Business, trade and COVID-19: What are experts concerned about?

Rowena Bermingham

Over 1,100 experts have shared with us their concerns about COVID-19 and COVID-impacted areas in the immediate and longer term future.
This report outlines concerns about business and trade. Experts have concerns about supply chains and logistics, particularly in the food and healthcare industries.
They are also concerned about business support and have identified arts and culture, hospitality and tourism, retail, manufacturing, and agriculture and horticulture as industries at risk.
Finally they have highlighted industry behavior and entrepreneurship as areas of concern.
You can find all our horizon scanning work on COVID-19 here.

Our survey of over 1,100 experts asked them what their most important concerns were in the short (next 3 months), medium (next 3 to 9 months) and long-term (beyond the next 9 months) relating to the COVID-19 outbreak. Their responses were analysed and synthesised. This synthesis comes from survey responses submitted between 3 and 30 April. Experts raised 260 concerns relating to business and trade. Below are the areas of concerns that experts have relating in this area.

Supply chains and logistics

Experts raised over 100 concerns in the short and medium term about issues with supply chains and logistics across all industries. They note that the global nature of many supply chains means that they have already been disrupted by events in other countries. This disruption has been compounded by many businesses in the UK being unable to operate as normal. They also note that there are logistical issues in distributing goods across the UK. This is due to infrastructure limitations and increased demand on delivery and logistics companies who are also facing reduced staff capacity. There were particular concerns for supply chains in two industries:

Food

Over 50 concerns were raised about food supply chain issues. Experts are concerned that reliance on global food supply chains could lead to food shortages in the short and medium-term. They expressed concerns about logistics, noting that some distribution of food supply was uneven across the country. Distribution issues are seen as a particular issue for food because, unlike most other goods, it can spoil if not delivered within set windows of time. Experts are concerned that interruptions to distribution could mean that there is food waste in some areas and food shortages in others. They also expressed concerns about shortages leading to panic buying by consumers and stockpiling by consumers and/or industries. They suggest that there should be contingency plans during the COVID-19 outbreak to prevent this happening, such as rationing or rules against stockpiling.

Healthcare

Experts are concerned in the short and medium-term that the UK may not be able to import the medical equipment and medication required during the COVID-19 outbreak. This included equipment and medication for COVID-19, but also those for many other conditions. They are also concerned that the distribution of equipment and medication is not operating efficiently. They suggest this is leading to a disparity in regions for how well-supplied they are. They propose that during the COVID-19 outbreak, the UK may need to change rules on reusing prescribed medication, which is currently not allowed. They suggest that to deal with shortages, people could be asked to return unneeded (but unopened) medication to pharmacies. Pharmacies could then redistribute this to cover shortages. Some experts also suggest that in the long-term there should be better tracking of medication (possibly using technology) to prevent stockpiling and reduce waste.

In the long-term, experts are interested in how the UK can build more resilient supply chains and better logistics. They note that there are likely to be future demand shocks (where demand for goods/services suddenly increases or decreases). They are concerned that UK supply chains will not change after the COVID-19 outbreak and will just return to normal. This would leave supply chains vulnerable to future demand shocks. Some experts are concerned that supply chains will be more vulnerable in the future than they were before the outbreak. They warn that if some supply chains are permanently disrupted, it leaves the UK reliant on a smaller network. A concentration of demand on fewer supply chains leaves the UK at greater risk of shortages if there is future disruption.

Many experts also suggest a need for the UK to have greater self-sufficiency and sustainability in its future supply chains. Some suggest that overreliance on international imports has reduced UK capacity for self-sufficiency. For example, they note that manufacturing capacity and domestic food production have been dropping in recent decades. This leaves the UK vulnerable to shortages when events disrupt global supply chains. Experts suggest that the UK will need to introduce policy to protect UK food production and UK-based manufacturing. They also suggest that policies should ensure local production is more cost-effective than importing goods in the future. They also suggest greater investment in local infrastructure is required to support UK supply chains and logistics.

Experts are also concerned that UK exports may be affected in the long-term. They note some countries are already restricting imports. They are concerned that many countries in the future will introduce economic policies restricting imports from other countries (protectionism). This would impact UK businesses reliant on foreign trade.

Example of a typical long-term concern in this area: Countries less focused on building domestic manufacturing base with limited economic diversification and with less emphasis on upskilling and cross-skilling will experience long term impact of COVID19.

Business support

Experts raised over 100 concerns in the short, medium and long-term about business support. In the short-term, some experts want to know how it was determined which business were allowed to remain active during lockdown (those deemed ‘essential services’).

Many experts are concerned that, across the short, medium and long-term, consumer behaviour will change resulting in businesses facing financial difficulties. They are concerned that this will lead to job losses, bankruptcy and business closures. They suggest that local businesses and SMEs (small and medium-sized enterprises) are most at risk.

Some experts are concerned that in the medium-term, the support packages being offered to businesses will not keep them viable and they will end up taking out high-risk loans to cover their costs. Others also expressed concerns that some individuals (such as freelancers and the self-employed) are not protected by Government financial support.

In the long-term, experts are concerned that businesses that survived initially will find themselves in financial distress. For example, businesses may try to tide themselves over by taking out new loans to pay the instalments of old loans. This would create snowballing debt for businesses. Experts raise concerns that if consumer demand does not return to normal levels, many businesses will face a solvency crisis. This is where the business does not have enough revenue or assets to meet its debts. If many businesses face a solvency crisis at the same time, this can seriously harm the economy and cause spikes in unemployment. Experts suggest that in the long-term, insolvency laws may need amending to reduce the economic impact of widespread insolvency.

Example of a typical medium-term concern in this area: The most important concern is that too many businesses will be unable to bounce back after the Covid 19 [sic] pandemic resulting in job losses and severe economic downturn.

At-risk industries

Experts note that most businesses are at risk of collapse without adequate support during the COVID-19 outbreak. However, experts raise particular concerns about the following specific industries (in order of the number of mentions):

Arts and culture

Experts are concerned that theatres, museums and other cultural venues may be closed for a long time. This will affect their profits and ability to continue operating. It will also affect the incomes of people who work in arts and culture. They note that arts and culture is already a precarious industry and many people who work in it are freelance. Experts are concerned that some arts and culture venues may never reopen and this will be a loss to local communities and to UK culture in general.

Hospitality and tourism

Experts are concerned that hospitality and tourism will be badly affected by a lack of international travel and ongoing social distancing restrictions. They note that this industry employs many people and, without measures to support it, there is the potential for large-scale job losses.

Retail

Experts are concerned that consumer behaviour will change during lockdown and people will strongly prefer to buy goods online in the future. This would affect traditional retailers, including those on UK high streets. They note that many UK high street shops were struggling prior to the COVID-19 outbreak and that the ongoing situation could cause them to go into liquidation. They note that multiple retailers closing would have a detrimental effect on city centres and on retail landlords.

Manufacturing

Experts suggest than maintaining manufacturing is vital for the UK to continue having access to goods. They note that medical manufacturers are essential during the COVID-19 outbreak. However, experts are concerned that social distancing restrictions may mean manufacturing firms will be unable to reopen quickly. They also note a need to strengthen UK manufacturing to avert future supply chain issues.

Agriculture and horticulture

Experts note that businesses in agriculture and horticulture are seasonal. Delays to harvesting and selling produce could eliminate the profit of these businesses for the entire year. Experts are concerned that without specific support, many businesses in this area could close. This would exacerbate any future issues with food supply chains.

Example of a typical short-term concern in this area: How will the hospitality/leisure sector (including food/beverage, outdoor recreation and both international and domestic tourism) recover, and what can government and researchers do to support that recovery?

Industry behaviour

In the short and medium-term, some experts suggest that businesses should be incentivised to cooperate rather than compete. For example, knowledge sharing in manufacturing would allow higher production of essential goods. Other experts express concern that the COVID-19 outbreak would allow some businesses to engage in illegal or irresponsible practices. There were specific concerns that businesses would not comply with their legal duties to staff or their procurement obligations. There were also concerns about unfair contracts being established during this time between businesses with high bargaining power and those without. More serious concerns include a potential rise in corruption, embezzlement and human trafficking. Experts are concerned that not enough is being done to monitor industry behaviour during the COVID-19 outbreak.

Entrepreneurship

In the long-term, some experts note that establishing and reenergising businesses after the COVID-19 outbreak requires entrepreneurship. They are concerned that there is not enough current support for entrepreneurs. They also note that laws disqualifying directors of failed businesses from being directors in the future could be damaging in this period. This is because viable businesses may fail through no fault of the director and disqualification stops these entrepreneurs from establishing potentially successful new businesses. They also suggest that greater funding for research and development may be necessary to help bring new products created over this period to market.

You can read the methodology of this work here. All researchers who contributed to this survey are listed under Acknowledgements.

You can find rapid response content from POST on COVID-19 here.

You can find more content on COVID-19 from the Commons and Lords Libraries here.