While the hope of a V-shaped dip in the economy is still a possibility, we cannot underestimate the sheer magnitude of the economic impact of the global lockdowns as Kevin Green explained in a episode of the Field Service Podcast…
Understanding the True Economic Impact of Covid-19
Talking to Kris Oldland, Editor-in-Chief, Field Service News during episode one of season five of the Field Service Podcast, Kevin Green outlined just why the challenge we face now is different from anything that has come before.
“I suppose the starting point, is recognising the difference from an economic perspective the Covid-19 health crisis has created in comparison to previous recessions,” Green began.
Going on to draw on his own experience both as Chief executive of the Recruitment and Employment Federation, as well as former HR Director for the UK’s Royal Mail, Green continued “the recruitment industry always rises to the economic waves quite well. In that, it goes into recession early, but it also comes out early.
“I can remember in 2008, and that was a pretty unprecedented economic downturn, six quarters of contraction where our industry lost 30% of its revenue. However, in 2008 there was a period before we went into that recession. There was a debate going on, as to whether a recession was coming or not. So, most businesses had six to nine months to prepare for the downturn. The difference with COVID-19 is it happened within a week.
“The government first decided it was going to start asking people to self-isolate and close down parts of the economy. But actually, when we then entered lockdown, in reality with like an asteroid hit the planet, effectively we were switching off 70% of the economic activity of the country. What that has done to our economy is created a huge shock. We’ve not got any preparation. People weren’t prepared at all, and we’ve just gone headlong into a recession, which will be pretty significant.”
“Liquidity has become everything. It’s not so much about profitability, or your P&L and your balance sheet. Now, it’s more about how I got the cash to get the business and as many people as possible to the other side…”
The point Green makes is crucial for how we are to make the necessary adjustments as we prepare a road towards recovery. We cannot under-estimate the sheer magnitude of the impact of Covid-19 on the global economy and how that will have an ongoing effect on the business chains our organisations exist within.
As Green continues; “So [this recession] is clearly more severe than previous recessions and much faster. I suppose the obvious way to compare is if you think about unemployment. Within the first two weeks of the this crisis, we have had a million people [within the UK] register for Universal Credit. In the last recession, it took us nearly three years to get a million more people unemployed. So that gives you an indication of how rapid the changes be.”
This is an eye-opening statistic. It does well to outline how the current scenario is not comparable to the global economic downturn in 2008, where we had a more generic, slower build into a recession. Something that allowed companies to make advance decisions around not hiring and cutting back on investment.
Green went on to describe the situation in 2020 as one where “businesses were, all of a sudden on a precipice, deciding whether they could survive. [They were] taking costs out having to make very draconian and hard decisions very, very quickly, just to survive.
“Liquidity has become everything. It’s not so much about profitability, or your P&L and your balance sheet. Now, it’s more about how I got the cash to get the business and as many people as possible to the other side.”
It has been a period of testing times for all of us, and those in leadership roles have had hard, hard decisions to make. Green is closely connected to many involved in such conversations in his role as a serial entrepreneur.
“It’s been a time of crisis, and it’s been incredibly difficult for leaders and leadership teams,” Green explains. “it’s taken its toll in terms of stress, anxiety, and lots of sleepless nights as businesses have had to take really tough decisions.”
Yet, despite being in the heat of ‘battle’ on many fronts and having a comprehensive viewpoint on how the challenges we face today are genuinely unprecedented, Green still sees a glimmer of optimism in the future.
“Hopefully there is some good news in that we can come out of recessions as quickly as we entered it. As soon as soon the government starts lifting some of the self-isolating and people having to work from home, then parts of the economy can and will switch back on again. I think what we all have to hope is that, while we’ve gone into recession very, very quickly, we will come out pretty fast on the other side as well.”
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