One of the biggest challenges during any large-scale crisis is how businesses react to emerging developments. We are seeing this happen with COVID-19, with each day bringing further news. UK airlines have requested a £7.5 billion payout to aid the impact of widespread border control and hotel closures impacting the travel industry. The impact on the aviation industry has seen a drop of 24% to Boeing’s stock price to $129.61, as of March 16. In the car industry, the crisis has seen Honda close both UK and North American plants due to “falling demand”. These are just some of the many examples of the impact the virus has had throughout different sectors, with many more expected in the coming days. When it comes to the financial sectors, there has been no exception, with many companies who do not have available cash reserves in times of need, facing laying off employees or risk closing altogether. So, what are the main issues being faced amongst the financial sectors?
The Decision to Lay Off
According to the International Labour Organisation (ILO), 25 million jobs could be lost worldwide due to COVID-19, levels not seen since the economic crash of 2008. The reason this is happening is because of the issue that many companies do not have the resources to continue to pay staff if levels of business continue to be impacted. This is why the tourism sector has been hit particularly hard with travel bans in place all over the world, affecting hotels, restaurants and bars in many usually vibrant areas. Across the financial sector, large companies including Lloyds Banking Group, Virgin Money and Direct line Insurance are set to cut more than 2000 jobs by October, this being announced before COVID-19 had become a bigger issue in the UK. The result means a lot of these planned job cuts may come sooner than expected. With more people moving away from branches and using online services instead to apply and find the information they need, such as guides to payday loans, mortgages, personal loans and more, the changes shouldn’t affect the consumer’s experience when they need vital information during this uncertain time.
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Declining Stock & Currency Value
The FTSE 100 recently recorded its biggest one-day loss since 1987 on March 12, prompting anxiety within the markets that a global recession could be just around the corner. This means many of the large banking and financial organisations are having to make rapid adjustments so that at some point they can recover. Also, the pound fell lower than the dollar by 5% in just one day, its lowest level since 1985, partly due to investors unsure on how the government's stimulus package of £350 million will be financed. For finance companies in general, the negative impacts will inevitably affect how lending for the corporate and personal sector will proceed. Contingency plans will already be underway on how to minimise what’s to come.
Remote Working
With social distancing well underway, many who can have begun working from home. The challenges this creates for financial services include how to monitor staff productivity, ensure safe and secure connections to VPNs due to the handling of sensitive data, to the practical aspects of employees working away from the office. The communication between financial institutions and its workforce is imperative to ensure the smooth ongoing continuity of services. All of these aspects are changing regularly as we move through the crisis.
What’s clear is that from businesses to consumers, the way this is all going to pan out over the next few weeks and months is uncertain. With sales of corporate bonds and leveraged loans stalling, the hope is that the markets will pick up soon to bring the levels back up to where they were only a few weeks ago. The Treasury and Bank of England are both promising new measures to help blunt the continuing impact of COVID-19, so in the meantime, the anxious wait for a positive upturn in events goes on.
