Coronavirus: UK/EMEA Weekly Update – Call Briefing and Recording from 4.22.20

Below please find key take-outs from our April 22nd senior panel with Humphrey Cobbold, CEO of PureGym; Sir David Dalton, Former CEO of Salford Royal NHS Foundation Trust and Pennine Acute Hospitals NHS Trust; Amber Rudd, Teneo Senior Adviser and former Home Secretary; and Wolfango Piccoli, Teneo’s Co-President, Political Risk Advisory -  chaired by Principal of Teneo’s Situations and Politics practice and former Downing Street Director of Politics and Communications, Craig Oliver.

Listen to the Call

The Political Outlook in the UK and Beyond

• As the crisis continues, the UK government remains in the same position as most other governments - facing the stark reality of some very difficult choices.
• Measures which were put in place to protect and stabilise businesses – and to buy some time - are now needing to be revisited as the government looks to move to the next stage of planning.
• The measures that have been put in place have been effective in terms of keeping unemployment down but as the government is discovering, it is hugely expensive to furlough this many people and the costs which were expected at the time to amount to approximately £10BLN are now expected to be over £30BLN. With the measures expected to last until June, the government will be presented with a great challenge in approaching the end to the furlough scheme. For business to reopen and to return to profitability, it will need a clear exit plan. To cease the paralysis and for government to stop spending epic sums of state money, there need to be jobs to go back to, and restaurants and shops must reopen.
• In this context, there is increased uncertainty and dissatisfaction with the government. Ministers are running to regular difficulties in the daily press conferences where they are saying one thing and swiftly being contradicted – on a range of subjects, from the sourcing of PPE to the exit strategy from lockdown. Meanwhile, rumours are that Boris may well return soon and by next week we may well start to see some of the longer-term planning revealed to us.
• Beyond Covid-19, early indications are that the government remains very committed to its zero-carbon commitment by 2050 which is expected to remain as a key agenda item. This will at least give a vehicle for infrastructure spend to help to deliver fiscal stimulus against a highly challenging economic climate.
• Finally, on a more optimistic note – and from a practical point of view – the result of the crisis will be that the one area that can no longer be ducked by any UK government is social care. This government will address social care, find a solution and the public will wear it.

A Perspective from Business: COVID-19 and the Consequences for the Gym Sector

• It is no surprise that like many other leisure industries, the gym sector has been deeply impacted by Covid-19 and the responsible measures implemented by government.
• Following the PM’s lockdown announcement, PureGym, the UK’s largest gym chain, was given just ten hours to close all of its UK sites, a measure that it was able to swiftly put into effect as lockdowns rolled across mainland Europe - impacting its over 1.7m members and 7000 people working across the UK, Denmark, Poland and Switzerland. And overnight reducing its revenue to zero.
• As for any business during this crisis, the challenge for PureGym during this time of uncertainty has been to retain customer engagement, to put its people first and to provide a safety net for employees and to reassure its investors.
• Following lockdown, PureGym took the decision to cancel customer direct debits. For its people, its main aim has been retention and to avoid redundancies, meaning that it has taken full use of the government’s support scheme. The majority of its employees have now been furloughed, while the remaining minority have agreed to salary reductions.
• Meanwhile, PureGym has made it a priority to maintain regular contact with its equity and debt investors to explain the measures it is taking to ensure the business would remain viable - both directly, and also indirectly.
• It has taken the decision to be front-footed in its engagement with government, to ensure that the business’ voice is clearly heard and has the opportunity to represent its sector. It took the decision to engage with media and government early and openly -both directly and through its industry body. So far this has delivered a positive response in terms of stakeholder reaction and goodwill towards the company.
• Now the challenge is looking ahead. As one of the primary leisure industries, the gym sector will have a clear role to play in reflating the economy. It's first job will be to address how to bring back its operations in line with government guidelines, and in a way that protects the wellbeing of its employees and members.
• Relaunch in this new climate will no doubt present some great practical considerations and challenges. For example, in securing the necessary sanitary and health and safety equipment to safeguard gyms - from thermometers for members, to antibacterial wipes for equipment. The scale of requirements for all businesses is significant, and in a world where supply is short, the NHS rightly has first call.
• To move forward, business will ultimately need greater clarity. While governments in other European countries like Denmark have provided a phased approach to reopening the economy, the UK government has still not provided any framework for taking the next step. It’s likely that the UK will have progressive mechanisms – we expect this to be sometime between the end of May and the end of June – but greater clarity around timings in particular is vitally important.

The Future of the NHS

• When the Covid-19 crisis passes – a key question will remain for the NHS - will it revert to how things have been always done before? Or will it use this experience to evolve and to change the way it operates?
• There is no doubt that the government has invested huge sums to secure services (including health care services), infrastructure and support for business and the public.
• On the whole, the public has largely been accepting of the government’s instructions and we’ve seen the rise of a sense of collectivism and community across the country – from the emotive ‘Protect the NHS’ messaging employed by the state, to the weekly applause held across the UK. The NHS and keyworkers are being held in reverence.
• However, once the pandemic gives way, the NHS will very soon need to address some very significant challenges – from the backlog of waiting time and waiting lists which will be hugely inflated by people who have been unable to attend hospital in the current crisis, the backlog in state maintenance of the NHS’ very fragile infrastructure, of debt, and of course a backlog of staff leave and time owed as a consequence of the exhaustion felt on the frontlines of the fight against Covid-19. Very soon that positive public sentiment will be tested – and it remains to be seen if it will wane and give way to frustration as the NHS starts to address these issues.
• It is also possible that the public sympathy we’ve seen for the NHS may drive trade unions to pursue a new contract for NHS staff as a new dynamic between the NHS and the government comes into play.
• Additionally, the crisis has highlighted the key dependency on social care and its current inadequacies. The crisis may create a new space for political consensus to emerge and a way forward to address the social care crisis in the UK.
• Finally, the challenge that NHS procurement practices have experienced, particularly around PPE, have exposed the fragility of the NHS’ supply chain and questions are being rightly asked about the UK’s global dependence, the reshoring of manufacturing in the UK and the need for higher levels of stockholding for vital medical supplies.
• With these challenges – we have also been presented with some opportunities. Covid-19 has highlighted the agility of UK manufacturers and universities which are driving rapid innovation and adoption at rates unprecedented in peace time and this energy must be maintained into the future.
• The rapid adoption and deployment of digital technologies will continue and change the means of delivery of healthcare. Digital services are transforming the public’s experience of the NHS as 95% of primary care activity is now being delivered online. Indeed, in the space of a week, we have seen levels of digital transformation in what might have taken years to introduce. This change in the public’s interaction with the NHS will grow and become a new reality.
• Finally, the NHS’ experience of its workforce has also undergone unprecedented change – as staffing and skill mix ratios have been forced to adapt to the new world. Staffing flexibility, erosion of demarcations and automated substitutes will change the workforce profile with the potential for greater efficiency.
• Ultimately, the response to Covid-19 means that models are being created for better governance and leadership arrangements – and that new group models could feature to assure better care at lower cost.
• The real test for the NHS is whether it will learn from this experience and become more agile, adaptive and welcoming of change.

The Global Covid-19 Response

China

• Harbin, the capital of northeast China's Heilongjiang province, has suffered the biggest new Covid-19 outbreak in over a month, offering a test case for the government's ability to contain new clusters. This was blamed on the return of students from abroad.
• Authorities have demonstrated a willingness to re-impose lockdown requirements, suggesting that China's economic recovery is likely to proceed haltingly as regions cope with new waves of infection. Like an outbreak earlier this month in the town of Suifenhe near Heilongjiang's border with Russia, the Harbin cluster was traced to a Chinese student returning from abroad.
• A Beijing health official has said the city was on high alert for other imported cases. Beijing authorities appear to be taking extra precautions as they seek to create a secure environment to convene China's annual parliament session, which has been delayed since early March.
• Visitors to the city from elsewhere in China remain subject to 14-day quarantine. The city also announced new mandatory testing requirements for various cohorts including visitors to hotels and high school students returning to the city. Rumours have circulated that Beijing has ordered gyms, swimming pools, and other sports facilities closed as of Sunday

Europe

• No country has been able to put together a policy of testing, tracing and tracking that can be scaled up. Social distancing remains the first frontier.
• The exit strategy process is getting increasingly politicized, forcing governments to adapt their approach depending on the pushback and at times to do outright U-turns. The debate around exit strategy is transcending traditional political and social cleavages and ideologies, making it hard for governments to get it right and put together an effective plan.

Netherlands

• Yesterday, the Dutch government announced it will ease some of its coronavirus measures, including the reopening of primary schools and childcare centres, but other lockdown rules will remain in place until at least late May.
• Primary schools will be allowed to reopen "fully or partially" on May 11 with smaller groups of pupils. Secondary schools will reopen on June 1, provided schools can ensure pupils can socially distance.

France

• In France, President Emmanuel Macron announced his exit plan could include the use of a digital contact tracing app called "StopCovid" which would use bluetooth technology on smartphones to see if people recently met with anyone infected with coronavirus.
• French lawmakers want to have a say in how the government intends to use digital tracking as part of its lockdown exit strategy. Plans to submit the use of a contact tracing app to a parliamentary debate but a no vote sparked outrage in the parliament.
• Macron and his troops have been accused of lacking clarity and even distorting facts, for instance by underplaying the usefulness of face masks and coronavirus tests because they knew France did not possess enough of either, according to some polls.
• France is still struggling on the testing front: it needs to ramp up to a capacity of 500K test per week by 11 May according to Macron’s chief scientific advisor. Current capacity is 150K test per week.

Germany

• In Germany, shops up to 800 square metres, as well as car and bicycle dealers and bookstores, have been allowed to reopen  this week under an agreement with the leaders of Germany's 16 states, while schools are set to begin reopening in two weeks.
• The federal and state governments have strongly recommended Germans wear face masks when shopping and on public transport, and some states have even made that measure compulsory.
• The standoff over the right exit strategy overlaps with the question of Merkel’s succession. North Rhine-Westphalia’s premier Armin Laschet is pushing for a return to normal, while Bavaria’s Markus Soeder is leading the careful camp. But political self-marketing might complicate rather than entirely prevent coordination. In this regard, the cancelation of the Oktoberfest (which is slated to start on 19 September) is a good example of self-marketing by the Bavarian government.

Spain

• Prime Minister Pedro Sanchez announced on 18 April that the lockdown in Spain would be extended until 10 May.
• The PM suggested that the exit from lockdown would be gradual, and that the lifting of the confinement measures would not necessarily be applied uniformly across the country. Despite the strong politicization of the government’s handling of the outbreak, Sanchez will likely be able to obtain the support of the opposition for the new lockdown extension.
• Finally, yesterday the Spanish government was forced to announce a further relaxation of lockdown rules for children after the initial measures provoked an angry backlash from parents. The announcement stated that children under the age of 14 must be accompanied by a parent or guardian when they leave the house to accompany their parents on valid trips outside the home that are permissible under lockdown restrictions. That means, only for a trip to the supermarket, pharmacy, ATM or bank. The announcement created much uproar and the government was forced to do an embarrassing U-turn.

Italy

• It is anticipated that the Italian government will unveil by this weekend plans to loosen the shutdown. Meanwhile, the announced plan to use an APP for contact-tracing has already sparked a lively debate about privacy. The central government and some regions are already locked in a bitter fight about easing the lockdown. Indeed, the heads of Lombardy and Veneto regions have both warned that they might soon have to begin reopening businesses on their own.
• Italy’s entrepreneurs are also up in arms as they look to resume production. Carlo Bonomi, the newly elected president of Confindustria - the main business lobby in Italy, has stepped the pressure on the government to unblock the economy. “Time is the worst enemy of the people” he said.

Sweden

• It’s too early to determine whether the Swedish experience can be labelled a success.
• However, it will be very challenging for the experience of Sweden to be replicated elsewhere in part due to the culture of the nation, whereby citizens have shown far greater willingness to obey social restrictions and exact more self-discipline around precautionary measures, and secondly because of its very successful and effective healthcare system.