Is it safe? The pressure to return to offices is antediluvian, and investors should be wary

September used to mean “back to work,” but this year things are different. In the US and UK people are reluctant, leading to some very public hectoring. These Siren cries luring us onto the rocks tend to be on the right of the political spectrum where a spirit of Covid denial has taken root (there’s even now a ‘Covid-sceptic’ dating website in the UK). They are undermined by rank hypocrisy, and flawed international comparisons. Will you ever get back to a desk? More importantly – should you?

New York is in danger of becoming the city that always sleeps. In Times Square average daily footfall is down 83%, while developers of high-end Chelsea condos are not just cutting prices, they’re halving them. Offices are deserted – The Partnership for New York City says only 8% of workers have returned. The same is true of other large cities – restaurant chain Sopraffina recently described the situation in downtown Chicago as “Armageddon.” Central London also stands silent, a “ghost town,” with Centre for Cities claiming average footfall is down 73%.

In desperation, the UK government launched a mass advertising campaign to persuade people back to work. There have been no shortage of sympathetic columnists leading the charge. In an article in the UK’s Daily Mail newspaper, Financier Dame Helena Morrissey begged Brits “to take some responsibility for ourselves” and ignore “scaremongering” from pesky epidemiologists and the WHO about the probability of a ‘second wave’ (her speech marks). After all, she argues, the mortality rate is “less than 0.5%.” Quite how she gets that number eludes me when the UK’s (massaged) death count is 41,499 out of 334,467 cases.

The argument for returning centres on the knock-on effects on all the businesses associated with daily commuting and office work – the dry cleaners, the newsagents and the sandwich bars (In the UK, Pret A Manger recently announced 2,700 redundancies). 

Should companies listen? As Lawrence Waterman chair of the British Safety Council put it “we simply don’t know that workplaces are safe – why is there such firm advice – there is no evidence for that?” Investors should be wary of the legal minefield companies will enter if they comply. 

Chinese and German research has considered the performance of the virus in air-conditioned environments and suggested it may infect people up to eight metres apart.

In the US, the Covid-19 lawsuits are already piling up, enough to make Republicans insist on employer immunity as a condition for passing further relief packages. Lawyers, Hunton Andrews Kurth, keep a handy online tracker which shows there are now some 4564 of them. Many major companies are involved – not just meat packers and cruise companies (Carnival is facing four class action lawsuits in California involving 2400 plaintiffs).

Investors must fear these lawsuits multiplying, while remembering all are personal tragedies. 

Walmart worker Wando Evans was allegedly put back to work until his symptoms got so bad he went home, where he was found dead two days later. 

Plaintiffs against McDonalds allege they only received gloves and masks after striking, and then were only given one mask to be re-worn. 

The widow of Safeway worker Pedro Zuniga alleges the company actually posted a memo entitled “Coronavirus: Fact vs. Fiction” which argued “if you are healthy, a mask will not protect you.” Arguably reflecting flawed Government advice, but “unfortunate” doesn’t cover it.

Lawsuits haven’t been seen on this scale in Europe. So far. There has been talk in recent weeks of a class action against the “Ibiza of the Alps” Ischgl, where the authorities allowed revellers to play mouth-to-mouth “beer pong” as an epidemic raged. But that may change as Europe is gripped by a second wave. 

In France there are now more people infected (161,160 active cases) than in the first wave, and 25% of the 746 outbreaks have been in workplaces. Think about that when you next hear someone cite Morgan Stanley’s survey showing 83% of French workers have returned to their offices (compared to 34% in the UK).

“It’s the economy stupid,” I hear you say. “We’re tanking.” Declines in US and German Q2 GDP of over 10%, eclipsed by the near unimaginable 22% fall in the UK. Look at Sweden with its very light-touch lockdown and only 8.6% fall in GDP.

Well Sweden is not a role model. Emails that have emerged recently suggest Anders Tegnel, Sweden’s chief epidemiologist may have deliberately sought “to reach herd immunity more quickly.” No such immunity has been achieved, despite 576 deaths per million, one of the worst rates in the world. It is also notable that in neighbouring Denmark (which had a much stricter lockdown) Q2 GDP fell even less, only 7.4%.

In fact McKinsey research shows no correlation between longer lockdowns and economic performance. Rather it is aggressive health action that reaps rewards economically. The UK’s mismanagement was noteworthy – a fiasco on testing, inadequate supplies of PPE and belated mask adoption. South Korea’s death rate is just six per million people, the UK’s is over six hundred. Korea’s Q2 GDP fell just 3.3%, the UK’s 22%.

Public attitudes reflect Covid failure. Pew research found 54% UK citizens were dissatisfied with their Government’s Covid response compared to just 12% in Germany or 5% in Denmark. The only comparable country was the USA with 52%. And people tell McKinsey they won’t feel safe until health experts say they are (56%) and everyone wears masks (75%).

In other words, people aren’t stupid. Governments are.

The implications for investors are obvious. Look at the differential performance of FTSE and the DAX. We should also recognize that Covid is massively accelerating digitalization – ten years change in ten weeks. The outperformance of the NASDAQ testifies to this. Amazon’s share price has nearly doubled from the panic in March. We might not like this – I was struck last week by the erection of a guillotine by protestors outside Jeff Bezos’s home. But we must accept inevitable economic change.

Remote working goes with digitalization. It allows huge economic benefits. In their paper “How work from home may work for investors” Morgan Stanley notes there will be a human capital windfall. The labour force will expand dramatically from people previously excluded by presenteeism. A revolution for many women, older workers and those with disabilities.

Anyway, why be upset? Most people like remote working: 83-90% of them depending on your survey. The FT describes a widely felt “epiphany.” As I have argued before, we should also embrace the end of commuting and reduced business travel as a victory for combatting climate change. I recently lunched with a leading fund manager in Sydney…by zoom.

It’s time to change outdated, pre-Covid attitudes. A fashionista friend boasted last year his Christmas cracker was plastic free, as if giving up a plastic trinket made up for the 100 business flights he had taken in 2019.

As they say in the fashion business, convenient hypocrisy is “so last year.”

 

Christopher Walker is a writer on business and politics.