IAA-Advisory founder Derek Soper looks at the challenges many in the sector will face in returning to work, as well as considering the outlook for mergers and acquisition as the industry’s smaller players look to survive post-Covid-19
It seems that we are on the upward path again; or so we are told by the powers that be.
Clearly a good portion of luck will be needed, but it certainly is welcome. The main sticking point amongst City workers seems to be the question mark still lingering over modes of transport.
Train, tube, bus all have the distancing problems we are all still seeking to avoid. That alongside the huge cost of parking in central London will continue to keep ‘working from home’ a popular choice for some time to come. Speaking to one very senior colleague today it seems that he and a number of companies in the same sector are planning a return from September onwards.
What to expect when we do get back to the new normal? According to many of the weekend papers and the well-known pundits, there is a considerable amount of private capital seeking a home in order to avoid the fast-approaching negative interest rate trap being mulled over by central bankers.
A way for them to try and get the economies stimulated again, yes, but not attractive to those of us who see our business in ‘margin’ terms where everyone gets a slice of the cake.
Debt and mergers
It is plain to see that many of the challenger banks, lessors and lenders are not reaching the size required to survive alone. This will stimulate the merger market and create opportunities for new capital to enter our business.
The big question to be answered before that starts to take place is: what amount of bad debt will emerge from the present situation?
The creation of a ‘Bad Bank’ has been suggested which could act as a cleanup mechanism and present opportunities for companies to talk ‘merger’ without the bad debt burden hanging over them. To some extent it has been tried before and with considerable success.
My main concern for the decision-makers is the present noise being generated by the press and public broadcasters; whatever decision is made there are shouts of indignation from those who purport to know better, even though in our hearts of hearts we know that they just don’t.
When it boils down to the basics, we are all social creatures and Covid-19 will disrupt our way of life, but only for a relatively short time.
Once we regain our confidence and overcome the threat of destruction of many of our previously viable businesses, we will find ways to once again strive and thrive. I just hope that ‘work ethic’ isn’t a victim of the pandemic.