Businesses need investor capital now more than ever but are they ready to step up?

Almost every economy has taken a major hit in the last six months as a result of the COVID-19 pandemic and the self-inflicted lockdown that was required to limit its spread. In fact, it was the latter that did much of the damage, since precautionary measures saw many industries grind to a halt whether their areas had recorded coronavirus cases or not.

As recovery seems to be on the horizon, we think it’s the time to ponder on just what that recovery would look like, and what can encourage it so that we come back strong in the next financial year. Read on to see our thoughts about how we start cleaning up this mess, rationalized by a post-mortem of what the outbreak did to different sectors of our economy and how investor confidence has shifted in recent years.

 

Investor Capital and Confidence

The title says it all. Given that many of the world’s most powerful economies have started to dip back into recession territory, it seems evident that it will take some heavy investment to get companies on the right track. The problem with this, however, is that a proven, and quite frankly predictable, effect of this pandemic was to make everyone more wary of where their liquid assets go.

Whether that’s an everyman or a seasoned investor, and everyone in between, those who have taken hits are going to be more skittish when allocating cold hard cash into investment opportunities. There is something to be said for taking it slow and steady, you can’t rush a phenomenon like market growth after all, at least not at your own financial peril. That said, we also need to see strong investments in the returning industries if we’re to capitalize on a renaissance of post-COVID growth.

We’ll take a cursory look at the industries affected below, as well as which ones are predicted to make the strongest return in the coming weeks and months. For now, if you’re an investor or even someone seeking investment, you should take into consideration that investors need to part with some of their capital. However, it’s not that easy, they need to do so in a way that inspires confidence in all parties involved, including the sideliners who are unsure about reinvesting yet and will analyze early investors as canaries in the coalmine.

For more thoughts on striking this balance between a steady and stable return to investing whilst stepping up and taking advantage of the post-COVID revival, we’d recommend this piece by Javad Marandi.

 

Industry Winners and Losers

Before any corrective measures can be taken, it’s necessary that we look at the post-mortem of this crisis so we can understand where and why it happened, whether a return is likely, and, if so, what shape that return will take. Thankfully, there has been an abundance of resources published by banks and building societies detailing the immediate losers and likely winners of this pandemic.

The World Health Organization first declared COVID a pandemic on the 11th/12th of March 2020, from which the lockdown began and many of the initial, sometimes extraordinary, financial losses started to take shape. Make no mistake, many indices were trending downwards in late February, but it was in mid-March when the pandemic was officially called, and it became a reality for those in areas relatively untouched by the virus.

Airlines

So, what did this initial sting look like? As you can imagine, it was the airlines who took the brunt of the damage. With governments across the world actively discouraging international, national, and even local travel, it’s no surprise that the airline industry were the first ones on the chopping block as passengers canceled their trips and travel bans started being enforced.

The future of the industry isn’t as bleak, however, since they survived that initial liquidity crunch, and many Western governments have allocated billions in a bailout scheme for their airlines. With that said, they won’t be coming out of lockdown larger than they were when they went in, with consolidation very likely to take place as only the big dogs have the means to survive.

There’s also an elephant in the room, which is the question of how much a market will there be for international business and travel in the following years, now that everyone is so conscious of how easy a crisis can spread.

Restaurant and Catering

The restaurant industry, and other adjacent industries like catering, obviously suffered from the pandemic and its lockdown. Breaking lockdown to go on a plane was one thing but even the most skeptical of the movement restrictions would think twice before going to eat in a crowded area, as it presents a unique vector for spreading the virus.

So, predictably, these industries suffered in the initial weeks. Now that many places are easing their lockdowns, however, there have been many news stories decrying the massive queues that have been spotted outside of the country’s most popular fast-food chains, like McDonald’s and KFC.

Is a return to normal likely for these industries? We have some reservations. Between job loss and supply chain shortages, investors should enter these industries at their own peril, since there’s every chance a headwind could sweep them up. Like with airlines, expect consolidation as only the largest food chains, often the franchises, will have the resources to overhaul their restaurant spaces to comply with social distancing.

 

Collaboration Technology

To close off on a positive note, industries that can be expected to see an unmitigated boom are those focused on connecting people electronically over both short and vast distances. From e-learning to workplace meetings, and even recreational activities like online gaming, it’d be foolish not to anticipate continued growth here as these relatively new phenomena become cultural mainstays after the great lockdown of 2020.

Even political meetings aren’t out of the question, which has positive ramifications for those involved in the cybersecurity industry since every country will want their electronic communications secured against the prying eyes of foreign entities.

Video conferencing apps like Zoom have seen share growth of up to 120%, and the continuing work from home culture will only further contribute to the growth of apps in this field. The best part is that working from home has become preferable for companies just as much as workers, cutting out utility and supply overhead for a lot of smaller businesses, so the consequences of a boom in collaboration tech should reach even further into other industries.

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