August 18, 2020 Recovery, hidden in plain sight
We started our last article, Reviewing Company Incorporations, with the comment that the second quarter of 2020 saw a sharp increase in the number of incorporated companies on the UK register. That quarter was also notable for another reason; a 20.4% fall in GDP which, following on from a decline in GDP in Q1, signalled the UK’s move into recession.
Not that that came as much of a surprise. Ever since the lockdown was announced in the middle of March the expectation was that a recession would follow. Quite simply, you can’t shut down entire sectors of the business community and society without a consequent fall in GDP. Nevertheless the ONS comment that the measures taken in response to COVID had erased seventeen years of economic growth in just two quarters does give pause for thought.
Should we be concerned and start battening down the hatches; potentially leading to a prolonging and deepening of the recession? Not so says Bank of England Chief Economist Andy Haldane. Pointing out that GDP has grown by 1% per week over the last three months, Andy Haldane comments that the foundations for recovery are already there, ‘hidden in plain sight’. Moreover he expects to see a 20% rebound in the second half of this year and therefore ‘the time has come to see the economic glass half full rather than half empty.’
This then is a time for leadership, for Boards to embark on a proactive rather than reactive series of measures which will promote the success of the company and help to restore economic activity to pre-coronavirus levels. Or as the IoD Chief Economist, Tej Parikh, said “The battle now is to prevent longer-term scarring from this coronavirus-induced plunge in economic activity.” In accordance with the Companies Act 2006 these measures to promote the success of the company include considering the likely consequences of any decision in the long term; again highlighting the need for long-term growth planning as well as ensuring that any short-term measures needed in response to Covid do not hamper long-term outcomes.
The Companies Act also expects the Board to consider the interests of company employees in any decision-making. In the current climate this may include taking appropriate measures to reduce the chance of transmission in the workplace or providing flexible working schedules which will enable individuals to either shield where necessary or look after loved ones who are shielding, whilst at the same time contributing fully to the organisation.
