Colin McLean: For many years, company normality could not return fully.


Colin McLean by

Trust in business is a delicate thing. The mood of other enterprises and customers, as well as political and trade risks, are part of the preparation. Can a vaccine cause new investment, combined with the possibility of more stability in U.S. politics? Signals and headlines from the stock market are positive – but is this a cornerstone for business decisions?

Stock markets are also only a barometer of sentiment themselves. As illustrated by this year’s stock market roller coaster trip, financial professionals are in new territory. Few have a lot of medicine or pandemic awareness, and so vaccine news is vulnerable to misinterpretation. In a broad sample, the seemingly accurate effectiveness figures may say a lot about the advantages for those more likely to experience mild symptoms, but less about hospitalizations and the pressure on health care facilities. Public policy is directed at protecting the vulnerable, and we should expect it to continue until there is a broader reduction in viral transmission. New vaccines may be a bridge, but not a complete solution to that. Without providing much to businesses, they hold out the promise of more usual times.

Equity markets have decoupled from corporate spending in recent years. Financial assets and real estate have been enhanced by money printing and low interest rates, but not corporate spending in the real economy. This needs confidence, certainty about future growth and taxation, and political and trade stability. In addition to the existing emphasis on the management of vaccinations and public health, corporations face major return-to-work problems and must determine the effects of higher unemployment and taxes.

Issues of market vulnerability and bad debt are contributing to the challenges in the business climate. Interventions to help companies and employment would leave a legacy of problems with credit. Economic recovery also brings company failures, as failing firms are assisted before restructuring or sale is easier. Also well-intentioned government support can mask far deeper issues, such as bank loans via bounce-back loans. A host of existing cloud business studies of economic distortions. How is it possible to reverse rental holidays or other indulgences in payments? Are the creditors who are unable to collect healthy enough to bear it, and can they trust balance sheets and business financial statements? For all these tensions to be eased, it will take some time. For many years, market normalcy does not completely return.

With the possibility of negative interest rates – which would further distort the economy – companies can feel a false sense of security when it comes to borrowing. To help longer-term decisions and cope with uncertainty, the economy needs more equity investment. Fortunately, government business funding is projected to turn towards investment incentives for infrastructure, public investment, and taxation. Investments aimed at enhancing sustainability and resilience have new potential. The biggest alternative energy firm in Denmark, Orsted, is now priced higher than BP, showing how investors see the need for improvement. For conventional businesses, there is a significant opportunity to speed up the demolition of their legacy properties and adjust to the new environment.

The pandemic has prompted much-needed government funding to support enterprises that would have collapsed otherwise. New stimulus will follow – perhaps much more so than after the financial crisis. But these measures raise their own challenges for companies – the financial power of suppliers and consumers is difficult to determine. It will take time to get to the bottom of a bad debt.

The tastes of consumers have shifted, but not all this demand will last. For companies investing in a post-collapse environment, there are great risks. Certainly sectors like travel and hospitality will recover in 2021, but there will be costs to remarket. Tourism in Scotland has relied on many festivals that may not be back on the calendar until 2022. Science has a remarkable result


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