As we decided to include the possibility of this in our ‘Five Looming Dilemmas for 2020’ series, I hadn’t thought that by the time we came to produce the article we would be right in the middle of the event! Many of you will be under local lockdown, or back to working-from-home due on the latest government advice. One of my favourite authors, Adam Kay (best known for the book This is Going to Hurt), summarised it quite well in a recent tweet. Adam said, “I can’t believe the government’s plan of keeping cases down by telling us to go back to work and eat at restaurants as much as possible hasn’t worked.” I feel as though the UK response has appeared muddled at times. History and understanding For those who have been living in a cave, or recently arrived in 2020 via time machine, Covid-19 is a strain of Coronavirus that originated in China in 2019. Its highly contagious nature has resulted in a rapid spread throughout the globe and current statistics show it has infected over 38m people, with an excess of 1m deaths. The effect on consumers and world markets was initially one of panic, with toilet roll less prevalent than diamonds for the first time in recorded history, as supermarket shelves were stripped bare. Stock markets initially tumbled, with the FTSE100 dropping from around 7,400 in February to a low of around 5,000 in March, a near 39% drop. We currently sit around 5900, still 22.5%
I remember being glued to the daily briefings in mid-March after initially dismissing the early news with a ‘this will pass attitude’ – clearly Covid-19 was a different beast. What I hadn’t expected was Chancellor Rishi Sunak’s announcement of the astonishing and unprecedented economic relief package for the UK. History and understanding This package announced on 20th March 2020 included grants to small businesses, access to alternative funding, deferred taxes, support for renters and additional financing for the welfare system. Additionally, the Chancellor announced the scheme that most of us are now very familiar with and what this article will discuss; the Coronavirus Job Retention Scheme. Within this, the government agreed to pay for 80% of people’s wages so they can be furloughed rather than laid off to protect their jobs. This is one of the most important economic tools in recent history that has helped retain jobs in many of the business sectors that have been most affected by Covid-19. From 1st October, employers pay 20% towards furloughed staff’s wages and the government cover the remaining 60%. The furlough scheme now ends on 31st October 2020 and will be replaced by the Job Support Scheme and the extension of Self Employment Income Support Scheme. The Job Support Scheme is designed to protect jobs in businesses who are facing lower demand over the winter months due to Covid-19, to help keep their employees attached to the workforce. The scheme will open on 1 November 2020 and run for 6
History and understanding During the Brexit negotiations in 2017, the UK & EU agreed that trade negotiation could only start after the UK's withdrawal because such negotiations could not happen when the UK still had a veto capability in the EU. For this and other reasons, a transition period after Brexit day (31 January 2020) was defined to allow those negotiations. The transition period started on the 1st of February 2020 under the withdrawal agreement. The deadline is the 31st December 2020, a deadline which can be extended for two years, although the British government has declared that it will not apply for any such extension. In 2018 the UK conducted 49% of its trade with the EU, 40% with the Rest of World and 11% with countries that have EU trade agreements. Figure 1: UK % of Total Trade 2018 Source: Department for International Trade / BBC https://www.bbc.co.uk/news/uk-47213842 Potential scenarios There are various types of deal frameworks available in these negotiations, with the UK said to favour a Canada style arrangement called the Comprehensive Economic and Trade Agreement (CETA). CETA provisionally came into force between the EU and Canada in 2017, this is a free-trade agreement removing 98% of the pre-existing tariffs between the two areas. A CETA agreement between the UK and EU would aim to get rid of most, but not all, tariffs between the UK and the EU, this does not cover anything in services, particularly financial services, which is key to negotiations
By Tyler Betts: FX Risk Manager at Infinity International Working offices are rooted in history with the first ever examples found in Ancient Rome, within its very own business district. Upon the collapse of the Roman Empire, offices were not a part of modern life until 1726 in the UK, when Thomas Ripley built the Ripley Building to house the Admiralty and bureaucrats of the Royal Navy. This was followed by East India House on Leadenhall Street in 1729, to serve the powerful East India Company. Both impressive buildings are still standing today! Early offices were segmented across individual rooms for each employee and only in the 1900’s did we see the advent of open plan working space, which has largely been the way we’ve worked ever since. Covid-19 has brought to light many challenges including the need to temporarily overhaul the way we work, with many organisations moving from office to home based in under 48 hours – a remarkable achievement for businesses operating exclusively from an office or on legacy technology. According to a study by Censuswide around working from home, it is claimed that “Sixty-eight per cent feel they are either more productive or equally productive from home – which is particularly significant given the unique challenges many workers face with handling childcare and home-schooling.” This may be one of the reasons that Barclays CEO, Jes Staley, has said that “There will be a long-term adjustment to our location strategy,". "The notion of putting 7,000 people
By Tyler Betts: FX Risk Manager at Infinity International This psychological prejudice where a person believes themselves to be better and more competent than they actually are, was first identified in Kruger and Dunning’s 1999 study “Unskilled and Unaware of It: How Difficulties in Recognizing One’s Own Incompetence Lead to Inflated Self-Assessments“. To explain this in simple terms, I can use an example from a personal experience in January this year when I joined a skiing trip with a friend to Austria. This friend had never been to the mountains before, but had spent two hours at the Milton Keynes Snow dome and watched a few instructional videos, in addition to purchasing all the top brand skiing equipment. In his mind, he was 100% confident that he was going to be an expert. His actual experience and ability level was zero. It will be no secret to those of you who ski that this overconfidence was premature. The first day consisted of him continually falling over on the baby slopes and moaning “my instructor is awful”, resulting in me taking over instruction. He was injured within 10 minutes of my ineffectual teachings and ended up with minor ligament damage. At this point he was ready to go home, but with a couple of days rest and reality setting in that good skiing requires a high level of competency, he hit the bottom of the Dunning-Kruger Effect curve with a total loss of confidence. He humbled himself and got back
By Tyler Betts: FX Risk Manager at Infinity International It is not uncommon for many industries to have marquee networking events throughout the year where having a presence is an expectation in order to remain relevant. This is not only time consuming but is also a significant cost to the business; with a key challenge being it’s difficult to accurately forecast the revenue benefits. To illustrate the point, this happens in an industry that I am involved with, the super-yacht and maritime community. Having friends working in the space meant that 6 years ago we started to work with several crew and a handful of suppliers to the industry. As we tried to broaden our approach through direct sales, we encountered the same response. “Are you attending any Boat Shows this year? Let’s try and catch up out there” … and so we did. With excitement and trepidation, in 2014 we booked flights and a hotel and ventured out to what is the most prestigious event in the yachting calendar in September. Initially fashioned as an event for yacht brokers and the super-rich to meet and discuss the sale and purchase of the world’s best yachts, in recent years it has transitioned into a more supplier focused event, with less footfall from billionaires and more from business owners and sales people trying to grow their share of the super-yacht market. It’s no secret that at a networking event, it can be a nerve-wracking experience to
By Tyler Betts: FX Risk Manager at Infinity International It was 7.30am on a Monday and I had reached the summit of the Canary Wharf station escalators, with the pyramid topping One Canada Square on my right and to my left, the US investment banks Morgan Stanley and Lehman Brothers, followed by a footbridge across the water to South Quay. The sun was shining as I turned left towards my offices, my first role as a trainee foreign exchange broker was based across the bridge, the date was 15th September 2008. There, formed one of my most vivid memories: reams of people walking out of the Lehman Brothers building with boxes containing the contents of their desks, looking desolate and lost. As a trainee and having only been in the city for a year, the significance of what I was walking past did not compute. Arriving at the office, my boss, an ex-Trader at the large banks throughout the 1980’s to the early 2000’s explained the magnitude of the situation as we watched the news events from the weekend roll in… Merrill Lynch has agreed to be taken over by Bank of America and the insurance company AIG was on the verge of collapse unless it could raise funds. Our primary clients at the time were importers, with a large portion of our client base being companies exchanging GBP into USD to import from the USA and the Far East. Business had been good, with GBP/USD on the cusp
By Tyler Betts: FX Risk Manager at Infinity International As a foreign exchange company, we find ourselves in a fairly well-informed position. Our business model means we have relationships with a range of industries across various sectors, giving us access to interesting insights. Most articles focus on the doom and gloom, but as someone on the front line of Infinity, I’m keen to share some of the more positive thoughts and feelings from across the spectrum of our network. We all know that as a direct result of Covid-19, some businesses face crushing hardship as revenue streams dry up, whilst others are seeing unparalleled levels of demand with global supply chains unable to keep pace. The one thing we can probably agree on is that it’s not ‘business as usual’ for most. So, where are we seeing opportunities? Some of our clients have seen a huge increase in demand from supermarkets, with export businesses turning their focus inward to help the UK keep shelves stocked. Products for the home are in huge demand (it’s not just loo roll!). Distributors have struggled to keep up with orders for gym equipment, gardening tools, home computing, paint and kids’ toys to name a few. Medical supply companies are having to operate almost 24/7 to keep up with the additional pressure on the healthcare system. Manufacturing and engineering companies are gearing up to source more of their components and materials from closer to home, reducing reliance on the Far East.