As the bell sounds for round two with Covid-19 at Christmas, businesses brace for the unpredictable battle ahead.
For a minute, it seemed like we were going to make it through winter without the pandemic pantomime taking the headlines. But the uninvited Christmas guest is back again, and this time under a new name.
The situation this year, however, could be slightly different. At the time of writing, the UK has 70.2% of its population double vaccinated, and 47.1% boosted with a third jab. Similarly, Europe has seen nations like Portugal administer two jabs to almost its entire population – offering protection against previous variants.
Nevertheless, with cases on the up, all eyes are back on governments and businesses fear their plans for future lockdowns.
The Omicron challenge for governments
The Omicron Covid-19 variant has spread like wildfire across the globe. And despite Europe’s valiant vaccination efforts, the situation feels worryingly déjà vu.
Once again, it’s all about the word ‘uncertainty’. Early signs are positive, but the data we have for Omicron is new and limited, meaning we’re still not sure how severe its symptoms are and the effectiveness of vaccines against it. But we do know it’s living up to its highly contagious reputation.
Covid-19 variants old and new have combined to break pandemic records in the latter stages of 2021. So far, we’ve seen the UK, Germany and the Netherlands reach fresh peaks for daily confirmed cases, with many other countries set to follow.
As a result, December has brought restrictions back in many areas of Europe. The Netherlands entered a national lockdown on 19th December and Austria continues its lockdown for the unvaccinated. Those in charge face a sticky situation. In economic terms, lockdown spells disaster.
Covid-19 lockdowns and the economy
Industries like hospitality, aviation and tourism (to name just three of many) will almost certainly need more financial support if further restrictions come into force. And this raises a few questions.
Will we see the return of furlough? Can governments afford to support jobs in this way again? Let’s not forget the role past lockdowns played in contributing to global supply chain issues and rising shipping costs.
The powers that be desperately want to avoid lockdowns if they can. And some nations, like the UK, are reluctant to act.
The decision for governments will be whether to bet on vaccine effectiveness and mild Omicron symptoms keeping the number of hospitalisations down – allowing the economy to remain open. Or prepare for the worst by reintroducing full lockdowns, slowing the economy and preventing healthcare services from becoming overwhelmed.
Arguments can be made for both sides, but while the debate goes on, businesses suffer. It’s all down to that word again, ‘uncertainty’. With no clear instructions of what the future holds, businesses are struggling to prepare.
The hospitality headache
Hospitality is a sector that has been heavily impacted by the Omicron variant. The festive season is usually one of the industry’s most crucial times financially. And, despite limited restrictions being in place now, surging cases have put people in self-isolation and created fear. This has led to mass cancellations and concerns over possible future lockdowns.
In the UK, Chancellor Rishi Sunak has offered a £1bn support package for hospitality and leisure firms as Covid-19 stifles business. While all financial aid will be welcomed, cynics argue the package falls short of the mark.
But empty seats at the dinner table aren’t the only sign of struggling business.
Which businesses have been affected by Omicron?
Uncertainty leads to a change in mindset, which has affected businesses like Spylix – as we discovered from Steven Walker, the CEO.
‘Our business has seen a sharp sell-off over the past few sessions as the Omicron Covid-19 variant reignited questions of intermittent lockdowns and limited movement of goods and people across key economies.’
Spylix, which offers legal parental and employee monitoring services, faced headwinds with its international payments. As Mr Walker put it, ‘payments and pricing have been affected in a large percentage in our organization as we got to hear about the new variant of Covid-19.
‘As we can expect one more lockdown, we are trying to be confidential and more knowledgeable. We need to plan for it so that we again face no other issues because of the lockdown.’
‘Always be alert and be one step ahead’
Planning is key for businesses managing the turbulence caused by Covid-19 variants. They’re not getting much help from governments umming and ahhing about restrictions, but some firms are already well prepared.
Emily Cooper – founder and general director of online luxury Italian menswear brand Oliver Wicks – said, ‘the rise of the previous variants has taught us to always be alert and be one step ahead.
‘The road ahead is still uncertain, so it is best to learn to adapt and be nimble to the various circumstances thrown our way.’
Ms Cooper said Oliver Wicks has ‘continued to stay afloat despite the onslaught of the Covid-19 pandemic by investing in digitalization and keeping track of trends.’
The impact of Omicron on currency markets
Blink and you’ll miss it. The news of Omicron’s rapid spread at the start of December hit currency markets fast and hard. One moment the dollar was up and cruising against its rivals, the next it was speeding down a bearish path.
The Great British pound experienced a similar narrative – plummeting from 1.175 to 1.164 against the euro on 6th December. Periods of uncertainty generally mean investors flee risk-on currencies like the pound. Unusually though, the dollar saw little benefit – and the euro was in dreamland.
One of the reasons for this could be down to the damaging effect interest rates hikes can have on an economy during a lockdown. And with the European Central Bank coming into the month adamant that no rate raises would be happening anytime soon, the euro got a boost.
Since then, however, the markets have taken another turn.
The UK raises interest rates
The Bank of England surprised analysts by bumping interest rates up from historic lows of 0.1% to 0.25% on 16th December to help tackle the UK’s raging inflation.
As a result, the pound gained some strong momentum in the last trading period of the year. It rose by 0.44% against the dollar and 0.12% against the euro on the day of the announcement and has continued its climb into the final trading week.
This is typically what happens to a currency when central banks raise interest rates to tackle inflation. But, as we touched on earlier, if the UK was to enter a lockdown, the increased bank rate could have the reverse effect on the pound’s progress.
Also, interest rate hikes are commonly a sign of an economy performing well. If businesses and industries like hospitality face suffer more from Omicron restrictions, traders may lose confidence in the strength of the economy. This could do the pound some damage.
How can businesses save money during lockdown restrictions?
Lockdowns are something businesses can’t control. They can’t make governments‘ decisions for them, so knowing what to prepare for can be difficult – and create financial turmoil.
Although you can’t change restrictions coming into force, you can alter aspects of your business to reduce costs.
Often, businesses find themselves overpaying when making international payments. Usually, this is due to weak exchange rates and market volatility.
But with Privalgo’s state-of-the-art payment solutions, you can mitigate the risk of market movements and keep the value of your transfers safe. What’s more, our industry-leading rates mean you’ll be getting the most for your money.