Much discussion has occurred about how long the COVID-19 Coronavirus will last, and how we should prepare as companies or as households. Although no one knows for certain, it would be wise to expect a long road ahead, with once reliable gas stations often closed along the way.
Fill up your tank, a couple of jerrycans, and fill them up at every opportunity you see. This is going to be a long road trip through the desert of despair, and you don’t want to run out of staying power before the trip is over.
At BGE, we are lucky to be in the air filtration business which is considered an essential product/service to maintain healthy indoor air environments in everything from hospitals to commercial buildings to pharmaceutical labs and oil sands plants. We have watched the erosion of consumer activity and demand across all industries in Q1 and, despite the grit shown by our customers, we expect the onslaught to continue. We have prepared for a Q2 (April, May, June) where the overall economy will be down -24% and we have extended our scenario models through to August 31st and December 31st, as we want to ensure we always have gas in the tank.
These timelines are very different than President Trump’s declaration that this will be over by Easter or April 30th.
What will be interesting is how consumers and industries come out of this. It is hard to imagine a declaration stating that “COVID is now over, please go back outside and resume your lives.” Rather, like restarting a manufacturing plant, the economy will likely return to full production in gradual phases. For that, we may want to draw on an augmented version of Maslow’s Hierarchy of Needs and apply it to industry sectors. Starting at the bottom with the most basic economic needs and working our way up is an interesting view to how to rebuild or reopen the economy. Also of interest are the questions surrounding which industries or human activities simply do not return – a topic of many subsequent posts.
Governments will need to slow the spread of the virus before opening up parts of the economy. By the end of Q2 we should see a movement away from the mandatory lockdown measures to a slow economic reopening based on expanded capacity within the healthcare industry. This may be done by region, or more presumably by a phased approach based on necessity. This may take months, as recurrence of the virus will become the high-risk topic through the summer months.
Regardless, what we know to be true is that many businesses out there have spent the past two months rapidly digitizing every available part of their business model, and are now implementing creative partnerships, processes, technologies, forecasting tools, channels, pricing & terms, and supply chains. These are all overdue improvements to productivity out of necessity, but they also all suggest that when the economy does come back, employment may not return to its original form.
Government support programs, rent & mortgage holidays, utility & tax deferrals, credit & loan facilities are all critical jerrycans to be filled. Debt levels were at all time highs before this all started, and no one is calculating the collective impact of the programs that have been announced.
So, whether you are a business, a non-profit, a household, or an individual, it is important that you keep your tank filled, get your jerrycans before they run out, and prepare yourself for the long, long road ahead.