Public health, economic effects and travel and leisure

Karen Taylor and Ian Stewart give a public health and economics update on the effects of COVID-19. We then hear from two lead Partners, Andreas Scriven and Alistair Pritchard, from Deloitte’s Travel and Leisure industry. They discuss the impact of the coronavirus on THL and its highly inter-connected services.

Public Health - Karen Taylor, Director, Deloitte Centre for Health Solutions 

• The situation is fast moving, with data from the WHO showing that the epicentre for the outbreak has moved to Europe, in the context of a slowing down of new confirmed cases in China.
• No UK region has been unaffected by Covid-19, however we see London ahead of the curve in comparison to other areas of the country, due to its larger population.
• There is an inextricable link between the economy and people’s health outcomes, which are often dependent on social determinants of health including income and employment.
• The UK Government is also responding to requests to ramp up testing, as called for by the WHO to enable a better understanding of the reach of coronavirus and its impact.

Economics – Ian Stewart, Partner and Chief Economist, Deloitte UK

• Covid-19 has provided a unique shock to the economic system from outside, with immediate and pronounced effects on the ability of people to work and restrictions on movement.
• In a public-health focused society we are, very sensibly, trading economic activity for public health. This means a sharp contraction is in prospect - large by the standards of recession, but which we hope will be short lived.
• The strain this causes is already apparent in the travel and leisure sectors and is coming through in the financial markets where we are seeing volatility and moves by investors to safer assets - away from equities, commodities and corporate bonds and, above all, into cash.
• The Government’s response has been to attempt to calm financial markets with liquidity, cheap money and vast amounts of capital for banks and corporates.
• At the same time, it is providing targeted help to people and sectors experiencing the greatest hardship. The debate is centred on replacing people’s incomes with the clear risk of insolvency, as people are unable to work and companies unable to pay them.
• National Insurance and Universal Credit have been discussed as possible vehicles for tax cuts. Other countries have proposed measures that guarantee a proportion of people’s income and help to keep them in their jobs and the search seems now to be on for a similar scheme for the UK.

Travel and Leisure – Andreas Scriven, Lead Partner, Hospitality & Leisure, Deloitte; Alistair Pritchard, Lead Partner, Travel & Aviation, Deloitte

• It is clear that the recent decline seen in the hospitality industry means it is among the hardest hit by Covid-19. The impact on its highly inter-connected services is unprecedented.
• A combination of Government-issued restrictions and checks, social distancing measures and restrictions on corporate activity are already having a significant impact in the UK.
• No single previous event is directly comparable to Covid-19 in its combined speed, severity and scale – however, previous unforeseen events, like the SARS and Swine Flu epidemics and global financial crisis, have shown the Transport, Hospitality & Leisure (THL) sectors to be resilient.
• The ability of businesses to bounce back in the long term will depend on their ability to get through the coming days and weeks. The Government’s immediate response to Covid-19 and the actions of business leaders will influence the depth and duration of its effects.
• In the short term, the most immediate focus is on cash management. Businesses of all sizes will need to manage the situation carefully and many are likely to require Government intervention. Regulatory forbearance will be welcomed, while Government support is critical and cannot come too soon.
• In the long term, businesses’ ability to survive will also depend on how they can evolve to meet the demands of the ‘new normal’, reacting to consumer demands and modifying their offers.
• For example, they must continue to analyse whether trends like a move towards virtual meetings can be expected to suppress business travel in the longer term, especially in light of environmental concerns, or whether lingering health concerns will further curtail travel.
• The THL industry is critical as an engine and catalyst for prosperity and benefitting society more broadly. Covid-19 is likely to have a transformative and profound effect on its evolution.

Useful links

• Travel risk e-map
• Weekly hospitality sentiment survey