The majority of investors believe the coronavirus lockdown will return, implying a precarious road to economic recovery.
A Peel Hunt survey of investors and corporate managers reveals uncertainty over timing and severity of the lockdown, but the strong view is that it will likely return.
Last week the foreign secretary Dominic Raab extended the UK’s lockdown by another three weeks. Health secretary Matt Hancock has said it is too soon to lift lockdown measures, but has indicated building sites and hardware stores can resume work.
The survey found that 94 per cent of respondents believe lockdown in its current form will end in May (60 per cent) or June (34 per cent). A significant minority – 21 per cent – believe the lockdown will end in more than three months.
It suggests that companies will be more risk-averse in managing their businesses and balance sheets. It also supports the view that the economic recovery may be W-shaped.
Investors are clear that responses to the current coronavirus crisis are important in assessing corporate outlook. The survey found 58 per cent believe companies who have not prioritised employee health will face a negative revenue impact in the short term. Nearly a quarter believe the damage will be long term.
For companies who have accepted government support, 81 per cent of respondents believe they should suspend dividends. The vast majority also think bonuses should be suspended, while management should take pay cuts.
The new normal
When the coronavirus lockdown is eventually lifted, investors anticipate a drastic change to working life with 69 per cent expecting to work from home more.
Some respondents thought the shift to homeworking will have an effect on how people approach the necessity of working five days in the office.
Communication will change as 63 per cent plan to have less face to face meetings. Three quarters of respondents said they will continue to use virtual technology.
Similarly, 62 per cent of respondents expect due to travel less in part because of virtual meetings. Eighteen per cent of respondents said they would cut down on travel due to health concerns.