas odds on 60/40. The uncertainty will create an unoptimal trading environment and most likely have over 60’s out of the picture.
To this end businesses that are trading online are most protected but there is a huge challenge which must be prepared for this month. Last year, delivery companies wrote to many of their clients to say they could not guarantee last minute deliveries within 5 days of Christmas. That was last year. So if your in retail and trading online in order to maximise profits in an uncertain environment it would be a good idea to guarantee delivery say with your personal deliverable area up to xmas eve and outside your deliverable area 5 days prior. When I say personal deliverable I mean saddle up the reindeer your going to be your own delivery agent. This guarantee will win you a lot more christmas custom regardless of the 3 scenarios above. However it will cost you time. Its unlikely you’ll be in a position to send staff due to insurance so the 3 days into xmas you need to plan to be on the road and absent from the shop. Depending on the scenarios above it’ll either be dead in the shop, middling or full. However this knowledge will transfer into the general populous too, customers are smart and I expect them to start ordering online early this year. Remember in a crisis and people are in crisis as much as business, reliability and certainty are key.
In case your wondering where we are going, earlier in the year I kept an eye on Italy as they were 4 – 6 weeks ahead of us. We swerved on time and avoided the scenario. Throughout most of Covid, Northern Irelands numbers have been roughly a quarter of ours and this made sense as the virus doesnt respect borders and our policies were fairly aligned. However some weeks ago we saw that ratio diverge. Two weeks after pubs opening and loosening of restrictions in the north the numbers started climbing. The virus loves to socialise. Now we are toe to toe with the numbers, a thousand a side and our pubs opened three weeks back. I expect that Irelands ratio will climb to 4x that of the north albeit with a 3 week lag time so our numbers are on a trajectory to 4000. I think Tony might of scared the bejasus out of us enought to soften it somewhat but time will tell. In any event its time to swerve now for christmas.