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News & Blog

Weekly insight from PwC’s experts on the latest frequently asked questions

Posted: 6th August 2020

This week’s topics:

  • The impact of COVID-19 on travel insurers
  • Business administrations – should we expect to see an increase in the autumn?
  • How COVID-19 affects worker productivity
  • COVID-19 has forced the hand of organisations into being more mindful of employees’ family and caring responsibilities
  • How will the ‘Eat out to help out’ scheme impact the hospitality sector?

How are travel businesses and the firms insuring them dealing with the unpredictability caused by COVID-19?

Mohammad Khan, general insurance leader and PwC partner, said:

  • Uncertainty continues to impact the travel sector. Businesses now have a careful balancing act to strike between selling goods and services and having adequate insurance to cover the cost of refunds to consumers who have had their holiday plans curtailed or cancelled as destination countries update their travel restriction and quarantine rules on an ad hoc basis.
  • Some insurers have already seen the level of potential claims rise by more than 50% and are braced for even more over the rest of the summer. Others are not offering new travel insurance due to the uncertainty caused by COVID-19. Additionally we have observed insurers issuing more stringent conditions in policies, for example only paying out claims if travel is to an area where there is no Foreign and Commonwealth office (FCO) or Government advice against travel.

What’s the outlook for businesses heading into the autumn? Can we expect a spike in administrations?

Julia Marshall, restructuring and insolvency director at PwC, said:

  • COVID-19 has resulted in the build up of liabilities in businesses across all UK industries and sectors. These millstones include rent arrears, supplier payments, additional borrowing and HMRC debts. They must be addressed once businesses begin moving towards normal trading patterns. Consequently, as corporates prepare to forge ahead without the safety net of the Government support, we’re likely to see balance sheet restructuring and operational turnaround in order to streamline their cost base, ensure business survival in the long term and, crucially, protect jobs.
  • It’s highly likely the level of administrations will increase in the short term as a result of the pandemic and the associated economic downturn. However the new Corporate Insolvency and Governance Act introduced a new moratorium regime which will provide breathing space to allow businesses to enter into negotiations with creditors.
  • As a result, we are seeing companies exploring a range of innovative options outside of formal insolvency. These include property company restructurings (with or without moratorium) and robust Company Voluntary Arrangements (CVAs) built to fully withstand current and continuing economic conditions. Accordingly, we expect CVAs to be a much more successful and sustainable restructuring tool to deal with built-up liabilities, potentially taking the focus away from landlords to include all stakeholders.

 How will COVID-19 challenge worker productivity levels?
Peter Brown, PwC Joint Global Leader, People and Organisation, said:

  • There are challenges to productivity as a result of COVID-19 and the future will likely bring more disruptions in the way we’ve traditionally worked. If businesses seek out updated productivity solutions based on attention management rather than traditional time management, they can equip staff with the strategies and tools required to face the current and future changes in the modern work environment. For example, during lockdown we have seen productivity increase for some shared service call centre teams working at home, where they have fewer office-based distractions, and can apply greater attention to the delivery of tasks.
  • A lack of staff holidays may have an impact on productivity. Some employees are reluctant to take annual leave due to the restrictions on travelling abroad, but they should be encouraged to do so in order to maintain high productivity levels when they are at work. Holidays, and indeed short breaks throughout the day, ensure renewed focus and better recall through allowing the brain time to process new information and have an impact on sleep quality. This in turn impacts productivity.
  • However, it’s important for businesses that their employees stagger their leave so as not to negatively impact overall productivity. At PwC we have staggered annual leave throughout the year to balance employee wellbeing with business continuity, planning and workforce productivity.

COVID-19 has forced the hand of organisations into being more mindful of employees’ family and caring responsibilities of their employees
Brenda Trenowden, PwC Partner and former Global Chair of the 30% Club, said:

  • “This pandemic has forced the hand of many organisations into being much more mindful of the family and caring responsibilities of their employees. Where this was a differentiator for some progressive employers, the past few months have made all businesses think about the work/life balance of their people. Intrinsically linked to this is the fact that, on average, caring responsibilities continue to fall much more with women than with men.
  • One particular concern is that men will be able to return to the office sooner and more frequently than women, which could cause unintended exclusion. Careful planning and regular communication with staff will help employers identify any challenges in this area, and take action to ensure the workplace is inclusive and not based on presenteeism.
  • “This is a tricky issue and employers have not found an easy fix but leaders are looking at ways to minimise this effect – one large retailer is insisting that 80% of all meetings should remain virtual even if people are working back in the office – the intention being that the default means of communication remains inclusive for al Other firms are looking at guidance for the timing of meetings to ensure they are held outside of school hours.
  • “This is a complex issue and it will require companies to work with their employees to understand and support them with their individual challenges. This pandemic has brought to the surface a realisation that every one of us truly has our own set of personal circumstances outside of work, and employers are increasingly waking up to the realisation that future success and productivity will mean making work commitments compliment life outside the office.”

How will the impact of the ‘Eat out to help out’ scheme affect the hospitality sector?

The  government scheme aimed at boosting restaurants and pubs post-lockdown began this week with UK diners being able to get 50% off eat-in food and drink on Monday to Wednesdays.  The scheme is being offered  at more than 72,000 venues.

David Trunkfield, Hospitality and Leisure Leader at PwC, said 

  • We regularly speak to the industry and there was broad consensus that it will take a year or two, at the very least, for sales to return to pre-crisis levels. The new government scheme to encourage consumers to visit their local restaurants and pubs can only be a positive step in encouraging spending. However, the question remains whether the discounts on offer will prove to be the encouraging push people need given many people are still cautious of going out to eat and drink.
  • The scheme could also present some challenges to the industry as it may distort trading patterns, with implications for operating efficiently. For example it could pull more trade to traditionally quiet mid week evenings but reduce trade on weekends
  • Looking ahead, operators will need to continue to think carefully about the route to recovery. Many sites remain closed, particularly across the restaurant sector where only 29% chain sites are open, as opening needs to be done when operators can be sure of generating enough income. Phased reopenings and further development of channels such as delivery, meal kits or retail will be crucial to how hospitality businesses perform in the coming weeks and months

Something to listen to:

What is the impact of unforeseen ‘Black Swan’ events on infrastructure and real estate programme delivery and the wider supply chain? What have we learnt? In PwC UK’s latest Reimaging Capital Projects podcast host Eoin O’Murchu is joined by Sean Lynch, Deputy Supply Chain Director for Hinkley Point C, as well as Neil Broadhead and Alpesh Shah from PwC.

Something to watch:

As part of PwC’s work to create an inclusive culture, we’re listening to our people speak up about the racial microaggressions they face in their daily lives so change can happen. Watch the video of some of our experiences here and to learn how we can all help to make a difference. Find out more on the firm’s actions to improve racial equality here.

Something to read:

The proportion of women in PwC’s tech workforce has risen from 14% to 27% in the last five years due to initiatives such as female-friendly recruitment and apprenticeships, reverse mentoring and flexible working says Women in Tech leader Sheridan Ash in The Times Top 50 Employers for Women supplement https://www.paperturn-view.com/?pid=MTA104789&p=10

 

Business Comment

Business Comment is the Edinburgh Chamber of Commerce’s bi-monthly magazine. It provides insight on Edinburgh’s vibrant business community, with features on the city’s key sectors, interviews with leading figures and news on new business developments in the capital.
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