News & Analysis

Small businesses face going down the pan, but the bigshots rocket

Andrew Saks, Tuesday, 15 June 2021

When the combination of a browbeaten public and a cynical set of shareholders come together, bizarre things happen, and this morning is no exception as the FTSE 100 index has jumped an almost unbelievable 26.39 points this morning to a lofty 7,136 points.

How can this be? Surely Commissar Johnson has just unleashed his latest bombshell onto the entire business environment of the United Kingdom in his latest buzzword-infused delivery yesterday which signalled the extension of the draconian lockdown beyond the end date that he had previously promised.

On the face of it, it appears that Mr Johnson has managed to achieve his objective of destroying small to medium businesses in the short term, and eventually all privately held businesses regardless of size should this go on any longer, and eventually the entire British economy when the state runs out of the billions of pounds it has been spending on paying people to comply.

With regard to that particular subject, it would be fair to assume that the burden of keeping the public compliant by means of payment is about to create an even larger burden for companies, as furlough payments by the government are about to be reduced and companies will have to pay 10% of the furlough amount to staff who have not worked for over a year and are unlikely to return to the workplace.

My father, a refugee who arrived on the shores of a new land with $5 in his pocket and the clothes he wore, worked 6 days per week, 10 hours per day. He once told me that if you do not work for six months, you will never work again.

Now, 18 months have passed, and many of the furloughed staff have either emigrated to nations where there is no lockdown and where their efforts will be rewarded rather than thwarted or have taken up residence on the sofa under the false pretence that they will somehow be employable when their existing employer did not miss them for a year and a half.

Inefficiency in large corporations is at a high point, whilst efficiency in the heavily industrialized Asia Pacific region is as prominent as ever. Not a mask in sight, and no lockdowns. Chinese and Malaysian industry is literally gobbling up market share all over the world whilst the British are not allowed to operate their businesses to anywhere like full capacity, and in some industry, sectors are banned from operating in any capacity.

This morning, I spoke on Times Radio about the effect on the economy that the extension of the lockdown will likely have, and the focus in the general news channels today is once again on the hospitality sector, as its trade representatives say that it cannot sustain itself as an industry any longer with these absurd rules.

That may well be true, and perhaps is relevant for many businesses which are owned by smaller entities and rely on customer footfall rather than online services, however the stock market is rocketing, and the British Pound is stable, and high.

Why is that?

The reason is that the overall sentiment these days differs from that of a year ago. Now the penny has finally dropped and people are beginning to see this for what it really is, and therefore are expecting lockdowns and extended restrictions, therefore economists are factoring it into their predictions and investing strategies.

No longer is the government able to create fear and panic as it did in March 2020. It was always astonishing to see people loading up with bathroom tissue and dried pasta, just because a man on the television had said that there was a 'life-threatening' menace.

Back then, the economy collapsed almost immediately, and a huge number of people believed they were sacrificing the shirt off their back and every last penny that they had ever worked for in case the entire world catches a cold.

Now, the commentary is totally different and the working population, investors and shareholders, business owners and large corporate governors can foresee what the government has been describing as 'the new normal' - especially when research is done on forthcoming tenders which show that Hertfordshire Council has been looking for a consultancy to provide 'Covid Marshalls' - whatever that is - until 2023 on a renewable basis.

A good dose of wisdom and British pragmatism which is the combination of sound mindsets that led to Britain having invented almost every piece of modern technology that powered the world through the industrial revolution has now permeated the business world and a longer term view is being taken.

No matter what the government says, it is clearly a case of 'Keep Calm and Carry On'.

Perhaps what may happen is that small businesses will either consolidate or go out of business, and large publicly listed giants with close connections to the government could continue to prosper, hence the upturn in the FTSE 100 index and the Pound's buoyancy.

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