This week’s topics:
Economic impact of changes to international travel rules in England
New regulations governing international travel as a result of the Covid-19 pandemic came into force in England on Monday 04 October, with the previous traffic light system replaced with a simplified version of “red list” and “non-red list.” The changes are expected to provide an economic boost to England’s tourism and travel sectors, which have been severely affected by the pandemic.
Barret Kupelian, senior economist at PwC, said,
“We expect that the latest overhaul of rules in England governing international travel which includes replacing the red-amber-green system with a more extensive “non-red list” along with a reduction in the cost of tests required for returning vaccinated passengers is likely to favour outbound rather than inbound tourism.
“For outbound tourism, we expect the lower cost to translate to higher demand for air travel to “non-red list” countries, as demand for air travel tends to be price sensitive. However, as much if not more of the impact will come from the significant reduction in red list countries, simplification of rules and removing the need for pre departure testing. People will be more inclined to travel abroad without the risk of testing positive and facing quarantine in a hotel for ten days.
“For inbound tourism, there will be a benefit as overseas visitors will be encouraged by easing of testing and quarantine requirements. Since the guidance and restrictions for return are determined by their own local health authorities, however, this may act as a deterrent for some tourists and so we may not expect to see a radical change in the short term. There could be an important role for government and tourism bodies to work together to make sure that information on domestic COVID-19 rules are accessible for overseas travellers.
“Nevertheless, the latest data from Heathrow Airport showed that in August, passenger traffic was the highest since March 2020. A closer look at the data shows that the Asia/Pacific passengers are down by around 80% compared to two years ago whereas EU passengers are down by around 60%.”
ESG and D&I strategies now key consideration for accessing finance, finds PwC Business Restructuring Services survey
PwC surveyed 400 businesses which had weathered varying degrees of stress or distress. The survey also included 150 UK investors’ views on whether they are more likely to extend finance to businesses with a clear ESG and D&I strategy in place. Some of the findings include:
Almost seven in ten (68%) of UK businesses say they can access better financing options with stronger ESG credentials
ESG is seen as a vital tool for attracting future talent- and selected as an objective of ESG strategy by almost half (49%) of businesses surveyed. This was followed by future-proofing the business, with 40% selecting this as an objective.
One of the major benefits of prioritising D&I as an effective tool in their current change management or restructuring programmes is driving innovation and growth- 73% of UK businesses rank this within their top three benefits
66% of businesses also agreed that change programmes including D&I are more successful
More than seven in ten (72%) investors say a clear and demonstrable ESG proposition increases their likelihood to extend financing.
Steve Russell, head of Business Restructuring Services at PwC, said:
“In the backdrop of government support rolling off and existing liabilities coming to the boil, it’s no longer enough to pay lip service to these principles via high-level policies. Key processes including accessing flexible financing options, retaining talent and future-proofing businesses are increasingly being anchored to the ESG and D&I targets.
“It’s a critical time for businesses to reassess how their commitments on sustainable change can be supported and translated into the tangible steps investors will want to see. Business must act now to make the shift from recovery to sustainable growth.”
PwC comments on the ending of the furlough scheme
David Baxendale, restructuring partner at PwC said:
“It’s been a week since the furlough scheme came to an end, bringing down the curtain on 18 months of vital support to help companies survive the pandemic.
“For businesses, this represents the apex of events which have been building since July and August when furlough started to taper off and consultation periods for redundancies due to the withdrawal of the support became active.
“A chain reaction has now begun for many companies: as support stops or tapers off, staff payrolls will need to be met, while tax, loans and arrears remain, alongside businesses having to deal with the headwinds of cost inflation and supply chain issues. Sharp rises to utility bills are now being factored in. Additionally the effect of an energy contract lapsing on a business can be significant on cashflows, as higher, ‘out of contract’ rates kick in.
“There are also implications for those businesses who have put themselves in the shop window for acquisition with their workforces protected by furlough funding. Without that funding, especially where businesses are solely reliant on it to pay staff, the outlook is understandably uncertain.”
Jane Steer, restructuring partner at PwC, said:
“Many companies are already experiencing significant pressure from inventory and supply chain disruption. The ability of creditors to issue winding up petitions for non-rental liabilities will also be closely watched.
“The withdrawal of furlough alongside wider market pressures are most likely to impact small to medium sized businesses at the heart of regional economies who don’t have access to funding flowing from capital markets.
“However, a range of businesses- for example travel, hospitality and leisure businesses that haven't fully re-opened- will have to make some difficult decisions over the next few weeks. Redundancies are being made almost immediately in some cases where trading activity remains far from the levels seen in early 2020.
“Maintaining working capital - the financial momentum needed to address inventory costs and run day-to-day operations while waiting for revenues to flow - remains one of the key objectives for many businesses.
“However it’s not all doom and gloom. There are key restructuring and refinancing options and other support mechanisms they can consider to hopefully offset the impact and retain workers where possible. Early discussions with key stakeholders including lenders, landlords, suppliers and the tax authorities are vital.”
PwC supports the West Midlands India Partnership to launch new five-year strategy
A new strategy aimed at strengthening links between the West Midlands and India has been unveiled by the West Midlands India Partnership (WMIP). Developed in collaboration with PwC, the West Midlands Growth Company (WMGC) and the UK India Business Council, the Stronger Together strategy identifies a five-year programme of activity to unlock sustainable economic opportunities between the region and India.
Senior officials from the UK and international trade community and regional business leaders were among those to endorse the strategy and its aims, including Andy Street, the Mayor of the West Midlands, Dr Shashank Vikram, Consul General of India in Birmingham and Lord Gerry Grimstone, Minister for Investment at the Department for International Trade and the Department for Business, Energy & Industrial Strategy.
Steve Page,Tax partner and Midlands leader for International Markets, who is on the partnership’s Executive Board, said:
“We are proud to have helped develop the strategy for the WMIP. The strategy will support the region’s long-term economic growth plans by developing stronger links and opportunities for collaboration with the Indian market, particularly as we prepare for the shared opportunities the Business and Tourism Programme and Birmingham 2022 Commonwealth Games will bring. We look forward to supporting discussions that will unlock even greater opportunities for growth across trade, education and the visitor economy.” The full press release can be found here.
PwC turns Birmingham and Belfast offices yellow for Hospice Care Week
This week is Hospice Care Week, and we lit up our Birmingham and Belfast offices in yellow to show our support for Hospice UK. We’re also proud of our people who ran in the London Marathon in support. Hospice UK is one our main charity partners, along with Crisis, that we support through the PwC Foundation. You can read more about the Foundation here: https://www.pwc.co.uk/who-we-are/our-purpose/empowered-people-communities/community-engagement/pwc-foundation.html
Something to read:
How can businesses prevent hybrid working from exacerbating inequality? In this blog Ben Oghene, a director at PwC, shares his insights on racial inequality in the workplace and discusses how technology - particularly data and VR - can be used to promote equality in a hybrid workplace.
Something to watch:
A great deal should be a win-win for all sides. It takes teamwork, trust and a focus on sustained outcomes. In collaboration with Sky News, PwC’s UK Deals leader Ken Walsh joins a panel to explore the lessons businesses can take from sport and why the challenges of signing the right deals will be Better Solved Together. https://pwc.to/3a7kl0J