Covid-19 & the market

Economists, businesses and social commentators have spoken at great length about how the Covid-19 crisis has shocked the market. Flying between meetings might be a thing of the past for many companies as business goes on as normal by utilising videoconferencing software. Home delivery services are on the increase, whether it is small businesses trying to cope with the lack of footfall or larger companies providing home deliveries for those not wanting to break quarantine. Netflix and other streaming services have seen an increase of users.

The market is changing. The way we operate is changing. These are changes that will linger for long after Covid-19 has become a thing of the past. But, as is a theme above, Covid-19 has done one thing especially well and that is boosting the information and technology and digital services sector.

I work in the aviation sector, arguably the hardest hit by the Covid-19 pandemic. Over the last week:

  • British Airways has cut 12,000 jobs
  • Virgin Atlantic has cut 3,000 jobs
  • Boeing has reduced production by 50%
  • Airbus has reduced production by 35%
  • GE has cut 10,000 aerospace jobs
  • Rolls-Royce set to cut 8,000 aviation jobs

People will travel for business and for pleasure but getting back to the levels seen before the Covid-19 crisis will be a rough, but is it right for companies to reduce their numbers? And how is the move supported by government given those companies listed above have such high profit margins? The BBC today (6th May) released a piece of news regarding Qatar Airways:

“In February, Qatar Airways increased its stake in British Airways owner IAG to 25% as part of its strategy to invest in other carriers.

This boost in confidence in IAG also comes not long after we have found out that the Spanish government has provided IAG with a substantial €1 billion-euro bailout package. This has, however, been directed toward IAG’s low-cost airlines – Vueling and Iberia. The amount has been agreed, but not yet been processed.

IAG has seen year-on-year profits before the Covid-19 pandemic (as illustrated below) leading to staff threatening strike action in regards to pay. Which raises the question; why was British Airways was so keen on making 12,000 staff redundant?

It is often argued that companies need to make reductions because they need to survive and to stay afloat. A slashing of jobs means that the company can go on. But Covid-19 removes us from what are considered standard levels of business practice and instead shoves us back into the realm of fiscal tightening not seen since the financial crash.

It is precisely because of this debacle that we need companies to put their staff first and continue to keep them in employment. We limped out of the last financial catastrophe with a huge divide between those that have money and have the facilities to store it in offshore accounts or who bet against the market, a practice known as “shorting”. The majority of us don’t have these capabilities and are therefore more likely to suffer as a result in companies clamming up with the money that their employees helped them create.

The money going into hands of employees means that more funds will be diverted to other areas of the economy that have seen a drop because of Covid-19 such as the retail sector, restaurants, pubs, renovations and home improvement that would bring back the fleet of self-employed people who suffered a shock after Rishi Sunak’s emergency Covid-19 budget. People will also be able to pay their mortgages and their rent instead of facing the ridiculous one month deferral period in which landlords are not allowed to kick out tenants.

Unprecedented times call for unprecedented measures. This is one of those times when big businesses need to not stem the flow of money, but approach their workers with a calm and collected resolve to spread money and help stimulate the economy. And maybe even win back some trust and faith from their employees because, when the time came, the companies did the right thing.

The New-build Dilemma

It is official – houses are getting smaller.

Here are a few numbers from an article on the subject by Andrew Ellson and Jedidajah Otte in The Times, 20th August, 2018.

On average:

– Houses are now 20% smaller than in the 1970’s

– Living rooms are 1/3 smaller

– Kitchens are 1/4 smaller

– Bedrooms are 1/5 smaller

The road to purchasing a house is littered with potholes, diversions, dead-ends and dodgy signage. It took myself and my partner a year and a half to save up the deposit needed for a house in our area. And we only managed it because of the charity of my parents letting me live rent free in their house. If my partner and I had been renting, it would have taken us nearly three or four years to save for that deposit. That says a lot about our current culture.

New couples, new families and O.A.P’s looking to upgrade in their later years are buying new houses in new developments. Around Crawley and Horsham alone – where I am based – five new sectors are being added. Thousands of houses and apartments. All of them built smaller than the average residence, and – from myriad conversations I have had with labourers on site – with ever cheaper materials. For example: door frames built from compressed cardboard, plumbing constructed from PVC pipework, fake chimneys made from wood and rendered to look like brickwork. As well as plasterboard walls which would crumble if the PVC breaks or splits – after all PVC is far more brittle than copper and more susceptible to changes in pressure and atmospheric conditions.

New builds are not just smaller but also more expensive than the regular property and they are selling on the notion that, because they are modern, they have a longer lifespan than those built during earlier periods. No previous owners. No degradation. A new space to make a new home.

Space aside there is another issue facing those living in the new build houses and that is one of mental health. Statistically those living in smaller properties are more likely to develop mental health and social issues such as depression and anxiety. In cramped conditions, members of the family cannot get the time on their own that they need, as highlighted by Ben Derbyshire, president of the Royal Institute of British Architects who says that “In a two-bed, four person home there is no space to be on your own except in the lavatory. Humans are social animals but they also need peace, quiet and space for concentration.”

Higher property prices of new builds lead to financial anxieties due to buyers taking out larger mortgages. Combined with smaller living conditions leading to mental health problems the precedent being set by property developers is worrying.

Mental health and social issues after all lead to the most amount of work days missed and account for two of every five visits to G.P’s. The financial demand of the house combined with the house itself causing stress and worry would only create a false economy, would it not?

That is not to say that every new build is small, but with prices already high for smaller dwellings, the costs of larger properties are exponentially more and therefore fall into a price bracket that is often unachievable by those living on the average income. As commentator Tim Montgomerie says: “Inflated house prices owe much to the power of a few major builders to restrict the supply of new homes.” If someone wants to buy a house to call a home, they are at the whim of the prices dictated by developers. If you are a high-earner or in a high earning partnership and have enough money to buy a larger property, well, it turns out money really can buy you happiness.

The saleability of houses in regards to number of rooms is another contentious issue that we face in the United Kingdom. We are one of the only nations that sell properties based on the number of bedrooms that it has. In America and in much of Europe houses are sold on the basis of how many square metres are available. While people within the U.K might be happy in the knowledge that they have bought a three bedroom property, the space inside might not be appropriate for either the family unit, or to provide adequate separation space. After all, many properties advertised to have three bedrooms live up to the promise but space is massively lacking. What are sold as double bedrooms can at best fit a double bed and nothing else. I came across many of these houses when looking for the place we eventually called home.

As property developers squeeze as many houses into an acquired space as possible in order to maximise profits, the government is doing little in the way of putting regulations in place in order to set a decent living standard. Instead the “minimum size standards for new dwellings” as laid down by the government is entirely voluntary. This needs to change. The standards should become policy for all new developments not only for the benefit of the inhabitants but, as pointed out above, for the economy as a whole.

Architecture and proper civic planning can be, and has been, a tool for great change. By giving people space in which they can be part of the family unit and when needed to spend time by themselves. By focusing on creating public spaces in order to eradicate seclusion from one another and by bringing back community centres for children and social clubs for adults.

Due to the neoliberal dogma that the Conservative government subscribe to, projects such as this will simply not take hold. Maximising profits for companies and deregulating the market only weakens the government’s voice in matters of public discourse as corporate interest takes control. Prices will rise, houses will get incrementally smaller so that it is barely noticeable, and the effects on buyers will only be negative as a result.

Is this the way we want to go? Of course not. We need a government that will implement change and stamp policy into place to give people the place, and space, that they deserve.