Public health - Dr Jane Halpin, Director, clinical lead, Deloitte UK
Dr Jane Halpin gave an update on mortality rates, noting that using rolling averages for this data tends to be more accurate. Across Europe, official reported numbers show Italy and Spain have been worst affected, while Germany and Denmark have seen much lower death rates, with the speed of decision-making thought to have a connection to the varying levels of severity.
There are differences in the ways countries are compiling data, and in their approaches to testing, and it is important to note case identification rates are more variable than death rates. This data is key in helping countries to work out when they can begin making decisions about restrictions.
The UK and global economy – Ian Stewart, partner and chief economist, Deloitte UK
This week brought reports that oil had dropped into negative territory in the US for the first time ever. On Monday (20 April), traders were paying $37/barrel to take oil off their hands. The global collapse in oil prices puts specific pressure on emerging market economies that are reliant on oil, and is also extremely challenging for the US shale industry and financial services sector.
Certain countries like Austria, Denmark and Germany are beginning to relax COVID-19 mobility restrictions, with plans for easing looking very different dependent on location - for some it has begun with opening book shops, in others schools or garden centres. In the UK, data suggests that the COVID-19 peak occurred around the 8 April, and with the next review due on the 7 May, many are speculating that we may begin to see some gradual easing around then.
In the UK, 13% of COVID-19 deaths have occurred in the working age population, while 87% were in the non-working age population. A recent paper from Warwick University proposed age-related easing for those less at risk.
The audience for this week’s webinar predicted the ultimate economic impact of COVID-19 will be protracted and severe, the highest reading since 12 March, at 65%. Ian also noted that over the past seven weeks, audiences’ predictions for the timing of the economic recovery have changed, with this now broadly expected to be in 2021 (66%).
Government assistance programmes – Jodi Birkett and Ben Davies, financial advisory partners, Deloitte UK
Jodi outlined recent updates to the COVID-19 government programmes available, namely:
- The large business loan scheme (CLBILs) opened for applications on 20 April 2020. When originally announced the scheme was for businesses with revenue of between £45m and £500m. In response to feedback from businesses and stakeholders, the upper turnover limit was removed, with a loan value of up to £25m for businesses with revenue of £45-£250m and up to £50m for businesses with revenue of £250m and above. The scheme mechanics are similar to those for CLBILs, such that applications are made through accredited financial institutions, administered by the British Business Bank. To apply for CLBILs companies cannot have accessed one of the other Government loan schemes - Covid Corporate Financing Facility.
- On 20 April, the Chancellor announced a new “Future Fund”, to offer support to high growth businesses who are not able to access CBILs. This is a £500m fund, with £250m provided by the Government, matched by £250m (or more) of private investment. Eligible businesses will be able to access £125k-£5m of convertible loan notes. Further detail around the conversion of the loan notes to equity (at a 20% discount) or redemption were also provided. This will launch in May (date TBC).
- The Chancellor also announced a £750m grant fund, to be provided by Innovate UK. The fund is intended for the most research and development intensive SMEs. The fund is available to be used to accelerate schemes for existing Innovate UK customers, together with funds for new grants for both existing and new Innovate UK customers. More details on how to apply are expected in the coming weeks but Jodi encouraged all SMEs who meet the criteria for eligibility to consider making an application for research or development projects.
- UK Research and Innovation (UKRI) launched a fund for grants for innovative businesses specifically in relation to COVID-19. This provides 80% funding for projects lasting up to 18 months, which can deliver an impact in furthering our understanding or response to COVID-19 within the project period;
- The Coronavirus Job Retention Scheme (CJRS) has been extended from the end of May to the end of June. A number of details have been clarified since the scheme was first launched, including that the employee must be furloughed for a minimum of three weeks, the scheme has been extended to include those employees who left between 28 February and 19 March, and there are additional measures to manage defined contribution pension costs.
- Claims made on the CJRS are expected receive significant scrutiny and to be audited by HMRC. Those businesses making claims should take particular care with calculations to ensure information is correct and to avoid any unnecessary delays in accessing claims and keep clear records of furloughing arrangements, communications with employees and calculation methodology in case of future audits.
- HMRC announced this week that future Time To Pay (TTP) instalment requests will need to be made in writing and are more likely to be granted the more of the liability that can be paid upfront and the shorter the requested instalment period.
Ben Davies made some practical observations around how management teams are approaching their funding challenges in light of the COVID-19 pandemic. Many companies have already successfully drawn down on credit lines, cut discretionary spending and taken up the available furlough schemes/tax deferrals.
Businesses remained uncertain about the practicalities of seeking access to the CBILS and Large CBILS initiatives, and noted that there was still a gap in provision for companies who had insufficient support from existing stakeholders, were not rated highly enough to access the CCFF, and required more than £50m of new funding. Companies are looking at options to get more cash flow out of their existing operations, including breaking in-the-money hedge positions to release immediate liquidity.
Ben highlighted key points in trying to fund a business in the current environment. In particular he drew attention to the reality that much of the rescue financing currently being provided by private and public sector institutions was adding debt to already weakened balance sheets. A large amount of fresh equity capital would ultimately be required in order to facilitate market-based refinancing of today’s “emergency” debt facilities.
Dr Jane Halpin
Jane leads Deloitte’s Clinical Team and is a qualified Public Health Medicine clinician. Prior to joining Deloitte in 2015, Jane had over 25 years’ experience in the NHS including roles as a Medical Director, PCT Chief Executive and NHS England Area Director. Since joining Deloitte, Jane has worked on numerous health care engagements for Trusts, health economies and others, spanning operational improvement, clinical strategy, service reconfiguration and health system integration. Jane has a proven track record in effecting strategic change, driving improvement and developing strong and effective teams, organisations and systems.
Ian Stewart is a Partner and Chief Economist at Deloitte where he advises Boards and companies on macroeconomics. Ian devised the Deloitte Survey of Chief Financial Officers and writes a popular weekly economics blog, the Monday Briefing. His previous roles include Chief Economist for Europe at Merrill Lynch, Head of Economics in the Conservative Research Department and Special Adviser to the Secretary of State for Work and Pensions. Ian was educated at the London School of Economics.
Jodi is a partner in Financial Advisory, with over 20 years of experience working in Transaction Services across a range of clients. She is the North South Europe (NSE) and UK Clients and Industry lead for Financial Advisory and is a member of the UK and NSE FA Exec. Jodi has extensive experience of working across a broad spectrum of clients, ranging from plcs to private equity backed and privately owned businesses. Through transaction services, Jodi supports businesses in equity raising, rights issues, acquisitions, disposals and refinancings. In addition to leading client programmes for the UK Technology and Media and Telco sectors, Jodi also works closely with CFOs and Next Generation CFOs on Deloitte’s CFO Programme, understanding the key opportunities and challenges facing businesses.