Business Trends to watch out for in Q2 as freedom returns

Businesses have spent much of the past 13 months scrambling to adapt to extraordinary circumstances. While the fight against the COVID-19 pandemic is not yet won, with the over-50’s having all been offered a vaccine there is at least a light at the end of the tunnel—along with the hope that another train isn’t heading our way. Business could soon be booming again.

2021 is the year of transition. Barring any unexpected catastrophes (fingers crossed), individuals, businesses, and society can start to look forward to shaping their futures. The next normal is going to be different. It will not mean going back to the conditions that prevailed in 2019. Just as the terms “prewar” and “postwar” are commonly used to describe the 20th century, generations to come will likely discuss the pre-COVID-19 and post-COVID-19 eras.

In this article, we identify some of the trends that will shape the next normal. Then we discuss how they will affect the direction of the global economy, how business can hope to adjust, and how society could be changed forever as a result of the COVID-19 crisis.

Consumer Rebound

There are lines outside shops, but they are often due to social distancing requirements. Theaters are empty. Bars and Clubs lack the familiar sound of laughter and music. All clothes hauls have been made online. In these and other ways, consumers have pulled back.

As consumer confidence returns, so will spending, with “revenge shopping” sweeping through all sectors as demand is suddenly unleashed. That has been the experience of all previous economic downturns. One difference, however, is that services have been particularly hard hit this time. The bounce back will therefore likely emphasize those businesses, particularly the ones that have a sense of community, such as restaurants and entertainment venues, with the British public already showing their loyalty this week.

How fast and deep confidence will recover is an open question. In late September, for example, the US consumers surveyed were more optimistic than before but still cautious. Only around a third had resumed out-of-home activities, compared with 81 percent of consumers in China, 49 percent in France—and just 18 percent in Mexico. New lockdowns and, critically, the rollout of COVID-19 vaccines have and will affect those numbers. The point is that spending will only recover as fast as the rate at which people feel confident about becoming mobile again—and those attitudes differ massively by country. The UK is amongst the most confident and this will be largely due to the huge success of the vaccine rollout.

Leisure travel to excel, business travel to falter

People who travel for pleasure will want to get back to doing so (which has been seen here in the UK with the constant push against the current travel ban). There was (obviously) a huge decline in domestic travel in 2020 compared to 2021 (down 62% from a combination of overnight and day trips). The forecast for 2021 is looking much more positive, with a 79% increase from last year. People are eager and willing to get away on holiday, even if it’s closer to home. 

During and after the pandemic, though, there is a question about business travel: Exactly when is it necessary? The answer is almost certain to be not as much as before. Video calls and collaboration tools that enable remote working, for example, are replacing face-to-face meetings, and gives the workforce more time, and less money spent on commuting. 

History also shows that, after a recession, business travel takes longer than leisure travel to bounce back. After the 2008 financial crisis, for example, international business travel took five years to recover, compared with two years for international leisure travel.

Regional and domestic business travel will likely rebound first; some companies and sectors will want to resume in-person sales and customer meetings as soon as they safely can. Peer pressure may also play a part: once one company gets back to face-to-face meetings, their competitors may not want to hold back. All told, however, a survey of business-travel managers found that they expect business-travel spending in 2021 will only be half that of 2019. While business travel will return at scale, and global economic growth will generate new demand, executives in the field think that it may never recover to the 2019 level. But we must have hope, and if you’re anything like me, I really miss being amongst my collegues.

Leisure travel is driven by the very human desire to explore and to enjoy, and that has not changed, in fact, the need to travel further afield may have increased as we have been living such stagnated lives over the last year. There is no reason to believe that the rise in global prosperity will reverse itself or that human curiosity will diminish. But the effective use of technology during the pandemic—and the economic constraints that many companies will face for years after it—could herald the beginning of a long-term structural change in business travel.

The crisis has sparked a wave of innovation and creates generation of Entrepreneurs 

As they say, necessity is the mother of invention. During the COVID-19 crisis, one area that has seen tremendous growth is digitization, meaning everything from online customer service to remote working to supply-chain reinvention to the use of machine learning to improve operations. Healthcare, too, has changed substantially.

Disruption creates space for entrepreneurs—and that’s what is happening in the United States and the UK, in particular, but also in other major economies. This trend actually took experts and forecasters by surprise. After all other financial crises, small businesses and entrepreneurial spikes seemed to down-turn. This time, though, small businesses and their support for them has blossomed. In the third quarter of 2020 alone, there were more than 1.5 million new-business applications in the United States—almost double the figure for the same period in 2019.

The EU has not seen anything like this, however, France saw 84,000 new businesses in October, the highest ever recorded, and 20 percent more than in the same month in 2019. Germany has also seen an increase in new businesses compared with 2019; ditto for Japan. The number of new businesses registered in the United Kingdom in the third quarter of 2020 rose 30 percent compared with 2019, showing the largest increase seen since 2012.

On the whole, the COVID-19 crisis has been devastating small businesses (like us). But we’ll take good news where we can get it, and the positive trend in entrepreneurship could bode well for job growth and economic activity once recovery takes hold.

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